Mercedes-Benz-owner Daimler has taken a stake in Taxify in a funding round that values the ride-booking group at more than $1bn, the latest investment by the German carmaker into the growing world of ride-on-demand services.

Estonian start-up Taxify, which also counts China’s Didi Chuxing as an investor, has raised $175m as it aims to expand beyond its network of 40 cities in Europe and Africa. Didi also participated in the round, along with European venture capital fund Korelya Capital and TransferWise co-founder Taavet Hinrikus, with more than $100m of the investment coming from the German carmaker.

Under the latest deal Daimler will join Taxify’s board. The carmaker may roll the service into its moovel app, a step that would increase Taxify’s customer base by a quarter to 12.5m.

Jörg Lamparter, head of new services at Daimler, said: “Taxify is an ideal addition to our existing and extensive mobility services portfolio. With its fast-growing ride-hailing activities and extensive geographical coverage, Taxify is a perfect fit with Daimler.”

Car manufacturers are investing in ride-booking services as a way of entering the fledgeling transport services market, in which consumers pay per ride rather than owning a car directly.

New partnerships also open new revenue avenues, with the possibility of selling vehicles directly to fleet operators.

In November Volvo agreed a $1.4bn deal to sell 24,000 sports utility vehicles to Uber for use in self-driving fleets, while Jaguar Land Rover will sell Waymo 20,000 electric Jaguars for its network.

Taxify, which is not developing autonomous systems but wants to focus on running a network of vehicles, is looking to Daimler for its leadership in engineering autonomous driving systems.

“Among all of the carmakers, we saw Daimler as the most progressive in both ride-sharing and autonomous cars,” Markus Villig, Taxify’s founder said. The business, which started in 2013, currently operates in 40 cities across 25 countries but is aiming to open in “tens of cities” in the coming years, as well as scaling up in its current locations. It expects to book about $1bn worth of rides this year, although it remains lossmaking in many of its cities.

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