Chinese government fund invests in Didi’s ride-hailing competitor

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China Business and Finance Update

Chinese state-owned funds are taking advantage of the regulatory pressures faced by the country’s largest ride-hailing app to flood the fast-growing Didi Chuxing competitors.

Cao Cao Travel announced on Monday that it has raised 3.8 billion yuan (US$588 million) from a group of state-owned funds in the eastern city of Suzhou to accelerate expansion and improve driver safety.

“The government wants technology companies to have state-owned funds,” said Shaun Rein, founder of China Market Research Group. “With the support of foreign companies such as SoftBank and Uber, Beijing is not satisfied with Didi’s overseas transactions.”

Five investors, including Suzhou Xiangcheng Financial Holding Group and Suzhou Innovation Capital, bet that domestic competitors can challenge Didi’s dominant position in China’s on-demand transportation. Cao Cao currently operates in 62 cities in China. It was founded by automaker Geely and raised RMB 1 billion in the first round of financing three years ago.

Since Didi started having problems with regulators after its initial public offering of $4.4 billion in June, Cao Cao has lowered user prices and increased incentives for drivers. Aggressive expansion Activity.

According to company documents, the application was established in 2015, and the number of monthly active users in July hit the highest increase in history, exceeding 10 million users.

At the same time, Didi was barred from registering new users until the regulator completed an investigation into its data security.

In the past two years, rival ride-hailing companies have struggled to raise funds, and Didi has been viewed as impeccable by investors. After the investigation was announced, Meituan, China’s leading food delivery platform, relaunched its online car-hailing platform, which was closed in 2019.

“Right now there is a price war in the ride-sharing market. Consumers are happy with the suppression — it forces all participants to cut prices,” Rein said.

Analysts said that after cracking down on the monopoly and anti-competitive behavior of large enterprises such as Alibaba and Tencent, government investment in technology companies is the next stage of the government’s campaign to create a more level playing field.

“The investment in Cao Cao has financial significance for state-owned funds, but the biggest winners are consumers,” Ryan said.

Additional report by Edward White in Seoul

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