Didi nabs coveted license with 32% stake in insurer

China’s biggest ride-hailing platform Didi Chuxing took a 32% stake in Hyundai Insurance China, according to a regulatory filing released Tuesday, ramping up with the move its prospects in the Chinese online insurance market.

Why it matters: The recent deal could help Didi widen its line of auto financial offerings and expand its footprint in the lucrative Chinese online insurance industry, which the country’s biggest technology firms are vying to enter.

• Didi gained with the sale not only the right to sell insurance but also to issue and price insurance products in the Korean insurer’s China operations, according to Chinese media reports citing industry insiders.

Details: The regulator recently approved the RMB 1.1 billion ($158 million) investment in Hyundai Insurance China, the total for four stakes going to Chinese investors, with Lenovo and Didi subsidiary Dirun Tianjin Technology taking the lions share.

• Didi and electronics company Lenovo each bought 32% of the Beijing-based insurer, and are now the second-largest shareholders after Hyundai Marine and Fire Insurance, which holds 33%, according to filings released Tuesday by China Banking and Insurance Regulatory Commission.
• The Hyundai subsidiary mainly operates property insurance, liability coverage, and cargo insurance, and was granted the permit to sell mandatory auto insurance by Chinese regulators in 2013.
• Didi’s move into the auto finance sector is not new. The company has been offering financial services such as insurance and car loans with partners for five years, and began issuing loans to ride-hailing drivers as of February 2018, according to a Chinese media report.
• The China mobility giant in late 2017 won an online payment license through the acquisition of a Shanghai-based fintech company 19Pay for RMB 300 million, reported Caixin.
• This was followed by the launch of several financial services including crowdfunding for critical illness protection in its ride-hailing app, and a car leasing and fleet management platform early last year.

Context: Chinese internet heavyweights including Alibaba and Tencent have all been jostling for a position in the country’s online insurance market.

• Alibaba and Tencent joined forces to establish China’s first online-only insurer Zhongan with the country’s second biggest insurer Pingan in 2013. Ant Financial had 16% stake of the company, followed by Tencent and Pingan’s 12.08% before the company listed on the Hong Kong stock market in 2017.
• Baidu in June 2016 forged an alliance with China Pacific Property Insurance with plans to form a joint venture for auto insurance products. The application for an insurance license became mired in the process, and the two companies abandoned the JV plan in October 2018.