INTERNET: Car Giant Rises In Uber-Baidu-Yidao Yongche Tie-Up
Bottom line: A Yidao Yongche merger with Uber China continues the rapid consolidation in China’s hired car services, which could be followed soon by a successful bid by Uber and Baidu for Nokia’s digital mapping division.
Rapid consolidation is taking place in China’s hired car services market, with word that a new alliance is shaping up between major local player Yidao Yongche and an existing tie-up between global giant Uber and local Internet search leader Baidu (Nasdaq: BIDU). As a longtime Chinese Internet watcher, I’m quite surprised at the sudden and rapid speed of consolidation in this particular sector, since such consolidation in other areas tends to be a slow and painful process that often takes years.
A major factor behind this sudden and rapid consolidation could be the participation by all 3 of China’s top Internet players, including Baidu, alongside social networking giant Tencent (HKEx: 700) and e-commerce leader Alibaba (NYSE: BABA). Two of those companies are also involved in a related headline that is seeing Baidu and Tencent making separate bids for the digital mapping division being sold off by former cellphone giant Nokia (Helsinki: NOK1V).
The China hired car services market has seen all of the “big 3” Internet companies take stakes in the space. Alibaba and Tencent are major shareholders in sector leaders Kuaidi and Didi, respectively, which announced a plan to merge in February. (previous post) Baidu made its own investment in Uber, reportedly worth about $600 million, at the end of last year. In March reports emerged that Baidu was trying to steer a union between Uber’s China operations and Yidao Yongche, which also goes by the English name of EasyGo. (previous post)
The earlier reports had said a Uber-Yidao deal could be announced later that month, but progress obviously wasn’t that smooth. Now a new post on Yidao Yongche’s microblog is hinting that an announcement could be coming on May 21, or Thursday. (microblog post) The post on May 18 includes several photos with a “pairing” theme, and says “A beautiful life shouldn’t be spent alone, and it’s better to ride together”. It adds that Yidao Yongche will explain how it plans to do that on May 21.
Such a merger would certainly make sense, as Uber would bring its background as a global pioneer in the space to Yidao Yongche’s strong local connections. Uber certainly needs some local help right now, as it has run into speed bumps in at least 2 Chinese cities over the last couple of weeks due to its foreign roots and also its aggressive business practices. (previous post) Yidao Yongche was one of the loudest complainers when the Kuaidi-Didi merger was announced earlier this year, and a new tie-up with Baidu and Uber would be critical to giving it the scale it needs to survive.
The Baidu element to the equation was in a separate but related headline, as the search giant and Uber were reportedly co-bidding for the digital mapping division being sold by Nokia. (English article) The reports said that Tencent is part of another group also bidding for the unit, called Here, which could fetch up to $4 billion. This particular deal first popped into the headlines earlier this month, when reports emerged that a group of German car makers was bidding to buy the mapping unit.
A good mapping service is obviously a critical component of any good mobile-based hired car app, and Uber was reportedly leading its co-bid with Baidu to lessen its reliance on the rival industry leading mapping product from Google (Nasdaq: GOOG). Baidu currently has its own digital mapping service that is quite popular in China, though I personally find the Google product much better. Given the large cash resources of both Baidu and Uber, along with the latter’s aggressive business practices, I wouldn’t be surprised to see this pair ultimately win the bidding for Here, though they could pay a big premium for the unit.
Related posts:
