Daimler's (DDAIY) Mytaxi will merge with U.K. rival Hailo to strengthen its position in an increasingly crowded European taxi-hailing app market.

Daimler will own 60% in the new company, to be called Mytaxi, while the remaining stakes will be held by Hailo's existing shareholders, according to Mytaxi spokesman Stefan Keuchel. Following the merger, Mytaxi will have contracts with 100,000 drivers in 50 cities. The companies didn't disclose the valuation of the deal. The merged business will be led by Hailo CEO Andrew Pinnington.

"It makes sense for companies like Mytaxi and Hailo to join forces to work together to compete when international competitors are entering the European market," Keuchel said. "It also makes a lot of sense because Hailo is very successful in the U.K., and especially in Ireland to the extent Hailo has become a verb there when you order a taxi."

While the Hamburg-based Mytaxi, founded in 2009, was the first taxi-hailing app developer in the world, it has faced fierce competition from players like Uber Technologies, which connects app users with cheaper rides. The competition has intensified this year as Daimler competitors have stepped into the ride-hailing market as part of an effort to diversify their revenue into the so-called mobility services market. In May, Daimler's direct competitor Volkswagen (VLKAY)  invested $300 million in Gett. In the U.S., Detroit, Mich.-based General Motors (GM - Get Report)  invested $500 million in Lyft in January.

The newly formed company also hopes to address the demands of countries like Germany and France where the taxi business is highly regulated and where Uber, whose apps connect customers to privately driven cars, has been banned in certain cities. Uber co-founder and CEO Travis Kalanick has publicly antagonized taxi drivers.

Both Mytaxi and Hailo have stuck to offering rides with only licensed taxis, and will continue to do so, Keuchel said. Gett follows a similar business model. Lyft works with unlicensed drivers but mostly in the U.S. and some Asian cities.

Mytaxi takes 7% of the taxi fare, according to Keuchel. That compares with Uber's 20%.

Currently, Mytaxi has contracts with over 45,000 taxis in Germany, Austria, Poland, Spain, Italy, Portugal, and Sweden, while Hailo works with 60,000 drivers in U.K. cities like London, Liverpool, Leeds as well as in Ireland, Madrid, and Barcelona.

By mid-2017 the Mytaxi brand will replace Hailo across its business.

Daimler and other major automakers are pouring their resources into the mobility services business, which also include car-sharing and self-driving businesses.

Mytaxi was launched in 2009 by Hamburg-based start-up Intelligent Apps. At the beginning of 2012, Daimler took a stake in Intelligent Apps and in 2014 bought the whole of Mytaxi. In 2014, a Daimler subsidiary also bought another car-hailing app, RideScout, as it sought to move beyond vehicle manufacturing.

Hailo was founded in 2011 and has thus far raised $100 million from investors including Virgin Group (VMED)  founder Richard Branson, Wellington Partners Advisory and Atomico Ventures.  Its app services are available in more than 20 cities including London, Madrid, Barcelona, Osaka, and Ireland.

Hailo investors will continue to hold stakes in the new company, Keuchel said.

The creation of the new Hamburg-based company is subject to approval of the European regulators.

Daimler shares recently traded up 1.7% at €60.97 ($67.02).