China’s top taxi app firm is raising $1.5 billion to battle Uber

In a bid to fight off US-based Uber's expansion plan into Chinese markets, Didi Kuaidi, China's largest taxi app company is raising $1.5 billion, Bloomberg reported. This development come only days after a leaked memo from Uber showed that it is raising $1 billion for its expansion plan. 

Uber is looking to expand its taxi app business from 12 cities to 50 cities in China.

In February, Didi Kuaidi was born from the merger of Didi Dache and Kuaidi Dache. The merger happened because both companies want to put an end to their aggressive plans to outdo each other, which had led to extra costs for both sides. Also they had a common enemy- Uber- which was always going to make further inroads into other cities in China. 

Before the merger, Didi Dache and Kuaidi Dache had raised massive funds to support fare cuts and had doled out incentives to their drivers just to drive the other out of business, which never happened as both the companies were well backed by their respective investors. It is said that both the companies sunk million of dollars competing against each other.

The merger also happened for business reasons as heavyweights in China's taxi app business and competing against each other would have been detrimental for both the companies. Both companies retained their own brand, and together they operate in 300 cities. When these companies were separate entities, Didi Dache and Kuaidi Dache raised over $800 million and $700 million respectively. One of the most prominent investors of Didi Dache is Tencent. While Kuaidi Dache's most recent investors are Alibaba and SoftBank.

According to reports, Didi Kuaidi is said to be in total control of the taxi app market in China with more than 95 percent passengers using their taxi cabs. Given this fact, it is an unexpected move for the company to hold its first fundraiser.

With the new capital Didi Kuaidi could fight against Uber as it did before Didi-Kuaidi merger, or it could invest in people-to-people (P2P) business, which was started by Uber with its Uber X service. Uber X service does not exist in China. Instead Uber runs People's Uber, which allows anyone to be a driver.

Didi Kuaidi previously gave away about $161 million in free rides to battle Uber, Business Insider reported.

At the moment Uber does not make any profits from the service and if Uber's CEO Travis Kalanick is to be believed that US taxi app company has at least 50 percent market share in P2P, then most likely, Didi Kuaidi does not want to be in a situation where it is constantly chasing Uber and miss out on a big opportunity to be a market leader in P2P taxi app segment.

"Simply stated, China is the #1 priority for Uber's global team," Kalanick wrote in a letter to investors.