China's Didi sets up joint ventures with BAIC unit, Volkswagen

By Yilei Sun and Norihiko Shirouzu

BEIJING (Reuters) - China's Didi Chuxing has set up joint ventures with a unit of Chinese carmaker BAIC and Germany's Volkswagen as part of the ride hailing giant's goal to ultimately develop purpose-built cars for its services.

China's biggest ride-hailing operator said on Monday the joint venture (JV) with state-owned BAIC, called BAIC-Xiaoju New Energy Auto Technology Co. Ltd, aimed to develop "next-generation connected-car systems."

It is the first JV between the two companies and follows another partnership announced by Didi last year with Volkswagen.

Volkswagen said on Monday the two firms formally set up their JV last month. Chinese company registration records showed that Didi holds a 60 percent share in the JV, called Shanghai Juzhong Smart Mobility Co, while Volkswagen Group China owns 40 percent.

This JV "will focus on fleet operations, fleet sales, fleet management, repair and maintenance services. The new JV will also explore fleet leasing business," Volkswagen said in a statement to Reuters.

"At the same time, it will carry out extensive discussions to cooperate with industry leading companies in the field of smart mobility," Volkswagen added.

The two JVs are among the most significant projects that Didi has begun pursuing as part of a broad alliance the Chinese company formed with 31 automakers and parts suppliers last year.

Didi said at the time that it formed the alliance to offer its customer and operational skills to automakers wanting to develop their own ride-sharing services in return for design expertise. Eventually, the Chinese firm intends to develop cars purpose-built for its services.

The growing popularity of ride-hailing services for commuting and running errands in congested cities such as Beijing and Shanghai is showing early signs of reducing private car ownership.

This could have serious consequences for existing carmakers and is forcing companies like Volkswagen to adapt their businesses and seek out future revenue streams.

($1 = 6.7435 Chinese yuan renminbi)

(Reporting by Yilei Sun, Norihiko Shirouzu and Cate Cadell in Beijing; Writing by Brenda Goh; Editing by Himani Sarkar and Mark Potter)