Daimler AG has bought a stake in the main rival to Uber Technologies Inc. in the Middle East, the latest of a series of investments by the world's largest car makers in the rapidly expanding ride-hailing sector.
The maker of Mercedes-Benz cars took part in the second round of a $500 million fundraising alongside Saudi billionaire Prince al-Waleed bin Talal's investment vehicle Kingdom Holding Co., Careem said on Thursday. The firm didn't disclose details, but the transaction values the Dubai-based ride-hailing service at about $1 billion.
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Careem, which launched in 2012, is now active in more than 80 cities in the broader Middle East and boasts over 10 million users. "The opportunity for further expansion in this region is huge," said Careem co-founder and chief executive Mudassir Sheikha.
With the rise of Uber and car-sharing services like Zipcar, young drivers are increasingly using shared-vehicle services rather than buying and owning cars in emerging economies in addition to developed markets.
There are now about eight million subscribers for shared-vehicle services world-wide. Subscribers could grow to 37 million by 2025, according to consultancy Frost & Sullivan.
Auto makers such as Daimler have poured money into new mobility services to capture revenue they would lose if car sales fall dramatically.
General Motors Co, invested $500 million to buy a stake in Uber rival Lyft Inc. last year. Volkswagen AG, the world's biggest car maker by sales, paid $300 million for a stake in Gett, an Israeli ride-hailing service with ambitions to challenge Uber. Toyota Motors Corp. has invested around $100 million in Uber.
Daimler's investment in Careem is one of several investments it has made in the sector. Daimler's Car2Go car-sharing service, launched in 2008, has more than two million subscribers, making it the largest car-sharing service in the world, according to Frost & Sullivan.
"With our investment in Careem, we are now taking the strategic step to becoming the world's leading provider of mobility services," said Klaus Entenmann, CEO of Daimler Financial Services AG. The company didn't disclose details of its investment in Careem.
Daimler's growing interest in ride-hailing--which allows users to find a vehicle with an app from a smartphone, bypassing conventional taxi switchboards--extends to owning MyTaxi, a taxi-hailing app, and Blacklane, an upscale chauffeur-hailing app. Daimler has launched a joint venture with Bosch GmbH to develop a robot-taxi by the end of the decade.
"[T]he future of transport is autonomous," Careem's Mr. Sheikha said. "We are hoping a partnership with [Daimler] will put us on the fast track of innovation," he said.
Careem is working with a U.S. startup to bring battery-powered, self-driving electric pods to the Middle East and North Africa, consistent with Dubai's goals to make at least a quarter of all trips in the city smart and driverless by 2030.
Careem on Thursday said it would use the funds it has raised to gain traction in the region and to develop driverless pods as a new mode of public transportation.
In the past six months, Careem started operating in Turkey and in cities in Egypt and Pakistan. The app is popular in Saudi Arabia where women--who make up about two thirds of Careem's customers in the kingdom--are barred from driving.
Careem raised $350 million of the $500 million late last year from investors led by Japan's Rakuten and Saudi Telecom Co. DCM Ventures and New York-based Coatue Management LLC also contributed to the latest fundraising, Careem said.
Prince al-Waleed owns 95% of Riyadh-listed Kingdom Holding, an international investment company with a stake in News Corp., owner of Dow Jones, the publisher of The Wall Street Journal.
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(END) Dow Jones Newswires
June 15, 2017 10:33 ET (14:33 GMT)