Chinese entertainment portal LeTV acquires 70 per cent of car-hailing app Yidao Yongche to raise its valuation to US$1 billion
Company says US$700 million investment is part of its broader plan to produce and utilise electric cars
Chinese online entertainment portal LeTV has invested US$700 million in car-hailing company Yidao Yongche for a controlling 70 per cent stake, according to media reports this week.
Yidao Yongche is a distant No 4 player in the Chinese market with a 2.7 per cent share as of the second quarter of this year, according to Chinese consultancy firm Analysys International. Other analysts say its true share may be as low as 1 per cent.
It also has a presence in over 20 cities in the US and other countries, mainly catering to non-English-speaking Chinese, according to China's state media.
The extra funding raises the company’s valuation to about US$1 billion, making it another Chinese unicorn, and shows how much faith LeTV has in China’s car-hailing market, which is facing regulatory challenges and a backlash from established taxi operators.
Market-leading Didi Kuaidi, which was formed by a merger of the country’s two biggest car-hailing services in February, raised another US$3 billion in September. It controls more than 80 per cent of the market and is backed by e-commerce giant Alibaba and social and gaming titan Tencent.
San Francisco-based Uber, the No 2 player in China, is backed by Chinese search engine giant Baidu, which led a funding round of US$1.2 billion in the company last month.
Chinese car-sharing services have been spending heavily this year to expand their market reach, but new government regulations may make it harder for them to turn a profit.
Drivers have also complained that the government clampdown is making more of their peers ditch the apps as their attractiveness wanes and attendant risks multiply.
The Ministry of Transport proposed a new set of rules on October 10 with stricter controls. These require drivers working for such apps to have at least three years’ driving experience, pass a government test, and the car needs to be registered as a taxi.
The companies must house their servers in China and let the local authorities dictate the fees they charge, the size of their fleet and the areas in which they can operate, among other conditions.
The proposed regulations are open for feedback for a month.
Despite these challenges, LeTV, which also sells smartphones in addition to its video site and other interests including robotics, has grand ambitions for its internet car business.
It said the deal with Yidao Yongche is a crucial next step in its electric car project, after it announced last year that it plans to produce its own electric cars.
LeTV has already struck a deal with British luxury car maker Aston Martin to provide it with in-car entertainment. Another agreement with Beijing auto maker BAIC gives LeTV access to the former’s smart car system.
LeTV has also invested in DZ , a leading company in the field of charging infrastructure for electric cars.
A chronic shortage of these charging stations is one of the major hurdles to more widespread adoption of electric cars in China, which the government is promoting with subsidies and other incentives.
Beijing will present its 13th Five-Year Plan at a plenum later this month and the building of such stations and the improved efficiency of batteries are expected to be highlighted, according to media reports.