Mercedes Set To Enter Chinese Ride-Hailing Market With Its Luxury Cars

The German vehicle maker Daimler – the owner of the Mercedes-Benz brand, is hoping that common people would soon be able to ride in a Mercedes-Benz S-class if its plans go through.

The plan of the company is to start an upscale ride-hailing service in China next year together with Chinese automaker Geely.

Similar to what some of the other global vehicle manufacturers are doing, these companies are also attempting to take advantage of the fast changes in the technology in the industry.  In recent years, the sale of cars gave seen a downslide through the world – especially in some of the growth markets such as China, and therefore the car makers feel that it is no longer viable to only manufacture cars.

The software for this venture would be jointly developed by Daimler and Geely and the new entity would have its base in the eastern city of Hangzhou where the Chinese automaker’s headquarters are located. Mercedes-Benz S, E and V-class cars would be the initial vehicles that would be used for the service. The new service would later on add Geely’s high-end electric cars.

Since a 10 per cent stake in Daimler was taken up by Geely Chairman Li Shufu  this ride-hailing service is the first prominent business tie-up between the two companies.

“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 President An Conghui said in a statement.

CaoCao, a ride hailing service in China is already owned by Geely. Operational primarily in the smaller cities of China, Greely’s electric cars are used for this service. There have been several attempts made by Daimler to venture into the ride-hailing business which includes the development of a joint venture with BMW, working together with Uber on self-driving cars and investing in start-ups with a promise of growth.

The ride hailing market of China is highly competitive and it would be a challenge for the Daimler-Geely service.

The market leader Didi Chuxing already uses high-end vehicles for its services. Didi is known throughout the world for forcing Uber to quit China after years of very stiff competition in the market that ran into billions of dollars for both the companies.

About 90 per cent of the ride hailing market in China is controlled by Didi. However this year, its image has been dented by a number of incidents involving its drivers and cars. Currently, the company is struggling to win back the trust of customers following the rape and murder of a female customer by a Didi driver in August, according to information from the police. That was the second such incident in 2018 involving Didi.

“If Geely and Daimler are just offering luxury cars, people can already get that with Didi. To win over customers in China, their ride-hailing service will need to be “truly unique and high-end …They really have to differentiate themselves by service and reliability,” according to Bain partner Raymond Tsang.

(Adapted from Money.CNN.com)

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Categories: Entrepreneurship, Strategy, Sustainability, Uncategorized

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