CATL and Didi said on Jan. 28 that they have signed a partnership to build battery swap stations for commercial fleets to recharge their electric vehicles, in a sign of China’s urgent need to set up a gold standard for EV infrastructure.

Why it matters: The news reflects how major players are rushing to build alliances and expand their presence in the hope of getting a larger say as the Chinese central government is pushing for industry-wide standards to drive EV adoption and reduce the strain on the grid. 

• Xin Guobin, a vice minister of industry and information technology, in June said Beijing will back businesses’ efforts to jointly set standards for battery specifications and swap techniques. 
• Meanwhile, the central government recently set a goal to begin operating large facilities for bi-directional charging in the next two years, which would allow EV batteries to charge during off-peak hours and return surplus energy to the grid when demand is high.

Details: CATL and Didi will set up a joint venture for a fast and large-scale roll-out of a battery-swapping network for ride-hailing services in China, according to a joint announcement, which did not reveal detailed plans for the swap network or the size and structure of the JV. 

• The two companies will also promote the adoption of EVs with swappable batteries while exploring collaboration on other areas such as storage-integrated EV charging facilities, the statement said.
• CATL expects such efforts to enhance its reputation since public infrastructure could help promote it as a purveyor of better quality and longer service life, people close to the company told Caixin.

Context: NIO is for now the dominant player in the field, operating more than 2,300 battery swap stations in China as of December. The EV maker plans to add at least 1,000 more this year and has partnered with big names including Geely, Changan, and Chery. 

• China reported a significant 81% annual increase for its battery swap infrastructure network with a total of 3,567 swap stations as of December, according to data compiled by the Electric Vehicle Charging Infrastructure Promotion Alliance (EVCIPA).

Chinese carmaker Guangzhou Automobile Group (GAC) is strengthening its alliance with ride-hailing platform Didi, investing up to $75 million into the latter’s autonomous driving unit. The move is expected to help GAC enhance its self-driving technological capabilities and sustain its sound growth momentum in the Chinese electric vehicle segment, according to an industry veteran. 

The deal, nearly clinched over three years ago, has recently been revived by the two companies as the impact from Beijing’s extended crackdown on Didi has waned, a person with direct knowledge of the matter told TechNode on Friday. It also comes against the backdrop of Didi’s renewed efforts to solidify its position as China’s biggest ride-hailing service with new incentives, putting smaller rivals under pressure. 

Self-driving push: Autonomous driving has proven to be among the most capital-intensive startup businesses on the current tech landscape, and the extended collaboration with Didi would allow GAC to share its costs and risks of making robocars, said Liu Guanghao, partner at Shanghai-based venture capital firm Befor Capital.

• The first robotaxi jointly developed by GAC and Didi is slated to join Didi’s ride-hailing network for commercial operation in 2025, the companies said earlier this year. GAC’s EV arm, Aion, announced a partnership with Didi back in May 2021 to develop a mass-produced car with Level 4 autonomous capabilities, indicating that the car can pilot itself without a human driver most of the time.
• Didi will also jointly test and operate autonomous vehicles for ride-hailing with OnTime, a mobility platform launched by GAC with partners in 2019, as disclosed by an anonymous source. OnTime, primarily active in the southern Chinese province of Guangdong where its parent company is headquartered, has been testing AVs with Toyota-backed Pony.ai, as well as Nissan-supported WeRide.

EV sales boost: The investment would also help GAC’s core carmaking business achieve sustained growth, especially in the Chinese commercial fleet segment, where its EV brand Aion has established a significant presence over the years, according to Liu. “Carmakers need more sales in order to survive in this highly competitive market,” he said. 

• Aion ranked second in sales among all-electric vehicles for ride-hailing, with approximately 49,000 units sold from January to October 2022, which accounted for 29% of its total sales, according to figures compiled by Shanghai-based consultancy LandRoads (in Chinese). BYD was the top-selling brand in the field, with sales of 35,000 more units during the same period, although this accounted for only 14% of its total volume. 
• GAC told investors last March that shipments of its Aion EVs for ride-hailing services only accounted for 12% of its total sales. The automaker, also a manufacturing partner for Toyota and Honda in China, reported sales of nearly 360,000 Aion EVs from January to September and is hoping to achieve 500,000 units for this year, which could almost double the number it sold in 2022. 

Context: GAC Capital, a wholly-owned subsidiary of the automaker, as well as state-owned Guangzhou Development District Investment Group, will invest the same amount of up to $149 million totally in Didi’s self-driving unit. GAC is set to inject no more than $75 million in the funding round, according to a Friday announcement (in Chinese). 

• OnTime is currently pursuing a public listing on the Hong Kong stock exchange, four years after it was launched by GAC along with a group of investors including Didi and Chinese gaming giant Tencent in mid-2019. It completed roughly 60 million rides last year and has operated in 21 domestic cities in the country’s Greater Bay area as of June. 
• GAC declined to comment when contacted by TechNode on Friday. Didi did not respond to TechNode’s request for comment. 

China’s Didi has recently set new growth targets in the three years to 2025, with new incentives for drivers and riders, in its latest move to recapture lost market share in the country’s ride-hailing sector, LatePost reported Monday. 

Why it matters: The move comes after Didi received a permit in January to resume new user registration and downloads through Chinese app stores for its ride-hailing service, marking an official end to a long-running regulatory crackdown on the company. 

• The development also puts competitors such as Meituan and Alibaba’s Amap under pressure, although industry insiders warn of a bumpy road ahead for Didi in the face of softening market demand due to weakening economic conditions, according to the report. 

Details: Didi recently informed investors that it is aiming for a 45% year-on-year growth in daily orders in 2023 and expects to keep the pace between 10% and 15% over the next two years, individuals familiar with the matter told Chinese media outlet LatePost. 

• This implies that the company is expected to complete more than 29 million rides per day for the full year, rebounding from its lowest point of around 20 million last January, and increasing the number to nearly 40 million by the end of 2025. 
• The annual target for this year is achievable, according to company insiders, with Didi starting from a low base in 2022 when major Chinese cities were repeatedly placed under Covid-19 lockdowns, dealing a blow to the country’s ride-hailing sector.
• The company delivered roughly 28.2 million rides per day on average in the first quarter of 2023, representing a 42% growth from a year ago, and increased its average number of daily rides to 29.4 million in the second quarter, according to its filings. 
• However, Didi’s ambitious objectives for 2024 and 2025 may face significant hurdles amid shrinking demand. By the end of 2022, ride-hailing app users in China totaled 437 million, down around 15.5 million on the total from the year before, according to figures compiled by the China Internet Network Information Center. 
• China’s biggest ride-hailing platform has increased its efforts to subsidize drivers and riders in recent months. A source estimated that the overall amount of subsidies could reach RMB 26.6 billion ($3.6 billion) this year, which would be equivalent to 14.8% of its total revenue at home, surpassing its previous level of 14%. 
• Didi did not respond to TechNode’s request for comment.

Context: Didi has been scaling back its efforts in developing cash-bleeding, emerging new businesses, and refocusing on its core business over the last two years after the Chinese government launched a cybersecurity probe into the company in July 2021. 

• Chengxin Youxuan, Didi’s community group-buy grocery unit, reportedly shut down more than 60% of its service locations shortly after the probe began, only a year after the launch of the service. 
• The company announced the sale of its smart electric vehicle business to Xpeng Motors in August. It had previously launched an all-electric hatchback for ride-hailing with BYD in November 2020.
• Chinese authorities announced a RMB 8.02 billion fine for Didi last July, closing its 18-month crackdown on the mobility giant, which was initiated following its mega public listing in New York in June 2021. 
• Didi had previously set big targets back in 2020. Notably, it had set its sights on overall daily orders surpassing 100 million globally for the next three years, with its four-wheel businesses in China, including ride-hailing and private chauffeurs, intended to account for half of this figure.

READ MORE: Didi app ban ignites race for ride-hailing market share

Xpeng Motors chief executive He Xiaopeng said on Monday that he anticipates annual sales for an upcoming model, co-developed with Didi Chuxing under a new brand, to reach 100,000 units, in an unexpected partnership between the electric vehicle maker and the ride-hailing platform.

Why it matters: The move marks Xpeng Motors’ latest effort to expand its product lineup and extend its brand reach into the fleet market. The alliance is expected to help Xpeng significantly reduce costs and generate economies of scale in the production of highly autonomous cars, said He.

• While the deal will help Xpeng accelerate its EV manufacturing growth and facilitate the development of self-driving technologies with more driving data, it can help Didi monetize its smart auto segment and attract drivers with vehicles suitable for ride-hailing, Bernstein analysts wrote on a Monday note.
•  Nonetheless, doubts were voiced over Xpeng’s ambitious sales goal, citing limited market size and fierce competition. “BYD was the only OEM (Original Equipment Manufacturer) to deliver more than 100,000 units, and the remaining top players all have their own ride-hailing affiliates,” wrote Bernstein analysts.

