Didi Kuaidi is raising an investment round of up to US$2 billion, according to sources cited by Reuters.

Bloomberg originally broke news of the deal earlier this month, but initial estimates pegged the round at US$1.5 billion. That may now be driven up to US$2 billion due to strong demand, the latest report by Reuters said on Friday.

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The deal would value Didi Kuaidi in the region of US$15 billion, and make it the second most valuable Chinese tech startup after smartphone maker Xiaomi, now valued at US$45 billion. Uber’s valuation, meanwhile, is closer to US$50 billion.

“In overall rides, we now have 10x the volume of our closest competitor in China and at least 3x its global volume. With advantages in scale and operational efficiency, we can provide more ride orders to drivers than competitors.” (Source: Didi Kuaidi’s letter to shareholders, obtained by Reuters)

China’s three largest tech giants are deeply involved in the country’s taxi app wars. Alibaba and Tencent have backed Didi Kuaidi, while Baidu is an investor in Uber and has provided the company with its maps and wallet integration.

Didi Kuaidi is currently the market leader in China with 78 per cent, according to research firm Analysys International, which pegged Uber at only about 11 per cent.

Xiaomi remains China's most valuable tech startup. Image credit: Bloomberg

Xiaomi remains China’s most valuable tech startup. Image Credit: Bloomberg

China’s car service market is estimated to be worth US$1 trillion.

In its latest letter to shareholders, Didi Kuaidi also pledged to work closely with the government going forward. The space is still considered a legal grey area in China, with laws not yet decided on the legalities of private car services.

Earlier this month, a woman claimed she was raped by a taxi app driver in the country, and in some places riots broke out on the streets.

Didi Kuaidi expects the annualised amount of money spent on its platforms to be US$12 billion by the end of the year, according to the Reuters report. Beyond that, it aims to serve 30 million passengers and 10 million drivers a day by 2018.

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The company would likely not have welcomed news last week that its existing investor, Chinese fund manager Hillhouse Capital Group, is leading a reported US$1 billion investment into Uber. The move looks like nothing short of an attempt to hedge its bet.

Uber is, meanwhile, said to be preparing for an initial public offering (IPO) soon.

In any case, the news is further testament to the huge opportunity in China’s taxi app space. It also serves as a gentle reminder of just how big Xiaomi has become, still dwarfing Didi Kuaidi — even under its perhaps soon-to-be US$15 billion valuation — at three to one.

Image Credit: XiXinXing/Shutterstock