By Julia Love and Heather Somerville
MEXICO CITY/SAN FRANCISCO (Reuters) - Didi Chuxing, China's ride-hailing behemoth, plans to expand into Mexico next year, intensifying its global rivalry with Uber, according to two sources familiar with the plans.
Didi has spoken before of global ambitions, but has not formally announced where or when it would expand. The Chinese company is the second-most highly valued, venture-backed private firm in the world, after Uber Technologies Inc.
Didi has no cars outside China, meaning Mexico could be its first international operation.
Didi, whose brand is ubiquitous in China but little-known in the West, will launch a smartphone app in Mexico and recruit local drivers to the platform, according to the sources, who declined to be named.
It is unclear which cities Didi will target, although one of the sources said the company was aiming to launch in the first quarter of next year. The company has already begun trying to recruit corporate talent in the sector, the source added.
A spokesman for Didi declined to comment on Thursday.
About a month ago, Didi met with ProMexico, a government trade and investment body, to discuss opportunities in the country, according to a Mexican official, who declined to provide further details about the conversations.
The company has made no secret of its desire to expand beyond China, particularly in light of the growing number of Chinese customers who travel overseas. In April, Didi raised $5.5 billion from investors, in part to fund global expansion.
But until now, its plans have been limited to financial commitments to ride-hailing companies in other countries and a research lab in Silicon Valley that opened earlier this year.
Didi has invested in Uber rivals around the world, including U.S.-based Lyft, Brazil-based 99, India's Ola, Singapore-headquartered Grab, Estonia's Taxify and Careem in the Middle East.
The company acquired Uber's China business last year after Uber lost roughly $2 billion trying to compete.
After ceding its China business, Uber doubled down on Latin America, where Didi is now encroaching. Uber has established a stronghold in Mexico, with seven million users across 45 cities. Mexico City is Uber's third-biggest market in the world by rides, after the Brazilian cities of Sao Paulo and Rio de Janeiro.
Didi will also compete with Spanish ride-hailing company Cabify, which operates in seven Mexican cities.
Regulatory battles are looming. In the touristy state of Quintana Roo, for example, Uber has said the proposed regulation is so onerous that it would drive the company out of the market if passed in its current form. The regulation would ban cash fares, which Uber has said are critical for reaching riders without credit cards.
Mexican authorities fear that allowing ride-sharing apps to accept cash payments would put them in direct competition with traditional taxis, which are a political force in some cities.
Despite Uber's presence in Mexico, competitors have room to grow, particularly if they can find a way to reach "unbanked" consumers while addressing regulators' concerns about cash, said Enrique Garcia, a PhD student at Mexico's CIDE university who has published research on Uber's presence in the country.
"There is not a point of saturation," Garcia said.
(Reporting by Julia Love in Mexico City and Heather Somerville in San Francisco; Additional reporting by Noe Torres in Mexico City; Editing by Richard Chang)