Daimler's mytaxi said it will merge with British rival Hailo in an all-share deal, creating Europe's largest smartphone-based taxi-hailing business.
Unlike US-based ride hailing start-up Uber, which established itself to compete against taxi companies, the new company will operate using taxi firms.
It is the latest push by traditional carmakers to enter the taxi ride hailing services market dominated by Uber and other technology companies.
The companies declined to disclose financial terms.
"It's a paper deal. Daimler will own 60 percent of the new entity and the stakeholders in Halio will own 40 percent," said Halio CEO Andrew Pinnington, who will be chief executive of the combined company.
The merged entity, which will operate under the mytaxi brand, will have 70 million passengers and 100,000 registered taxi drivers in over 50 cities across nine countries in Europe, the companies said.
In similar deals this year, Volkswagen took a US$300 million stake in Gett and General Motors invested $500 million in Lyft.
Hailo, which operates in Britain, Ireland and Spain, will combine with myTaxi, which is available in Austria, Germany, Italy, Poland, Portugal, Spain and Sweden.
The combined company will be headquartered in Hamburg, Germany.
MyTaxi founder Niclaus Mewes will take a seat on the supervisory board and in addition he will become managing director of Daimler Mobility Services GmbH.
Sky News was first to report the potential combination of MyTaxi and Hailo.