Didi Chuxing, China’s largest ride-hailing company, has suspended its carpooling services after a passenger was killed. On the face of probable stricter supervision, the number of drivers is likely to decrease and cause extended customer waiting duration. This unfortunate incident that took place after a similarly appalling killing by a Didi driver in May has generated public and government backlash. It has also paved the way for rival ride-hailing companies to undermine Didi’s dominance in the country. According to a Bain report, Didi Chuxing controls 90 percent of the Chinese ride-share market and makes 10 billion daily trips.
There is certainly room for others to serve the market, and such incidents expose an apparent weakness in Didi’s business model: aggressive expansion without adequate control of the integrity of the drivers on their platform. – Bill Russo, head of Shanghai-based consultancy Automobility Ltd.
In a humble move, a lengthy public apology letter was issued by Didi founder Cheng Wei and President Jean Liu saying that, “our vanity overtook our original beliefs.”
More than 80 businesses with licenses operate in the $30 billion Chinese ride-hailing sectors, including Tencent-backed (0700.HK) Meituan Dianping, CAR Inc and Geely Holding Group’s CaoCao Car. Didi Chuxing was valued at $56 billion in a fundraising round in 2017 and is trying to expand globally, having bought Uber’s China business in 2016. The number of rides per day on Didi’s platform rose to 20 million from 14 million after its deal with Uber in 2016. Now, it is even considering a giant initial public offering in 2019.
However, business for Didi might not flourish that rapidly with the company officials having received orders of suspending drivers without proper operating licenses and ceasing new registrations for unqualified drivers by regulators in major cities including Beijing, Chongqing, Dongguan, Guangzhou, and Shanghai. It is likely that there would be tougher safety measures and driver screenings. The company sent a statement to Reuters on August 29 with the promise to “do everything we can technologically and institutionally to prevent crime,” and extend the use of technology to improve efficiency.
Moreover, there have been numerous complaints about Didi’s long customer waiting times. According to data sent to Reuters in January, the average driver response rates declined by 13 to 40 percent in some densely populated areas across China’s largest cities in 2017 as compared with 2016. Even though Didi has declined to provide updated numbers on the customer waiting times, domestic media have reported the continuation of waiting times.
Chinese technology companies have a culture of moving fast and breaking things, and while Didi got a free pass from the regulator for the first incident … it is unlikely to get off scot-free the second time. – Richard Windsor, technology analyst
Transport officials in Dongguan have also commented that” There are still a large number of drivers and vehicles that do not have the regulatory qualification to operate,” pointing to more drivers operating than those that have been registered in the city.
Didi is in dispute with its drivers over dissatisfaction among drivers, with at least eight strikes in different cities across China in the past year, as per reports by local media. Drivers working for Didi have complained about how much Didi collects from drivers, how much fines drivers had to pay after regulatory changes, about having to obtain a certificate that would scrape their cars after eight years, cancellation of subsidies and even stricter dress standards for drivers in its premier service, all of which have made their lives harder.