(Bloomberg) -- Daimler AG and BMW AG plan to merge their car-sharing operations as the world’s biggest luxury-vehicle makers team up to take on ride-hailing providers such as Uber Technologies Inc.
The companies will form a 50-50 joint venture to include Daimler’s Car2Go and BMW’s DriveNow businesses as well as services including smartphone apps for calling taxis, locating parking spots and recharging electric autos, they said in a joint statement. Both carmakers raised full-year profit forecasts, saying earnings are likely to increase slightly if they can complete the deal in 2018, versus earlier predictions of flat figures.
The merger would allow Daimler and BMW to share the risk of operating in a tech-focused industry that includes a growing suite of rivals in mobility services. They’re entering a rapidly changing environment that in the past week alone included a market and share-swap deal between Uber and Southeast Asian rival Grab, the U.S. company’s struggles with a fatal accident involving a self-driving car test, and Alphabet Inc.’s Waymo unit agreeing to develop autonomous vehicles with Britain’s Jaguar Land Rover.
The German luxury-car manufacturers are “addressing the challenges arising from urban mobility and changing customer wishes,” they said. The companies pledged to continue competing in their main businesses of building vehicles.
Car2Go and DriveNow were both originally started as ventures with established auto-rental companies, but Stuttgart-based Daimler and Munich-based BMW each bought out the other owners this year, setting the stage for a tie-up.
The combination is unlikely to pose antitrust issues, depending on how the market is classified, said Sven Diermeier, analyst at Independent Research GmbH.
The manufacturers are also joint investors in the HERE digital-mapping consortium, which includes Volkswagen AG’s Audi luxury-car division as well as technology giant Intel Corp. and auto-parts suppliers Robert Bosch GmbH and Continental AG as partners.
The Daimler-BMW tie-up is “going in the exactly right direction, because mobility services is developing into a large area,” said Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany. “Right now, you can’t earn money there, and there are a lot of infrastructure and overhead costs that can be combined.”
Long Road to Profitability
BMW board member Peter Schwarzenbauer said the venture won’t be profitable immediately.
“We put this together to really grow now, to scale it. The first objective is to become a big player, then it can be profitable,” he said in an interview with reporters at the New York auto show.
The companies are considering rebranding the shared entity with a new name, but won’t announce anything until the deal is approved by regulators. Schwarzenbauer declined to say how much BMW is investing in the venture.
Car2Go offers rentals by the minute of models from Daimler’s Smart city-car unit and smaller vehicles from its main Mercedes-Benz brand. DriveNow’s fleet is comprised of Mini cars and BMW-brand compacts, including the battery-powered i3.
©2018 Bloomberg L.P.