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China’s ride-sharing firm Didi Chuxing announced on Friday its collaboration with telecom company and early backer SoftBank Group Corp. to offer taxi-hailing and other services in Japan.

The two companies stated that they expect to introduce a joint venture in the country soon, with plans to test matching services in Osaka, Kyoto, Fukuoka, Tokyo, and other locations this year.

The partnership will use Didi’s deep learning-based demand prediction and smart dispatch systems to develop ride-hailing platforms that will improve efficiency for both taxi operators and drivers.

The deal will mainly focus on taxi drivers and operating businesses, as peer-to-peer transport services are not legal in Japan.   

Japan is considered as a profitable market by ride-sharing firms, but due to its strict rules, companies have been pushing the country’s regulators to loosen policies.  

Taxi-hailing apps also found it difficult to enter the Japanese market, as risk-averse passengers would rather choose the country’s high-quality traditional taxi service.  

Didi and SoftBank would look into local market conditions and policies, and will engage with industry practitioners, policymakers, and other stakeholders, as they aim to create an open and large-scale platform accessible to every taxi operators in Japan.

Analyst Kirk Boodry stated that he can see Didi being accessed by Chinese outbound travelers everywhere to find a ride a year from now, helping the company secure its existing customer base.     

Didi currently has about 2 million drivers using its app, who have completed 1.1 billion rides in 2017.

Competing with Uber

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The agreement takes the Chinese firm another step closer to contend with its US counterpart Uber Technologies Inc, where the Tokyo-based telecom group recently acquired a 15 percent stake, making it the largest shareholder in Uber.

Didi, Uber, and traditional carmakers are all trying to get ahead in the ride-sharing market, amid a worldwide move in the auto industry towards car-hailing, autonomous driving, and electric vehicles.

Automaker Toyota Motor Corp. on Thursday announced its plans to invest in cab-hailing app JapanTaxi to jointly work on big-data collection and connected terminals for taxis.   

Asia’s biggest car manufacturer will invest ¥7.5 billion ($68.8 million) in JapanTaxi. They will collaborate on helping taxi drivers pick up customers more efficiently using artificial intelligence (AI).

Didi currently dominates its home market, on account of its acquisition of Uber China. It has also invested in its rivals outside of Asia. The company bought a controlling stake in Brazilian app 99 in early January and previously made acquisitions in India and the US.

The ride-hailing firm is aiming to enter the Mexican market and is widening its reach in regions outside mainland China, which includes Hong Kong and Taiwan.

However, Uber’s affiliation with Didi seems to complicate the relationship between ride-sharing firms and their investors.

SoftBank became Uber’s major shareholder after completing a $7.7 billion investment in the transport group, but it has also invested $5 billion in Didi, which is also a shareholder in Uber after acquiring its business in China.

Complications and conflicts may be nothing new, but as of now, those relationships are becoming harder to comprehend when SoftBank and Didi directly made a new rival in a market where Uber is competing as well.

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