Details: Speaking to Chinese reporters during a media briefing, CEO He expressed confidence in the forthcoming A-class sedan, scheduled for production next year. He believes the model will enhance Xpeng’s performance, but does not specify a timeframe for his annual sales volume goal. The company delivered 41,435 EVs for the first half of this year with six namesake-branded models on sale.

• The EV startup is currently developing the model with assistance from Didi under a project codenamed Mona. He believes that this could become “a hit product” featuring Xpeng’s self-driving technology at an expected price tag of around RMB 150,000 ($20,594). 
• The compact sedan will also be the first model under a new mainstream sub-brand, which He said will be positioned to target the Chinese consumer EV segment while also facilitating Xpeng’s expansion within the fleet market segment.
• As part of the collaboration, Xpeng will acquire Didi’s smart EV business, which comprises the design, research, and development of EVs with intelligent features. This acquisition will be accomplished through the issuance of approximately HK$5.84 billion ($744 million) worth of new shares to Didi.
• China’s biggest ride-hailing service will become a strategic investor in Xpeng with a stake of 3.25% after the deal,  helping take Xpeng’s newly branded EVs nationwide via its strong shared mobility market, according to a statement. 
• In Hong Kong, Xpeng’s shares surged 10.9% to HK$72.2 on Monday following the announcement. 

Context: The news comes a month after Guangzhou-based Xpeng announced a collaboration with Volkswagen to jointly launch two VW-branded B-class EVs in 2026. B-class vehicles are normally larger than A-class vehicles and have larger engines.

• Xpeng is not the only Chinese EV maker exploring new brand options to reach a wider customer base. Rival Nio has recently made notable progress in the development of two entry-level brands codenamed Alps and Firefly, with both scheduled for launch in 2024. 
• Didi initially had ambitious plans for its carmaking business, assembling a team of 1,700 employees dedicated to working on the project, with the aim of releasing a consumer EV in mid-2023, multiple Chinese media outlets reported. It even launched a battery-electric hatchback tailor-made for ride-hailing in collaboration with BYD in November 2020, Bloomberg reported. 
• However, the ride-hailing giant had been under an 18-month investigation for alleged national security issues which began right after its mega-public listing on the New York Stock Exchange in June 2021. Meanwhile, Chinese authorities have imposed strict regulations on the release of EV production licenses in recent years.

READ MORE: What to expect from Volkswagen and Xpeng’s new partnership

Meituan will stop operating its own ride-hailing fleet and shift towards aggregated rideshare services in a strategy update that will cut costs and, it hopes, develop other growth avenues, local publication LatePost reported on Monday.

Why it matters: The decision marks a significant retreat for the Chinese food delivery titan, which has been competing against dominant ride-hailing company Didi for more than six years and could be a turning point for transport in the country’s evolving services sector.

Details: According to an internal letter obtained by LatePost on Monday, Meituan has decided to cull its proprietary ride-hailing operations in several major cities and will look to expand its aggregated services with third-party providers nationwide.

• The life services platform said in the letter that it would scale back efforts in ride-hailing, with some employees to be consolidated into other business lines.
• The remaining ride-hailing team will be combined into a larger unit, with team lead Rocky Zhang to report to Li Shubin, head of Meituan’s platform operations.
• The backdrop of Meituan’s cost-cutting move is slowing revenue growth due to the macro economic environment, the report said, citing a person close to the company.
• A Meituan spokesperson declined to comment when contacted by TechNode on Tuesday.

Context: Meituan announced its entry into the Chinese ride-hailing market back in early 2017 and operates a proprietary fleet of around 120,000 drivers in cities including Shanghai, Nanjing, and Chengdu as of last December.

• The company has also been offering aggregated rideshare services that connect its users with other service providers since mid-2019 and prioritized the business in a stand-alone unit two years later, when unit leader Zhang began reporting directly to chief executive Wang Xing.
• The tech giant briefly ramped up efforts to subsidize users and drivers in exchange for market share in mid-2021. This came immediately after long-time rival Didi was banned from signing up new users by regulators in connection with its US public listing.
• The platform has a daily order volume of around 1 million rides, of which 40% are fulfilled by Meituan’s own fleet, said the report. Didi remained the dominant ride-hailing player with a market share of more than 60%, providing nearly 17 million rides per day as of February. In comparison, Alibaba’s mobility platform Amap provided 8 million rides.

China’s year-long, once seemingly never-ending investigation into Didi finally reached a conclusion on Thursday, with authorities imposing a massive fine equivalent to $1.2 billion on the ride-hailing giant over alleged violations in cybersecurity, data security, and personal information protection.

The RMB 8.02 billion ($1.19 billion) penalty, which was set at 4% of Didi’s 2021 revenues, comes as Chinese policymakers have reportedly been mulling over whether to call an end to their crackdown on the country’s technology sector in the face of the country’s slowing economy.

While Didi will now be looking to move past the year-long investigation, the Chinese mobility behemoth will have to be much more cautious about how it operates and how it deals with regulators going forward. On Thursday, the country’s internet watchdog issued unusually harsh criticism, calling Didi’s breach of data privacy and national security rules “a serious offense with negative influences.” The company said later that day that it will continue carrying out a comprehensive rectification of its operations, without giving a timeframe.

Although the fine itself won’t hurt too much in Didi’s finances, the probe is undoubtedly another landmark case for the Chinese tech sector following Beijing’s antitrust crackdown on Alibaba a year ago. So how did we get here? Below is a look back at the bumpy road that Didi has traveled over the past 12 months.

June 30, 2021 – Didi goes public in the US

• Didi raised $4.4 billion in its long-overdue initial public offering on the New York stock exchange last June, making it the biggest IPO from a Chinese company on a US exchange since Alibaba’s in 2014.
• Didi filed for a share listing on June 10, 2021, roughly around the same time that China’s market regulator reportedly opened an antitrust probe into the company. Didi had described reports of such a move as “unsubstantiated speculation.”

July 2, 2021 – Beijing officially launches an investigation into Didi

• Didi’s fortunes took a startling turn just days after its mega IPO when the Cyberspace Administration of China (CAC) announced it had launched an investigation into the company over alleged illegal use and collection of users’ data.
• The review was aimed at addressing “national security risks” as the government sees Didi’s mobility and traffic data as key to such concerns. This was followed by a ban on Didi’s mobile services from Chinese app stores on July 4, 2021.

July 6, 2021 – US shareholders sue Didi

• Didi faced two shareholder lawsuits in the US alleging that the company failed to properly disclose information that it was in talks with Chinese regulators over cybersecurity compliance issues ahead of its IPO. Multiple law firms also sought to bring additional class-action litigation against Didi, SCMP reported.
• Didi told Reuters that prior to its US listing it was unaware that China’s cyberspace watchdog would open a probe and suspend app downloads. A few days later, Beijing announced that seven central government departments had started an on-site inspection of the ride-hailer.

August 9, 2021 – SoftBank scales back China investment

• During SoftBank’s 2021 second-quarter results presentation, founder Masayoshi Son said that he would take a “wait-and-see” approach until the impact of regulatory action against Chinese tech firms became clearer. SoftBank’s Vision Fund was Didi’s biggest shareholder, holding around 20% of its equity ownership.

September 3, 2021 – Speculation is rife over probe’s end goal

• The cybersecurity review triggered a wave of speculation regarding possible resolutions to Didi’s regulatory crisis. On Sept. 3, 2021, Bloomberg reported that Beijing’s municipal government planned to wind up with a controlling stake in the ride-hailing giant. A few days later, Reuters reported that Didi’s president Jean Liu would leave the company in a few weeks. Didi denied both reports.

December 2, 2021 – Didi prepares to quit New York

• Didi announced that it had been in preparation to delist from the New York stock exchange while pursuing a new listing in Hong Kong, a move reportedly requested by Chinese regulators who feared the leaking of sensitive data to US authorities.

March 11, 2022 – Regulators put the brakes on Hong Kong listing plan

• In March, Didi suspended its preparations for trading shares in Hong Kong, a move initially slated for as early as this summer, after being informed by Chinese regulators that their proposals to comply with cybersecurity and data rules failed to meet requirements, Bloomberg reported.

June 11, 2022 – Didi delists from NYSE

• Didi delisted in the US on June 13, 2022, a few days after filing paperwork with the US regulators and garnering support from most shareholders. They were left with little choice, as the company had told them that it had to do so before it could achieve a settlement with Chinese authorities.

