March 28, 2018 / 12:20 PM / 4 months ago

Facing tech threat, Daimler, BMW to combine car-sharing businesses

FRANKFURT (Reuters) - Leading German luxury carmakers Daimler and BMW have joined forces to expand their businesses in new services such as car-sharing and electric vehicle charging to compete with Uber [UBER.UL] in the United States and Didi Chuxing in China.

The logo of carsharing company Car2go is seen at its headquarters in Vienna, Austria, June 13, 2016. REUTERS/Heinz-Peter Bader

Under the terms of their deal, which includes car-sharing units Car2Go and DriveNow as well as ride-hailing, parking and charging services, Daimler and BMW will each hold a 50 percent stake in a joint venture.

They said their goal was to offer customers a system of intelligent, seamlessly connected mobility services that could rapidly be expanded around the world, while continuing to compete on the market for luxury cars. Daimler is the owner of the Mercedes brand.

“As pioneers in automotive engineering, we will not leave the task of shaping future urban mobility to others,” Daimler Chief Executive Dieter Zetsche said.

Consultancy PwC has said that conventional carmakers will become marginalized by cash-rich technology firms if they do not develop pay-per-mile mobility services.

Their share of global auto industry profits may fall from 85 percent to less than 50 percent by 2030, it said.

The logo of carsharing service DriveNow is pictured on the back of a car in Berlin, Germany, May 27, 2015. REUTERS/Stefanie Loos

Evercore ISI analyst Arndt Ellinghorst said the deal between Daimler and BMW seemed to make sense for consumers.

“As with many things related to shared mobility/connectivity services, consumers want a ‘one-app’ solution rather than a multitude of standalone offerings,” he said.

“Industry-wide collaboration will need to materially increase if carmakers want to have a realistic chance to turn ‘new mobility’ services into profitable revenue generators,” he added.

Assuming that regulators approve the transaction, both companies expect their key profit figures — earnings before interest and tax (EBIT) for Daimler and pre-tax profit for BMW — to rise slightly year-on-year, compared with previous guidance for flat profit.

The deal will have no impact on the operating profit margin of BMW’s core automotive segment, the companies said.

Daimler agreed earlier this month to buy Europcar’s 25 percent stake in Car2Go for 70 million euros ($86 million), a move seen at the time as paving the way for closer cooperation with BMW.

($1 = 0.8100 euros)

Reporting by Edward Taylor; Writing by Maria Sheahan; Editing by Keith Weir

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