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BMW ventures into taxi-hailing business, posing a challenge to Didi Chuxing's dominance

A BMW car Photo: Reuters

German automaker BMW has been approved by the Chinese regulator to operate taxi-hailing business in China where it has just acquired a majority stake in a joint venture.

BMW Mobility Service, a wholly owned subsidiary of BMW Group, obtained the license this month to launch taxi-hailing service in Chengdu, the capital city of Southwest China's Sichuan province, according to a statement released by the company.

BMW is the first foreign automaker allowed by the Chinese government to do business in the country's booming ride-hailing market, which is dominated by Didi Chuxing. Didi Chuxing acquired the Chinese operations of US taxi-hailing leader Uber in 2016.

The statement comes a month after BMW was allowed to pay $4.2 billion to increase its stake in BMW Brilliance Automotive, its Chinese joint venture, to 75 percent from 50 percent. The approval was a break from a decades-long industrial policy putting a cap on foreign stake in automotive ventures in China at 50 percent with the aim of protecting the interests of domestic car manufacturers.

Joseph Pattinson, manager of the BMW Mobility Service, told the Financial Times that the company is set to bring an innovative ride-hailing service to Chengdu later this year.

At the early stage, BMW Mobility Service aims to deploy about 200 BMW-branded gasoline-powered and plug-in hybrid vehicles in Chengdu, and equip these web-based taxies with specially hired drivers for reaching high industrial standards, 36kr.com quoted a source from BMW as saying.

BMW Mobility Service was registered in Sichuan province in April, and runs businesses including taxi-hailing and automobile rental. Bernhard Blaettel, vice president of mobility and energy services at BMW Group, is the legal representative of the company, said Caixin.

BMW sees Chengdu as a sally port for the realization of its mobility ambition in the Chinese market. In 2017, the German carmaker launched car-sharing service in China, selecting Chengdu as a key city for its early-stage operation of 100 all-electric BMW i3 vehicles.

At the time, Blaettel said that Chengdu provided a good operating environment for BMW's car-sharing business as the city did not limit issuance of car license plates. In addition, the Chengdu government showed strong support to the car-sharing industry by simplifying approval procedures and providing parking lots, said Blaettel.

Entering into the taxi-hailing market is seen as a remedy for a sales slump in China, which has taken a toll on some global carmakers like US carmaker Ford, which saw sales in the country drop 43 percent in September from the same month a year ago. The reasons behind the doldrums are weaker demand for vehicles caused by some local governments' restrictions on issuance of car license plates and higher tariffs in the wake of the trade spat between Beijing and Washington. Except for BMW, many foreign car manufacturers like Daimler have established mobility ventures in China in partnership with local partners.

Consulting firm Bain & Company estimates that the value of China's taxi-hailing market is expected to grow to $72 billion in 2020 from today's $30 billion. Statistics from China's Ministry of Transport show that as of the end of 2017 the number of users of ride-hailing apps amounted to 225 million while the number of licensed drivers of web-based taxies was just 100,000.

Challenge to Didi Chuxing

BMW's foray into China's ride-hailing market is likely to deal a blow to Didi Chuxing, whose dominance in the industry has been undermined by a series of safety scandals in which several young ladies were killed by Didi drivers during rides.

Some industry experts believe that traditional automakers have natural advantages in the ride-hailing industry as they normally have strong capital chain and complete manufacturing and marketing network.

Didi Chuxing is aware of this point. Months ago, by virtue of its large user base, the ride-hailing company joined hands with 31 automobile-related entities such as Toyota, Volkswagen and BYD to establish a loose alliance, which takes aim at mobility services made up of taxi-hailing, taxi-sharing and car rental.

However, Didi Chuxing has to face up to a monopoly allegation in China, which stems from its acquisition of Uber two years ago. Recently, Wu Zhenguo, director of the Anti-monopoly Bureau of the State Administration for Market Regulation, told a press conference that the regulator was investigating Didi Chuxing's acquisition of Uber's China business and would assess the deal's impact on competition and development of the ride-hailing industry.


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