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Mobile Apps

China's leading taxi apps join forces in $6B merger

The merger of Kuadi Dache and Didi Dache is set to dominate smartphone-based transport services in the country.

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Kuaidi Dache and Didi Dache are merging to form a $6 billion company. Kuaidi Dache and Didi Dache

China's two largest taxi-hailing apps Didi Dache and Kuaidi Dache have announced a merger valued at a cool $6 billion. Collectively the pair command nearly the entire market in their homeland, Reuters reports. The merger will benefit users who will be able to book from a larger pool of taxi drivers, who in turn won't have to rely on slow radio bookings to quickly pick up customers.

The new company does not yet have a name, but Didi Dache CEO Cheng Wei claims that the deal is the largest merger in Chinese Internet history.

The Chinese government has not issued any new taxi licenses since the 1990s, which means current taxi companies have a stranglehold on the market and can charge steep rental rates for its fleet of cabs.

The apps' involvement in the Chinese taxi market fills a service and comfort gap which the existing government-backed taxi companies do not provide to their users. The Shanghai Municipal Transportation Commission's director Sun Jianping, however, says that "taxi companies should have a sense of urgency" in addressing this.

Prior to the merger, the apps have subsidised costs for both passengers and drivers in China in order to win market share -- Kuaidi Dache has poured in 1 billion yuan ($160 million), while Didi Dache's subsidies came to 1.4 billion yuan ($224 million).

The apps are both backed by massive Chinese e-commerce giants: Kuaidi Dache is funded by Alibaba, which had a net income of 23.31 billion yuan ($3.7 billion) in 2014 through popular shopping sites such as Alibaba.com and Aliexpress.

Didi Dache is backed by Tencent, which had a net income of 15.6 billion yuan ($2.5 billion) in 2013, and offers products such as the QQ portfolio, and WeChat, a popular Chinese texting and social media messenger.

The merger is also an omen for other taxi-hailing apps, such as Uber, in its uphill battle for significant market share in China. Despite receiving an undisclosed investment from Baidu, a Beijing-based search company with over 500 million monthly active mobile users, Uber will have to contend with a cornucopia of newly minted laws, both in China and elsewhere in Asia.

There is currently no information regarding the shareholder structure of the new company. CNET has reached out to both companies for comment.