Daimler and China's Geely to launch ride-hailing service

Geely CEO Li Shufu. Chinese car maker firm has formed a ride-hailing joint venture with Daimler. AFP

Germany's Daimler is setting up a ride-hailing joint venture in China with Geely Group, in a sign the Chinese company is making progress in its drive for closer relations with the maker of Mercedes-Benz cars.

Geely chairman Li Shufu took a 9.69 per cent stake in Daimler earlier this year, rekindling fears in Germany about its highly-prized expertise falling into Chinese hands.

Daimler initially baulked at the prospect of a broad-based alliance, in part for fear of alienating Mercedes' existing Chinese partner BAIC.

The German company said on Wednesday it would team up with Geely in China's ride-hailing market, led by Didi Chuxing.

Ride-hailing accounts for more than 30 per cent of the global taxi market and Goldman Sachs believes it could grow eight-fold to $285 billion by 2030, with significant growth potential in China, the world's largest car market.

"The JV [joint venture] will provide ride-hailing mobility services in several Chinese cities using premium vehicles including but not limited to Mercedes-Benz vehicles," Daimler said.

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The 50:50 venture will have its headquarters in Hangzhou, China, and use Mercedes-Benz S-Class, E-Class and V-Class vehicles among other vehicles. Financial terms and the investment plans were not disclosed.

Didi, founded in 2012, cemented its dominance in China when it bought Uber's operations in the country in 2016. It is preparing to launch car-sharing and other on-demand transport services.

The prospect of autonomous cars hitting the road has intensified competition between technology companies, ride-hailing operators and traditional car makers to roll out fleets of smartphone-hailed taxis, or strike co-operation deals.

Ola has been cooperating with Apple since November 2016 and Uber has received investments from Toyota and Google.

As part of the JV, Geely Group and Daimler Mobility Services will be equally represented on the board of the new ride-hailing service, for which the two companies will jointly develop the software required to support the business in China.

"The development of such services, in which both companies already have a presence, forms part of our transformation from a vehicle manufacturer into a global automotive technology group," Geely Holding president An Conghui said.

At 09.45 GMT, Daimler shares were up 1.3 per cent at €51.12. Geely also owns Swedish car maker Volvo.