By Julie Zhu
HONG KONG (Reuters) -China's Didi Global is in advanced talks to sell its smart driving and cockpit assets to state-backed digital mapping firm NavInfo's unit, as the ride-hailer focuses on its core business after a bruising regulatory crackdown, three sources said.
Didi plans to sell the assets to AutoAi, a provider of intelligent cockpits-related software and hardware, in exchange for a stake in AutoAi, said two of the sources.
China's largest ride-hailer expects to pull back significantly from the ultra-competitive electric vehicle market with the deal, which will value the assets at close to 500 million yuan ($70 million), said the two people.
Electric vehicle (EV) makers are competing fiercely in a consolidating Chinese market and are seeking new technologies such as smart cockpits and autonomous driving to appeal to consumers.
Didi sold its EV development business to Chinese EV maker Xpeng (NYSE:XPEV) a year ago in a deal worth $744 million in exchange for a roughly 3.25% stake in the vehicle maker. That accounted for the bulk of its EV-related assets, said the three sources.
The deal with AutoAi could be announced in the coming days, they said, declining to be identified as the information was private.
Didi, NavInfo and AutoAi did not respond to requests for comment.
As part of the deal, Didi also plans to invest more than 200 million yuan in the currently loss-making AutoAi, also known by its Chinese name of Siwei Zhilian Technology, said two of the people.
The deal will help Didi forge a deeper partnership with AutoAi and NavInfo, one of China's top internet mapping firms, to explore strategic cooperation in a number of areas including ride-hailing and intelligent driving, they said.
DIDI'S ROAD TO RECOVERY
Shenzhen-listed NavInfo, which offers services such as high-definition maps and navigation solutions to automakers and internet firms, provides mapping-related data and technical support to Didi.
NavInfo, which counts BMW (ETR:BMWG) and Mercedes Benz (ETR:MBGn) among its automaker clients, has also been competing with Baidu (NASDAQ:BIDU) and Tencent as a major supplier of mapping data and other software solutions.
The smart driving and cockpit assets its unit is acquiring from Didi are set for mass production, said one of the people.
The asset sale and the investment, if completed, would see Didi become the second largest shareholder of AutoAi, added another of the people.
Spun off from NavInfo in 2018, AutoAi currently counts the parent as its biggest shareholder with a 30% stake, followed by a unit of Taiwanese chip design giant MediaTek with a stake of nearly 20%, as per the Chinese corporate registry.
Didi had previously pushed ahead with an EV-making project, code-named "Da Vinci", which used to house about 2,000 employees, and had ambitions to move into manufacturing, sources have said.
It invested more than 10 billion yuan in the EV business which includes the development of vehicles, smart driving and smart cockpit since the project's inception in 2021, said two of the sources.
Didi has in recent weeks informed potentially impacted employees, most of whom are based in Beijing, about the impending AutoAi deal, said the sources, with one source adding that about 200-300 people would be affected.
Last year's divestment was Didi's first major transaction since its apps returned to domestic app stores in early 2023 after a regulatory crackdown on its business that forced it to delist from the U.S. in 2022.
The company said last week it swung to a net profit of 1.4 billion yuan for the second quarter from a 300 million yuan loss a year earlier and saw revenue rise 4.1% to 50.9 billion yuan for the quarter.
($1 = 7.1380 Chinese yuan renminbi)