Car Rental Service eHi Invested US$25 M in Taxi App Kuaidi for 8.4% Stake
In April this year, Chinese car rental service eHi Car Services invested US$25 million in Kuaidi Dache’s subscribing series B preferred shares, through eHi’s wholly owned subsidiary Elite Plus Developments Limited, taking an 8.4% stake in the taxi app. The news was recently released in eHi’s prospectus to the U.S. Securities and Exchange Commission, with the prospectus adding that Kuaidi Dache also issued a warrant to Elite Plus to purchase an additional 4,684,074 of their series C preferred shares.
eHi explained that the acquisition is part of its growth strategy to expand its customer base by acquisitions or strategic partnerships in areas which it either does not currently operate or does not sufficient capacity to operate. However, the expansion may expose the company to decreased profitability, and costs from integrating new operations, services and personnel, and so on, the prospectus added.
Founded in 2006, eHi is a traditional car rental company that services both consumer and corporate clients. Chinese online travel giant Ctrip led a US$100 million funding round in eHi at the end of 2013, and then invested an additional US$13 million in the company in April this year, increasing the company’s stake in eHi to 23%. According to the prospectus, eHi plans to raise US$200 million in its U.S. IPO. As the largest shareholder of eHi, Ctrip also led a US$ 60 million round in Chinese car rental service Yonche.
Kuaidi Dache and Didi Dache, venture-backed by Alibaba and Tencent respectively, have stood out from the series of Chinese taxi apps amidst the fierce land-grabbing battles in the Chinese taxi app industry last year. Although the taxi app sector is generally considered a money-burner, it is still attracting massive investment from venture capitalists. Take a look here to find out why Chinese investors are willing to take bold bets on the taxi app business.