July 21, 2022 – Didi fined for$1.2 billion 

• Hitting the ride-hailing titan with a massive $1.2 billion fine on Thursday, cybersecurity regulator the Cyberspace Administration of China said that the company had unlawfully collected vast troves of user data since June 2015. Didi also posed a serious threat to national security in the way it processed data, the CAC said. Didi’s CEO Cheng Wei and President Jean Liu were each fined RMB 1 million as part of the reprimand.

Chinese telecom giant Huawei is entering the ride-sharing market with the launch of a standalone car-hailing app “Petal Chuxing.” The company looks for ways to expand its car-related business and diversify revenue sources as sales of its smartphones slow.

Why it matters: Huawei’s foray into ride-hailing is a natural extension of the company’s ambition to become a key player in the automotive space as the autonomous ride-hailing service has the potential to make up a significant percentage of new car sales in the long run.

Details: Huawei launched a ride-sharing app called “Petal Chuxing,” based on its navigation app “Petal Maps,” which allows users to request rides from multiple ride-hailing providers, state media publication National Business Daily reported on Friday.

• Users can now access two domestic ride-hailing companies — Shenzhou Zhuanche, a Chinese car rental firm Car Inc subsidiary, and state-backed Shouqi. Huawei is testing the service in Beijing, Shenzhen, and the eastern city of Nanjing, the report said.
• At a press conference last week, Huawei’s head of consumer business Richard Yu said that the company has made Petal Maps more competitive than similar offerings by seamlessly linking users’ Huawei handsets to the HarmonyOS-powered vehicles.
• A Huawei spokesperson declined to comment further when contacted by TechNode, saying the company will share more information once it is available.

Context: Huawei first launched its proprietary mapping service for overseas users in October 2020, a year after US sanctions barred the company from including Google software and services on its devices. The service now has 28 million users from over 160 countries.

• The company also obtained a permit to draw up high-definition maps in its home country in mid-2019, a stepping stone to developing its self-driving car technology.
• Chinese tech companies Alibaba and Meituan also operate ride-sharing aggregation platforms, while automakers such as Geely, FAW, and Dongfeng, have built their own ride-hailing apps to take on long-time market leader Didi Chuxing.

READ MORE: Huawei begins selling EVs in stores, may offset sinking phone sales: CEO

Qcraft, a Chinese autonomous driving startup, said at a Wednesday conference that it is partnering with ride-hailing firm T3 to bring self-driving vehicles onto the latter’s ride-share network in the eastern city of Suzhou. T3 users within the range of those vehicles’ routes will soon be able to select one for a ride.

Why it matters: The partnership is the latest example of driverless tech firms rushing to work with more consumer-facing companies as they aim to commercialize autonomous driving tech. 

Details: Starting from July, Qcraft and T3 will begin offering rides to public passengers using self-driving cars within a restricted area in Suzhou, a neighboring city of Shanghai, where the companies are already testing the vehicles.

• The initial phase of the pilot deployment is expected to allow the companies to fine-tune their robotaxi offering by collecting rider feedback and improving user experience ahead of a commercial launch, according to an announcement (in Chinese). 
• On Wednesday, Qcraft also announced plans to test its self-driving system for consumer cars beginning in the third quarter of this year, collaborating with Chinese chipmaker Horizon Robotics. Backed by leading tech companies Meituan and ByteDance, the three-year-old Qcraft is testing a fleet of more than 100 autonomous mini-buses and sedans in around 10 major Chinese cities.
• T3 has emerged as a significant rival to Didi and is backed by state auto majors FAW, Dongfeng, and Changan. The ride-hailer completes over 3 million rides every day with operations in more than 80 Chinese cities, its vice president Li Jinfeng told reporters at a press briefing on Wednesday. To compare, Didi reportedly provided 20 million trips per day in January.

Context: Other Chinese self-driving car companies are racing to launch commercial autonomous ride-share services either by themselves or with partners.

• Baidu began operating fully autonomous taxis in the suburbs of Beijing in late April, a few months after being allowed to charge customers fares for rides in the capital city. The tech giant said it had offered around 213,000 rides in eight domestic cities in the fourth quarter of 2021.
• Self-driving unicorns Pony.ai and WeRide have turned to ride-hailing service OnTime for a wider group of users, recently participating in its RMB 1 billion ($153 million) Series A, TechCrunch reported on April 27. Operating in the southern Guangdong province, OnTime was launched by state-owned automaker GAC in mid-2019 and backed by Tencent.

On Wednesday, China’s ride-hailing giant Didi urged US investors to vote yes on delisting its shares from New York. Didi said it can’t pursue a new listing as it faces a cybersecurity review launched last July by Chinese regulators, which still has no clear end in sight. 

Why it matters: The company said in a filing to the US’s Securities and Exchange Commission (SEC) that the completion of Beijing’s cybersecurity review is “a prerequisite” for seeking approval for another listing, which implies a further delay for Didi’s plan to list in Hong Kong instead.

Details: Didi will only be able to complete a cybersecurity review on the condition that the company removes itself from the New York Stock Exchange, according to the filing.

• A settlement with the Chinese regulators is also a must for Didi to resume “normal” operations, including getting its apps back onto domestic app stores and having access to new users, which will benefit shareholders, the company said.
• The Chinese ride-hailing company said it remains unsure whether its rectification program will comply with local laws and when its business can return to normal. A shareholder meeting will be held on May 23 to vote on Didi’s proposed delisting from New York.

Context: Didi initially announced plans to delist from the  US and seek a new Hong Kong listing back in December. But the company had halted the process when it failed to meet the requirements on data security compliance, a March statement confirmed.

• Didi’s losses more than doubled in 2021 to RMB 19.1 billion, while revenue grew by only 22.6% compared to the previous year to RMB 173.8 billion. The company has lost a massive $60 billion in market capitalization 10 months after it made its public debut in New York. 
• The Chinese government launched a cybersecurity investigation into Didi over alleged data security concerns last July, immediately after its $4.4 billion US IPO, and has since neither disclosed any results nor lifted its ban on the company’s services on local app stores.

Nickel prices climbed to an all-time high and could further increase the cost of electric vehicles (EV) and force automakers to cut earnings forecasts. Ride-hailing giant Didi became the latest Chinese tech company to enter consumer EV space; it plans to deliver an entry-level sedan next year. Shares of Nio closed flat in the company’s Hong Kong trading debut. Its listing follows the steps of Xpeng Motors and Li Auto. All hope to attract more investors in China amid growing financial market tensions between China and the US.

Soaring nickel prices cast shadow over Chinese EV players

As the price of nickel jumped to an all-time high since early March, auto industry insiders expressed concerns that an escalating Russia–Ukraine conflict could disrupt supplies of the metal, a key component of EV batteries. While watchers have differing views about the impact on EV adoption, most expect battery prices to remain high and to weigh on the margins of Chinese EV makers for the rest of the year.

Nickel craze: Nickel markets had a wild ride early this month. On March 8, the price of three-month nickel on the London Metal Exchange (LME) more than doubled in a short period, reaching an all-time high of $101,365. The unusual surge prompted LME to halt trading for seven days, set new price limits, and adjust prices. When it reopened, the price dropped back down to around $80,000, yet still about 300% higher than the $20,000 price in late February. 

• China’s nickel producer Tsingshan Holding Group was caught on the wrong side of the market, having built the biggest short position in the metal and betting the price would fall since last year. Tsingshan on March 14 said it reached a deal with its banks to backstop its short position after struggling to pay margin calls on its position during the nickel price surge a week earlier. The company faced an $8 billion paper loss based on nickel’s price of $48,002 on March 14, the Wall Street Journal reported.
• The unprecedented price surge was partly due to concerns from Russia. Western nations imposed sanctions on Russia after it started a war with Ukraine in late February. Russia is the world’s biggest exporter of nickel, prompting buyers to worry that Russian nickel suppliers could be hit by sanctions and transport disruptions.
• The already tight supply of high-purity nickel, fueled by the rising sales of EVs, contributed to the highs in the metal’s price. Nickel is increasingly used in EV batteries as it ensures high-energy density that allows the vehicle to travel further.

Higher cost for EVs: Nickel’s price surge is magnifying the current supply chain woes that have dramatically pushed up automakers’ production costs. The global semiconductor shortage and a boom in the prices of other metals have been the principal factors. 

• The input cost of an EV equipped with a 60 kilowatt hour (kWh) battery pack will increase RMB 9,000 ($1,418) due to nickel’s price growing from about $20,000 early this year to the recent price point of around $50,000, according to estimates from China International Capital Corporation (CICC). Nickel’s price will probably stay high over the short term, partly thanks to low inventories in the country, but the high price may be hard to maintain long-term, CICC wrote in a March 9 report.
• Many experts anticipate an accelerated shift towards lithium phosphate (LFP) batteries from the current mainstream types that use nickel and cobalt as core materials. Nickel-free LFP batteries generally provide a lower driving range and cost less to produce than its counterparts, and yet are now also under price pressure thanks to rising lithium prices, the Wall Street Journal reported.
• Average prices of lithium-ion battery packs are expected to slightly grow to $135 per kWh this year from $132 a year ago, ending nearly a decade of price declines, Bloomberg New Energy Finance estimated in a report published on Nov. 30, 2021.

