Under the deal, the China business will retain its separate branding while Uber Technologies will gain a stake of about 17.5% in the combined company.

Cheng Wei, founder and chief executive of Didi Chuxing, will join the board of Uber. Uber CEO and cofounder Travis Kalanick will join Didi's board.

IHS commented on the deal, saying: “The merger of Didi Chuxing and Uber China reflects the incredibly competitive landscape for ride-hailing mobility services in China, emphasizing that neither company can profitably sustain the aggressive subsidies used to gain market share in the early expansion of the ride-hailing segment in the country. The merger will effectively end the hyper-competition that has been the norm between the two, and it will allow both companies more freedom to deploy their significant resources in new growth areas.

“Didi can now grow inside China at more manageable – and eventually profitable – rates and focus on international expansion, while more deliberately considering its role in the future of mobility in China. On the other hand, Uber will soon see a $1 billion annual operating deficit in China begin to dissipate, which means it can now focus on international expansion, a possible IPO, as well as research and develpment in future technologies – from self-driving cars to maps.’

It added: “The revolution created by mobility services by fleets of driverless vehicles will become a major opportunity for Didi, but it will also create opportunities for new market entrants. The result will be a large variety of mobility services, from low-cost services for mass consumption, to luxury mobility services – and many variations in-between.”