A VIEW TO PROFIT

Didi and Kuaidi invested heavily to secure a market share last year, awarding both passengers and taxi drivers huge subsidies. But neither managed to discover a feasible way to make profits, resulting in the unexpected merger.

In the first six months of 2014, Alibaba-backed Kuaidi's subsidies amounted to 1 billion yuan (around $163 million), while Didi, supported by another Internet giant Tencent, subsidizes cost it 1.4 billion yuan.

Understandably, the firms gradually reduced their subsidies in the second half of the year.

Kuaidi CEO Lyu Chuanwei said the deal was partly influenced by the sustainability of subsidies.

The merger will allow the newly established company to accelerate expansion in other areas, Lyu said.

A business insider said that even an initial public offering (IPO) would be on the agenda soon; which was an unattainable goal last year.

"The battle escalated last year as both financial backers fought to attract more mobile payment users," iiMedia Research CEO Zhang Yi said.

There were 172 million taxi-hailing app users by Dec 2014, 99.8 percent of which used the two apps.

Liu Qing, president-to-be of the new company, is upbeat that the new company has a future beyond just taxis.

"When you open the app, it can tell you when the next bus is due or whether you should take the subway to avoid traffic or even help you order a car," she said outlining her vision for the next five years.