Impact on EVs: Predictions vary among experts of how nickel’s price hikes could affect the EV supply chain and affordability for customers.

• Morgan Stanley automotive analyst Adam Jonas, one of the leading voices warning investors of massive earnings drops for automakers, expects at least a $1,000 increase this year in the input cost of an average EV in the US. If sanctions against Russia are extended to nickel, it’s “probably time for investors to take auto company earnings forecasts down,” Jonas wrote in a March 7 note.
• Other experts say the overall impact will be limited. The high price of nickel is likely to prove a temporary phenomenon since the metal has long seen high output, Cui Dongshu, secretary general of the China Passenger Car Association (CPCA), told reporters during an online conference on March 8. There are currently few signs of risks to output from other major nickel producers such as Indonesia, Cui added.

Didi’s first consumer EV could hit the roads in 2023

News: China’s red-hot EV market just added another competitor as struggling ride-hailing platform Didi reportedly plans to develop its first consumer car in-house. The compact EV could begin mass delivery as early as next June, according to a local media report on March 15. With an estimated price tag of RMB 150,000 ($23,580), the new model will be an entry-level compact sedan competing with existing offerings such as BYD’s popular Qin EV, the report said. The company is said to have more than 1,700 staff dedicated to the project at its Beijing headquarters. In addition, it is considering a deal to buy Zhijun Auto, a little-known EV manufacturer with a plant in central Jiangxi province.

Insights: The launch of a consumer car might create a new revenue stream for Didi as its core business falters. The project can also cover the high cost of developing autonomous driving technology, an initiative the company has undertaken since 2016. The move would also see the Chinese mobility giant lining itself up to compete with big auto names such as BYD, which is also its manufacturing partner.

Didi had a rocky start in its first attempt to produce an EV with BYD. The D1 was a purpose-built electric crossover for ride-hailing services developed by the two companies. It entered into production in late 2020, six months later than expected, the report said. 

Didi’s ride-hailing volume reportedly declined to 20 million trips per day in January, a 20% plunge from daily figures in the first quarter of 2021. Over the same period, the company’s ride-hailing market share in China has shrunk from nearly 90% to 70% due to Beijing’s ongoing cybersecurity review of the company that began last July. 

Nio shares debut in Hong Kong secondary listing

News: Chinese EV maker Nio made a weak debut in Hong Kong on March 10, closing down 0.69%. The listing took place after a long and winding journey. Already listed on the New York Stock Exchange, Nio has followed in the steps of rivals Xpeng Motors and Li Auto by tapping into Hong Kong’s capital markets. However, Nio did not sell new shares or raise money, and it chose to list by introduction. Xpeng and Li Auto, on the other hand, raised HK$14 billion and HK$11.8 billion, respectively, by selling shares in Hong Kong in the summer of 2021.  

Insights: Nio explained the move by saying it hopes to attract more investors by enabling more listing locations and flexible trading hours. A Singapore listing may be another possibility. The Hong Kong locale does bring the Shanghai-based EV maker closer to mainland investors and provides the automaker insurance against the risk of delisting in the US. But Nio said it had “a sufficient pool of working capital,” according to financial media Caixin (our translation), and did not have an urgent need to raise additional funds. 

Plagued by a shortage of semiconductor chips and batteries, among other supply-chain headaches, Nio has posted lackluster monthly sales volumes for several months. Sales of Nio’s existing three models have been slow. Its first sedan, the ET7, is scheduled for delivery later this month. The company hopes to catch up: It plans to begin delivering its second sedan, the ET5, in September and to launch a sports utility vehicle (SUV), its fourth, by year-end.

Chinese ride-hailing platform Didi wants to lay off 20% of its staff, Chinese media LatePost reported on Monday night. Didi is showing stress signs after Beijing launched a cybersecurity review on the company last July.

Why it matters: Didi is trimming its workforce to reduce operating costs and better cope with intense competition in the ride-hailing market. Other ride-hailers started going after Didi’s market share in China after regulators ordered the removal of Didi’s apps from app stores to review the company for cybersecurity reasons. The review, launched in July, is still ongoing.

Read more: Didi app ban ignites race for ride-hailing market share

Details: Didi will lay off about 20% of its staff across major businesses, including ride-hailing service, package delivery, and bike rental, Chinese media LatePost reported Monday, citing people familiar with the matter. Didi has already begun laying off employees in its corporate research lab in mid-January. 

• Sources told LatePost that the lay-offs will be completed by the end of this month. The company reported an average of 20 million trips per day in January, a 20% decrease from 25 million rides during the first quarter of last year. In addition, Didi’s share of the ride-hailing market fell from nearly 90% to 70%.
• R-Lab, Didi’s corporate research lab set up in 2017 and incubated its food delivery project, will close its operation in China, while overseas staff from the lab are consolidated into its international business group. 
• Didi’s self-driving subsidiary will be excluded from the job cuts, the report said.
• The ride-hailing giant has been unable to add new users. At the same time, it has also experienced a shrinking existing user base since the Chinese government launched a cybersecurity probe into the company in July. Meanwhile, its new businesses have made slow progress, the report said.
• Didi did not respond to a request for comment by TechNode on Tuesday morning.

Context: Didi’s domestic ride-hailing business took a hit due to Beijing’s investigation. The company posted a net loss of RMB 30.4 billion ($4.7 billion) in the third quarter of 2021, compared with a net income of RMB 665 million during the same quarter a year earlier. Its revenue decreased by 13% quarter-on-quarter to RMB 39 billion over the same period.

• Didi’s biggest rival Amap has taken this chance to build up market share, achieving 5 million daily rides on average since last September. The Alibaba-owned map platform is planning to launch a standalone ride-hailing app and establish its own car fleet, moving away from being an aggregation-only platform for third-party drivers, the LatePost report said.

For many Chinese tech watchers, the year 2021 can be divided into two distinct periods: before and after Didi’s cybersecurity review. 

Prior to news of the investigation into the ride-hailing giant, observers followed a broad range of topics: Luckin’s unlikely comeback, ByteDance’s moves to address US concerns, and a looming crackdown on crypto mining among them. 

After the Didi announcement, regulatory changes became the dominant thing to watch. As authorities unleashed an avalanche of new rules and regulations, companies were frightened into inaction on a range of important activities: pursuing overseas IPOs, raising funds for edtech companies, or buying up peers to maintain competitiveness in the market. 

Chinese tech companies will feel the impact of these events for years to come. As China goes on holiday for the Lunar New Year, or Spring Festival, for the week of Jan. 31 to Feb. 6, TechNode looks back at an eventful year and brings you a round-up of the stories that you read the most.

Luckin lives on

The Big Sell | Luckin is not dead
After admitting to financial fraud in April 2020, Chinese coffee chain Luckin delisted from Nasdaq, taking time to stay low and address multiple class-action lawsuits from shareholders. But Luckin is still very much alive: despite some closures, its stores are still a ubiquitous presence in Chinese office districts. Even more surprisingly, reports in early 2022 suggested Luckin may look to relist in the US, although the company subsequently denied this.

Luckin founder’s new noodle shop is no Luckin
Lu Zhengyao, the founder of Luckin Coffee who was forced out of the company following a 2020 admission that as much as half of the coffee chain’s sales were fictitious, is back in the retail game. This time, he’s running a noodle shop. But is it any good?

Didi’s IPO changes everything

How did Didi get in trouble with data regulators?
On July 2, three days after Didi went public in New York, authorities at the Cyberspace Administration of China said that they had launched a “cybersecurity review” of Didi to “guard against risks to national data security” and “protect the public interest.” They also ordered operators to pull Didi’s app from all app stores. The review is still ongoing – and the aftershocks still being felt. 

Insights | State investors place their bets as rivals close in on crippled Didi
China’s state-owned investors are pouring millions of dollars into promising new ride-hailers as the market leader Didi loses momentum following the suspension of its app in the wake of the suddenly-announced “cybersecurity review”. T3 was close to raising funds of $600 million, while Cao Cao Mobility raised $590 million. 

ByteDance moves

TikTok moves off Alibaba Cloud: report
ByteDance decided to stop hosting TikTok and other overseas apps on Alibaba Cloud in May, a heavy blow to the e-commerce giant’s cloud-computing branch. TikTok has an estimated 700 million monthly active users worldwide. Alibaba saw a significantly slower quarterly revenue growth rate in the first quarter of 2021 due to ByteDance’s decision.

ByteDance to end weekend work
ByteDance became one of the first Chinese internet companies to say it was attempting to curb overworking culture. It announced on July 9 that it would cancel weekend work days at the beginning of August. The controversial weekend schedule was known as “big and small weeks,” requiring staff to work every other Sunday.

Lark, ByteDance’s Slack-like app, eyes $1 billion global revenue in five years
ByteDance plans to accelerate the overseas commercialization of its workplace communication app Lark this year. The company is aiming for global revenue of RMB 6 billion ($940 million) in the next five years. Lark, known as Feishu in the Chinese market, is ByteDance’s bet on the enterprise-facing services sector. 

Semiconductor strategizing 

SILICON | Can Arm fend off Allen Wu’s latest autonomy moves?
The board of Arm China voted overwhelmingly to remove CEO Allen Wu in June 2020 after an investigation found he had failed to disclose conflicts of interest. But Wu’s supporters within Arm China soon refuted the findings and refused to replace him. In practice, Wu remains the chairman and CEO of Arm China. TechNode contributor Stewart Randall calls the situation “a red flag for any foreign tech company considering a joint venture in China.”

Where China is investing in semiconductors, in charts
As China realizes its heavy dependency on foreign imported chips poses major risks, the country has quickly dialed up investments in semiconductors. In 2020, China saw a whopping 407% increase in investment in China’s semiconductor firms. 

The great mining migration

Crypto miners start move to North America as China vows crackdown
In May, major Chinese crypto mining companies began moving their operations to North America in anticipation of a renewed crackdown on the industry in China. Texas in the US and Alberta in Canada are two top destinations for Chinese mining companies looking to move overseas. The moves proved to be prescient – the latter half of 2021 saw sweeping crackdowns on crypto mining across China.

Huawei burrowed further into the auto industry with the launch of the first vehicle with its homegrown operating system. The Chinese government cut purchase subsidies on new energy vehicles (NEVs) by 30% this year, while scrapping ownership limits on foreign automakers’ investments in the auto industry. Chinese electric vehicle (EV) makers Nio, Xpeng, and Li Auto celebrated record annual deliveries of nearly 100,000 cars in 2021. Alibaba’s head of autonomous driving lab quit the company after more than four years. Didi, soon to delist, shows a few signs of approaching break-even with its first post-IPO earnings report.

Huawei intensifies auto plans with launch of first vehicle with ‘seamless’ Harmony

News: Huawei on Dec. 23 unveiled the first EV model equipped with its HarmonyOS operating system with manufacturing partner Seres. Huawei boasts that this in-car software system offers users a seamless experience of smartphone and car features across devices. Priced from RMB 250,000 ($39,063), the Aito M5 sports utility vehicle runs on electricity or fuel and has a 1,242-km driving range, which compares with the 1,080 km offered by Li Auto’s popular plug-in hybrid crossover Li One. Huawei said that it will showcase the vehicle in 180 Huawei shops across 42 cities and deliveries should start around Feb. 20.

Insights: As US chip sanctions crippled its smartphone core business, Huawei is trying to diversify its operations by breaking into the Chinese automobile sector. The Chinese telecommunications giant last April started selling Seres vehicles through its sales network, but they did not sell well. From April through November, Seres achieved sales of only 7,080 SF5 EVs, which were equipped with Huawei powertrain system and in-car software, according to figures published by China Passenger Car Association. Huawei has also partnered with state-owned automakers BAIC and Changan to equip vehicles with its autonomous driving hardware and software. Yet some industry insiders are doubtful that the tech giant will eventually make its own cars.

News link: TechNode 

Beijing sticks to plan to end EV subsidies in 2023

News: Chinese authorities on Dec. 31 unveiled long-awaited details about its national subsidy program for new energy vehicles (NEVs), such as all-electrics and plug-in hybrids. For 2022, beginning Jan. 1, subsidies to EV buyers will be cut 30% compared to 2021. According to a document released by the Ministry of Finance, the grants for EVs delivering driving ranges of at least 400 km (248 miles) will be cut by RMB 5,400 on an annual basis to RMB 18,000 ($2,824). Meanwhile, the subsidies this year for all-electrics with a driving range of 300 km to 400 km will be lowered to RMB 13,000, while those for plug-in hybrids will be cut to RMB 6,800. Beijing also reaffirmed its plan to eliminate subsidies entirely at the end of this year. Subsidies for purchases of new energy vehicles (NEVs) were already trimmed by 10% and 20% during 2020 and 2021, respectively. 

Context: In reaction, several overseas automakers have raised prices for their EVs in China to offset the subsidy cuts. The prices of Tesla’s popular China-made Model 3 and Volkswagen’s ID series EVs have risen by RMB 10,000 and RMB 5,400, respectively. Newer local EV makers are taking a more active approach to reduce the impact of the subsidy cut. Nio on Jan. 1 announced moves to make up the difference between sticker prices and reduced subsidies of its vehicles for customers who had paid a deposit before the end of 2021 and who will get their vehicles delivered by Mar. 31. Cui Dongshu, secretary general of China Passenger Car Association (CPCA), forecasts that the trimmed government incentive program could still give a great boost to the EV adoption in the country, noting that the manufacturing cost of EVs and batteries are falling significantly. Cui estimated China’s NEV sales could more than double to around 6 million vehicles in 2022 from the previous year and therefore maintain leadership in the world EV race.

News link: Reuters 

China lifts restrictions on foreign auto ownership

News: China now allows overseas automakers to operate wholly-owned ventures in the country’s passenger vehicle sector. As of Jan. 1, 2022, foreign firms are no longer limited to 50% ownership in their joint venture auto operations. The law had been in effect since 1994. In addition, foreign automakers can now set up more than two joint ventures that make the same type of vehicles.  The new ownership rules were detailed in a Dec. 27 release from the Ministry of Commerce and the National Development and Reform Commission, China’s top economic planner.

Insights: The move has been perceived as a positive signal that would create a level playing field for domestic and foreign carmakers, Cui Dongshu, secretary-general of the China Passenger Car Association, told state broadcaster CGTN. Nonetheless, Cui said there would be no significant impact on the market from removing the limits since they were expected. German auto major BMW is expected to become the first internal-combustion vehicle maker to take advantage of the new JV rules. It plans to up its stake to 75% from 25% in its JV with Chinese partner Brilliance Automotive by the end of 2022. The Chinese government since 2018 has gradually ramped up efforts to fully liberalize the domestic auto industry, starting by scrapping limits on foreign ownership of EV makers as it aims to be a global leader in the sector. Tesla became the first foreign auto brand to enjoy the relaxed EV regulations when it set up its wholly-owned venture in Shanghai in May  2018.  

News link: Global Times 

China’s EV trio post record deliveries numbers in 2021

News: The US-listed Chinese EV trio of Li Auto, Nio, and Xpeng launched the new year by publishing record delivery numbers for 2021. Each noted that they had delivered nearly 100,000 vehicles in 2021, despite global chip shortages. All had doubled their deliveries from 2020. Xpeng Motors had stood out among its peers, delivering a record 98,155 vehicles last year, up 263% from its 2020 delivery count. It surpassed Nio, whose annual deliveries totaled 91,429 electric crossovers. Nio was hit by supply chain issues and changes to its manufacturing lines during the second half of last year. Meanwhile, Li Auto saw 2021 deliveries surge 178% year on year to 90,491 vehicles.

Context: Chinese automakers have been riding the wave of growing popularity of EVs in the country, boosted by a years-long national subsidy program and special license plates to EV buyers, among other policy measures. Nio, Xpeng, and Li Auto, all once struggling to stay afloat and beset by lackluster sales, are the poster children of the revolution. The trio has laid out ambitious plans to expand their sales and service networks as they vie to grab market share from internal-combustion vehicle segments. Analysts surveyed by Seeking Alpha expected Nio’s annual revenue to increase by 74% this year, Forbes reported, while Citigroup forecast that Xpeng’s deliveries could almost double to 175,000 units in 2022.

News link: South China Morning Post 

Alibaba’s head of autonomous driving quits

News: Alibaba has parted ways with Wang Gang, a renowned computer scientist who has served as head of the tech giant’s autonomous driving lab under its Damo Academy research division for three years, Chinese media reported on Jan. 5, citing people familiar with the matter. A former tenured professor at Nanyang Technological University, Wang joined Alibaba in early 2017 as the chief scientist for the company’s artificial intelligence lab and was tasked with improving speech recognition capabilities for its first smart speaker device, the AliGenie X1, launched later that year. Wang has begun working on a startup developing robot vacuum cleaners and has raised an unknown amount of funds, the sources added.

Insights: The move is noteworthy in many ways. For one, Chinese industry giants had hoovered up research talents and poured resources into exploring the potential of artificial intelligence (AI) over recent years. The rush is over given a slower-than-expected process of implementing AI in industries, as many top scientists give up the high salaries in the industry for academia, while others start up their own businesses. Wang’s departure comes after Li Lei, the director of ByteDance’s AI Lab, left the company to join the University of California Santa Barbara as a professor last August, following the resignation of ByteDance Vice President Ma Wei-Ying a year earlier, SCMP reported. Chinese tech powerhouses also struggle with executive turnover and layoffs, as Beijing’s regulatory clampdowns continue to weigh on the sector.

News link: TechNode 

Didi’s first earnings report after IPO: $4.7 billion loss

News: On Dec. 30, Didi reported its first earnings as a public company. It wasn’t pretty: The company lost RMB 30.4 billion ($4.7 billion) on RMB 42.7 billion ($6.6 billion) in revenue during the September quarter of 2021. To compare, the company reported a profit of RMB 665 million on revenue of RMB 43.4 billion in the same quarter of 2020. Didi’s largest source of revenue is still its domestic ride-hailing business, which yielded RMB 39 billion, down 12.9% from the previous quarter. The company posted an 8% quarter-over-quarter decline to 2.36 billion in ride volume over the period.

Context: Still the largest ride-hailing service in China by ride volume and revenue, Didi has been at the forefront in Beijing’s wide crackdown on local tech companies. Did’s business has taken a hit from a suspension order that has kept its services off Chinese app stores since July. Having been listed in the US for less than six months, the Chinese mobility giant on Dec. 3 announced plans to take its shares off the New York stock market and instead pursue a listing in Hong Kong. Beijing has yet to announce the results of its cybersecurity investigation into Didi, and the company’s shares have fallen more than 60% from its IPO price.

News link: TechNode 

China’s July crackdown on Didi has had knock-on effects for the wider ride-hailing market, as investors scurry to fund competitors cranking up efforts to steal market share from the ride-hailing monopoly.

Remarkably, this time it is not seasoned venture capital funds but state-owned investors including Citic that are pouring billions of RMB into promising up-and-comers. The leading beneficiaries so far are automaker Geely’s Cao Cao and T3, a ride-hailing service backed by three other domestic automakers. The investments follow more than three months of speculation that Chinese regulators could impose heavy fines, break up the company, or even demand a complete takeover by the state. Didi was listed on the New York Stock Exchange in late June but, less than one week later, cybersecurity regulators forced the removal of Didi’s app from online stores.

Bottom line: Venture capitalists are bullish that upstarts can catch up with the longstanding leader in China’s ride-hailing industry because Didi has been losing momentum ever since its app was suspended. However, the challengers still have to tackle the same regulatory problems Didi has faced.

T3 and Cao Cao gained traction: Dominating China’s ride-hailing market with a 90% share, Didi has had no serious competitors for more than five years. But now investors believe that Beijing’s cybersecurity investigation of Didi may put some ride-hailers backed by automakers in a better position to prosper.

Founded by auto majors FAW, Dongfeng, and Changan back in 2019, T3 is being thought of as one of the most promising challengers to Didi.

• The company is near closing a $775 million funding round led by state-owned financial conglomerate Citic Group, along with a credit line of RMB 2 billion ($310 million) from local banks, according to a LatePost report (in Chinese) on Sept. 23.
• Cao Cao Mobility is another Didi rival that managed to attract investor interest, currently on track to complete a new round of fundraising in the first half of 2022, Bloomberg reported late last month, citing chief executive Gong Xin.
• A subsidiary of Chinese automaker Geely, Cao Cao made the announcement less than a month after closing a nearly $600 million funding round led by five state-owned enterprises. The local government of the eastern city of Suzhou and its associated parties, such as Suzhou Xiangcheng Financial Holding Group and Suzhou High-Speed Rail New City Group, have since had a serious claim to the company’s capital structure.

Investors bullish on fast-growing entrants

The multi-million dollar investments are the latest to follow in the Chinese ride-hailing space which is witnessing investor interest running high over the possibility that two or even more companies could thrive after being a winner-takes-all market since Uber left China in late 2016. 

• Investors were “very enthusiastic” about T3’s recent external funding round, having placed investment biddings of “more than 10 billion yuan,” LatePost reported citing people familiar with the matter.
• Even minor league entrants, mostly backed by Chinese automakers, are capturing interest from mainstream investment firms and market watchers. Notable are SAIC’s mobility service Xiangdao and OnTime, a ride-hailing service partly launched by GAC, the report said.
• Some Chinese investors are now eyeing Didi’s misfortune as an opportunity for its competitors, especially those backed by local auto giants, to knock it off the top spot in the country’s ride-hailing market. As the industry is facing more stringent scrutiny, these companies, having generally hired more licensed drivers, will be under much less pressure in compliance with new regulations, an industry executive told LatePost.

Have they solved Didi’s problems? One of the biggest regulatory hurdles Didi has faced is compliance with regulations governing operating permits and licenses for drivers. Didi acknowledged in its initial public offering (IPO) filings that many of its drivers in China had not obtained the license legally necessary to provide ride-hailing services. 

• The cities of Beijing and Shanghai, for example, require ride-hailing drivers to be local residents and their cars must be registered with local number plates. Both these requirements are extremely difficult to fulfill for ride-hailing drivers, who are mostly migrant workers from other parts of the country.
• A “large number” of cars on Didi’s platforms may not have the necessary permits to provide ride-hailing services, Didi said in the prospectus. Violators of these regulations may face fines of up to RMB 12,000, local media reported.
• Despite lagging behind Didi in number of orders, those rivals are performing better in terms of compliance with regulations. Around 68.5% of orders completed on T3’s platform were deemed as “compliant” in August, meaning that they had met all regulations, according to data from China’s transportation ministry. Cao Cao managed to get a compliance rating of 56.8% in August. By comparison, the ratio for Didi was only 41.9% in the same month.

Didi’s pain is rivals’ gain: Another competitive advantage rivals have over Didi is that they can accept new app user registrations, while Didi still can’t.

• The Cyberspace Administration of China (CAC) on July 2 ordered Didi to stop taking new user registrations “to prevent the expansion of risk” during a “cybersecurity review” into the company.
• On July 4, the CAC ordered apps stores in China to take down the Didi app as part of the cybersecurity review.
• According to a 2020 regulation on the review process, a CAC cybersecurity review should be completed within 45 days. However, it can be extended if “the situation is complicated.” It seems that Didi’s situation falls under the definition of “complicated” as the review process is still ongoing and the app was still unavailable on Chinese app stores as of Friday.
• The Chinese version of Didi’s app was downloaded about 900,000 times in June, according to SensorTower, or 30,000 times per day.
• In September, the Financial Times reported that the number of Didi’s daily users had fallen 30% since the end of June.
• “Didi has sent me a fewer amount of orders since the investigation, but the impact is not big. I still mostly rely on its platform for rides especially during off-peak times,” (our translation) a Shanghai taxi driver surnamed Lu told TechNode on Oct. 15. Alibaba’s mobility service, Amap, currently collects a 9% service fee of the fares. That fee is “slightly higher than that of Didi,” according to Lu.

Analysts’ take

The Didi saga is “a window of opportunity” for rivals, Chen Liteng, an analyst with Hangzhou-based consulting firm 100ec.cn, told TechNode. But Didi still maintains a “significant lead” in China’s ride-hailing market and up-and-comers “would be struggling in their attempts to shake Didi’s position over the short term,” Chen said.

• “If Didi goes through the crisis, the company will find itself easier to be compliant with rules, and that would turn up the heat on its challengers. Ride-hailing platforms T3 and Meituan will in turn probably face more regulatory scrutiny in the future,” said Chen.
• “Collectively, all of the smaller players together could pose a threat but they still need to raise much more capital, keep trying to grow share, and ultimately compete with Didi in the tier-one cities where their true strength lies,” Tu Le, managing director of Sino Auto Insights, told TechNode.
• Le agrees that automaker-backed ride-hailers, with a higher rate of compliant drivers and vehicles than Didi, probably are more capable of adapting quickly to the new regulatory environment as Beijing imposes stricter regulations on the industry.
• “The automakers are used to influencing and knowing how to work through new regulations and currents, so I see that as an advantage for them,” he said.

READ MORE: Didi app ban ignites race for ride-hailing market share

Chinese ride-hailing platform T3 is close to securing RMB 5 billion ($775 million) in a funding round led by state-owned financial conglomerate Citic Group, Chinese media LatePost (in Chinese) reported Thursday, citing three unnamed sources. 

Why it matters: Didi’s rivals, especially those funded by state-owned enterprises, have received a new wave of investment since the nation’s leading ride-hailer was put under a cybersecurity review in July. 

Details: Two sources told LatePost that investment firms are “very enthusiastic” about this new opportunity in China’s ride-hailing market. “Firms have placed investment biddings of more than ten billion yuan,” the sources told LatePost.  

• Headquartered in the eastern city of Nanjing, T3 was launched in July 2019 with backing from state-owned automakers FAW, Dongfeng, and Changan, as well as tech giants Alibaba and Tencent. 
• In August, T3 completed, on average, more than 1.2 million trips per day, a 70% increase from December, the report said. T3 still lags far behind dominant player Didi, which averaged 20 million trips in the same month.   
• A spokesperson for T3 declined to comment on the report when contacted by TechNode on Friday and said the news should be “subject to the company’s official announcement.” 

Context: Cao Cao Mobility, the ride-hailing unit of Chinese private automaker Geely, raised RMB 3.8 billion from investors led by a group of state-owned enterprises in early September. 

READ MORE: Didi app ban ignites race for ride-hailing market share

Chengxin Youxuan, the community group-buy unit of Chinese ride-hailing giant Didi Global, is to shut down operations in 22 provinces, accounting for more than 60% of its service locations, Chinese media Late Post (in Chinese) reported Wednesday. The downsizing came a month after the company laid off one-third of its staff and relocated its headquarters.

Why it matters: Didi is shrinking Chengxin Youxuan after failing to mount a significant challenge to Meituan’s and Pingduoduo’s community grocery products. China’s competitive community group-buy sector is going through new rounds of consolidation that already forced out players such as Tongcheng Life and Tencent-backed Shixianghui in July. 

Details: Chinese media Late Post reported that Chengxin Youxuan will reduce service locations from 31 provinces to nine provinces. 

• Chengxin observed that most of the cut provinces are dominated by rivals Meituan Select and Duoduo Maicai, while the remaining nine provinces still have developing potential, the report said.
• The downsizing is expected to be finished by next week. The unit could see more changes in the future, including further layoffs. Chengxin cut 30% of its staff in July and currently employs about 10,000 people. 
• Chengxin is conducting 6 million daily transactions, a drop of nearly half from its peak, the report said. 
• Didi’s spokesperson didn’t respond to TechNode’s Wednesday inquiries. 

Context: Didi was one of the first Chinese internet giants to get into the community group-buy sector, with the hope of bringing in new revenue streams as its core ride-hailing business slows. In May, the Information reported that Didi planned to spin off the unit in a separate listing as early as next year.

• Didi is still under a state cybersecurity review that began in early July. The ride hailer listed on the New York Stock Exchange on June 30. Its market value has since tumbled to about $47 billion, a little more than half of that on its first trading day.

Cao Cao Mobility, the ride-hailing unit of Chinese private automaker Geely, announced Monday that it had raised RMB 3.8 billion ($589 million) from investors led by a group of state-owned enterprises. The move came two months after the country’s dominant ride-hailer, Didi Global, was put under an ongoing cybersecurity review.

Why it matters: It is the biggest funding the company has received in two years, Cao Cao said in a statement (in Chinese) published Monday.

Details: This new round brought Cao Cao’s total funding to around RMB 5 billion. Lead investors include Suzhou Xiangcheng Financial Holding Group, an investment company held by the Xiangcheng district government of Suzhou, as well as Suzhou High-Speed Rail New City Group and three other state-controlled enterprises.

• Cao Cao said in the statement that it plans to use the funds to further scale its business, such as upgrading technology and expanding its fleet. 
• The company currently offers passenger transport services in 62 domestic cities, almost double the number that its rival T3 serves, but far behind the footprint of Amap, Alibaba’s ride-hailing and map platform.
• Geely began testing ride-hailing service Cao Cao in the eastern city of Ningbo in late 2015. It raised RMB 1 billion in Series A from several Chinese venture capital firms in January 2018.

Context: Chinese ride-hailing platforms, either backed by tech giants or legacy automakers, have been rushing to take market share from Didi after regulators ordered the ride-hailing giant in early July to temporarily stop adding new customers.

• Meituan’s ride-hailing unit and Cao Cao in July saw their volume of rides increase by 24% and 32%, respectively, from a month earlier, while Didi’s only rose by 13.1% during the same period, according to Ministry of Transport figures (in Chinese).
• In July, on average, Amap completed fewer than 5 million trips while Meituan completed around 1 million trips per day, Chinese media LatePost reported on Monday, citing people familiar with the matter. Didi counted about 25 million rides a day in the first quarter of 2021.

Read more: Didi app ban ignites race for ride-hailing market share

China’s ride-hailing giant Didi reportedly scaled back a community group-buy grocery unit, Chengxin Youxuan, Chinese media Late Post reported on Wednesday. The unit is pivoting its business strategy from loss-making expansion to earning money.

Why it matters: Cutbacks at Chengxin Youxuan come as two community group-buy rivals, Tongcheng Life and Tencent-backed Shixianghui, abandon the market after years of costly cash-fueled expansion. 

• Didi is still under a state cybersecurity review that began in early July.

Details: Chengxin Youxuan began to scale back its business in June, according to Late Post‘s report. The unit laid off about a third of its staff, began an all-staff pay cut, and relocated its head office from Chengdu to Beijing and Hangzhou. 

• Chengxin Youxuan has reportedly laid off around 30% of its employees since July. Most laid-off staff were in city management, business development, operations, and logistics and located in central Hunan and Hubei province, the report said.
• Chengxin Youxuan canceled bonuses in August, meaning a 20% pay cut for all workers. The unit also reduced travel subsidies. 
• Didi moved Chengxin Youxuan’s main office from Chengdu to Beijing and Hangzhou, closing the Chengdu office.
• The unit will relocate some staff back to Beijing and Hangzhou to focus on product research and development and data analytics, while sending more staff to front-line operational positions, Late Post writes, citing employees at the company.
• Didi didn’t respond to TechNode’s inquiries, made Thursday morning.

Context: In May, The Information reported that Didi planned a separate listing for the grocery unit as early as next year, hoping to bring a new revenue source to maintain growth as its core ride-hailing business slowed down. 

• In March, China’s top market regulator fined five community group-buy platforms a total of RMB 6.5 million (around $1 million) for price dumping. Targets included Chengxin Youxuan and rival platforms backed by Pinduoduo, Meituan, and Alibaba.

At 9 a.m. on a recent Thursday, Sheng Li got out of a Didi ride at his office in downtown Shanghai. The ride-hailing company has had a rough ride recently, but for users like Sheng, Didi is still the first choice when hailing a car.

The 28-year-old office worker says he’s been experimenting with other apps lately. He’s noticed longer wait times as Didi struggles amid a “cybersecurity investigation,” temporary removal from Chinese app stores, and lawsuits from angry US investors.

Sheng told TechNode he doesn’t worry about the privacy and security issues the regulators are investigating. “That’s a matter for the state, not us,” he said. For him, it all comes down to price, service, and wait times.

Still, a Shanghai taxi driver surnamed Wu told TechNode that he has shifted his driving time to other platforms including aggregator Amap (Gaode Ditu in China), as there are now “much fewer orders” from Didi (our translation). Some former Didi users even deleted the app from their phones in a show of patriotism, the Shanghai-based driver added.

Founded in 2012 as Didi Dache, Didi has long been dominant in China’s ride-hailing market. It fended off an early challenge from Uber, buying out the US company’s Chinese operations when it left the market in 2016. The most recent estimates put its share at 90% of the Chinese market.

Now, challengers are racing to take advantage of Didi’s troubles. Like Sheng, millions of Chinese users are trying out other ride-hailing platforms. The rivals have begun a price war, offering steep discounts and subsidies to win over users and drivers.

Default Didi

Didi remains the default for most users TechNode met during rush hour interviews in Shanghai. Although Didi apps are no longer available for download on Chinese app stores, those already on users’ smartphones still work.

Chris Sun, a Shanghai-based video producer did not hesitate when choosing Didi to hail a ride to the city’s railway station for a business trip last week. Speaking to TechNode on July 22, Sun said he had no plans to try other services, adding that he “has got used to” Didi, despite some technical flaws such as inaccurate pin locations from drivers (our translation).

Chen Jie, a recent graduate, is also sticking with Didi. The 23-year-old tried Alibaba-backed Amap last year, but immediately switched back to Didi, frustrated by long waits at peak times.

Springing into action

Shopping and delivery titan Meituan, a longtime rival of Didi, relaunched its standalone ride-hailing aggregator app Meituan Dache on July 13, followed by a WeChat mini-app with the same name last week.

Meituan has offered ride-hailing services since February 2017, but shut down its standalone app in 2019 to cut expansion costs. Since then, it’s been available only as a mini-program within Meituan’s main app.

The company has boosted its subsidies to attract users after the long absence. Using a RMB 10 ($1.54) coupon, TechNode paid RMB 23.4 for a nine-kilometer trip on Meituan Dache on July 16 in Shanghai. A ride on Didi for the same route cost RMB 35 on July 2.

Upstart T3, a joint venture of state-owned automakers FAW, Dongfeng, and Changan, is among the most ambitious contenders. From its base of 21 cities and 15 million users in 2020, the two-year-old ride hailer has set goals to enter 15 new cities and add an average daily order of 1 million rides by the end of July, Chinese media reported, citing a company memo. 

Daily downloads of the T3 app on iOS peaked at 60,000 million on July 2, later stabilizing to around 40,000. In June, T3’s app was downloaded just 10,000 times a day, according to data from app-tracking service Qimai. Chinese media report that T3 staff have been working long overtime hours as the Nanjing-based company rushes to expand.

Alibaba-owned aggregator and mapping service Amap, launched in 2018, is also offering massive subsidies to both riders and drivers, including RMB 100 coupons for rides and a one-week zero-commission period to new drivers. Amap downloads on iOS have more than doubled since July.

Meanwhile, Tencent and GAC-backed Ontime is offering 50% off coupons plus a RMB 25 incentive to those who invite a friend to use the platform and take their first trip. Not everyone is joining the price war.

Chinese media reported that management at Caocao Chuxing have decided not to drive down prices,, but the company has adopted the infamous 996 work schedule following Beijing’s investigation into Didi.

Future landscape

Didi could be back on app stores later this month. Regulations specify that cybersecurity reviews should take no more than 45 days, and 45 days after Didi’s review began will be Aug. 16. However, the same regulations authorize regulators to extend the review if they find that the matter is especially complex or serious.

Some observers believe that Didi could face significant threats from smaller ride-hailers that are expanding their presence in China’s growing inland cities.

“Didi is mature in tier-one cities but not in second or lower-tier cities. There is still an opportunity for online ride-hailing in China, and Didi will not have a 90% share in China forever,” Tu Le, founder and managing director of business intelligence firm Sino Auto Insights, said during an online interview on July 6.

Didi controlled more than 90% of China’s ride-hailing market share before the government’s investigation into the company. There might be “double-digit” market share redistribution if the subsidy war meaningfully deteriorates the Didi app or mini-program core experience, according to Michael Norris, head of research and strategy at AgencyChina.

The supply of drivers, who are sensitive to subsidy and platform policy changes, will be key to winning the battle. “Didi’s competitors need to poach drivers to the point Didi’s app becomes unreliable to hail a ride,” he said.

“The competitive landscape depends on how hard Meituan pushes. Recall that Meituan, with one eye on its balance sheet, backed away from self-operated ride-hailing in late 2018. Meituan’s foray into community group-buy, including associated financing activities, have primed investors for big moves.” Norris said.

Meituan declined to comment on the story.

Still, at least one ride-hailer has decided to advance at its own pace. Rather than spending lavish sums for a victory likely to be temporary, Shouqi, operated by the namesake automaker, has publicly stated its goal is high-quality development, focusing on passenger and driver safety along with data security. With a footprint in over 170 Chinese cities, the state-backed company is now the country’s sixth biggest ride-hailer but lags far behind Didi in monthly active users, according to figures published by app tracking firm Aurora Mobile in May.

“China’s ride-hailing market has always been strictly regulated. Looking ahead, compliant, healthy, and sustainable development will be the major path for all the players,” a Shouqi spokesperson told TechNode on July 20 (our translation).

Read more: How did Didi get in trouble with data regulators?

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

Make sure you don’t miss anything. Check out our lineup of China tech podcasts.

In this episode, the guys are joined by Kendra Schaefer, partner at Trivium China and head of the firm’s tech practice. They dig into the ever-evolving saga at Didi, whose decision to go through with a US IPO against Beijing’s wishes has brought about waves of regulatory wrath against the ride-hailing and mobility giant. Kendra’s insights are helpful for investors, analysts, or anyone hoping to understand the new rules of the road for China’s tech firms.

Hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Watchlist:

• Tencent
• Alibaba
• Baidu
• Bilibili
• Xiaomi
• JD
• Pinduoduo
• Meituan-Dianping
• Kuaishou

Hosts:

• Elliott Zaagman– @elliottzaagman
• James Hull– @jameshullx

Guest:

• Kendra Schaefer – @kendraschaefer

Editor:

• Peter Isachenko

Podcast information:

• iTunes
• Spotify
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• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

Didi is everywhere in China. In the country’s major cities, you’re unlikely to find someone that hasn’t hailed a ride through its platform. The company’s popularity led the Uber-like taxi app to a much anticipated New York IPO on June 30. Didi raised a whopping $4.4 billion—the largest amount of any Chinese company going public in the US since 2014.

Then, Didi caught the attention of Chinese regulators.

For the first two days after going public, Didi’s stock performed well, rising more than 17% from its offering price. Then, the ride-hailer’s US debut took a jarring turn: China’s top internet regulator announced a cybersecurity investigation into the company.

Didi’s share plunged more than 20% on the news. Investors say that the move blindsided them. Apart from scrutiny at home, the company now also faces lawsuits from US investors for failing to disclose its regulatory risks. 

According to the government’s official announcement, Didi faces regulatory backlash over data security. The regulator did not provide any further details.

What kinds of data does the company hold that led to regulators souring on the company? This week, we combed Chinese media reports on the investigation into Didi, hoping to provide a clearer picture of what led the company to fall out of favor. All quotes have been edited for clarity.  

Didi’s big data analytics 

On July 2, the third day after Didi’s IPO, China’s internet watchdog launched a “cybersecurity review” of the ride-hailing company, citing national security concerns.

Then two days later, on a Sunday night, the same regulator—the Cyberspace Administration of China (CAC)—ordered app stores in China to remove Didi’s app. The CAC said the app “seriously violated Chinese laws and regulations on personal information collection and usage.”

Of all tech majors in China, Didi collects the most comprehensive data on personal travel. Its ability to do big data analysis on users’ activities and habits can carry security risks, said China’s nationalistic tabloid Global Times on July 4. 

The news of the investigation into Didi began trending on popular microblogging site Weibo over the weekend. The government’s inquiry won cheers from many Chinese internet users, who see the move as a means of protecting China’s national security and the data privacy of its citizens. 

Why China’s ban on Didi’s app is winning applause
Global Times, July 4

Didi Chuxing is a high-tech internet company that has greatly popularized online ride-hailing services in China. But the company undoubtedly collects the most detailed personal travel data out of all the major internet companies. It’s very worrying that, according to the Cyberspace Administration of China’s announcement, Didi may have violated laws in the way it collects and uses personal information. Didi appears to have the ability to perform big data analysis on users’ activities and habits, which could become a potential security risk to people. 

As a matter of principle, we hope that internet giants can minimize collection of users’ data instead of capturing as much information as possible.

Internet behemoths are used to calling the shots in their sectors, but the government cannot allow them to make the rules governing personal information. The government has to control the rules and standards, making sure that internet giants minimize their user data collection. Internet companies shouldn’t be allowed to have a super database of user information that is more detailed than that controlled by the Chinese government, let alone use the database however they please.

The government needs to be vigilant with a firm like Didi, which went public in the US and consists of top foreign stakeholders. This is not only a matter of protecting personal information but also a matter of national security. Regulating Didi doesn’t mean the country is stunting the growth of the company. It serves to eliminate risks so that the users will feel more comfortable, thus giving the company a bigger market. 

Maps and road traffic data

Experts told the Chinese business magazine 21st Century Business Review that Didi’s collection of road traffic data is at odds with China’s national security.

Didi’s investigation gives a stern signal
Cao Yanjun, Yang Song
21st Century Business Review, July 5

Cybersecurity investigations into internet companies will become the norm. 

Di Wei, an assistant professor of economic law at East China University of Political Science and Law, told 21st Century Business Review that Didi holds road traffic data including that which deals with surveying and mapping, traffic flow, and charging stations. This data is vital data, according to the third article in the “Provisions on the Management of Automobile Data Security (Draft for Comment Solicitation)” that was released on May 12. The provision defines vital data (to national security) collected by auto companies.

Data collected by automobile companies is closely connected to individual privacy and national security issues. For example, when a user follows a given route, companies can collect data on home addresses, work addresses, and surrounding geographic data.

“The potential risk lies in exposing personal information, and even data vital to the national interest, which in turn affects military safety,” Di Wei said.

Driving record data

Didi’s record of driving data and driver and passenger security information pose major security risks to China if leaked, according to Classification Evaluating Reviews, a WeChat account that promotes China’s multi-level protection scheme, a tiered system of national cybersecurity levels. 

China launches its first cybersecurity investigation! Didi gets investigated
Classification Evaluating Reviews, July 2

Cybersecurity investigations aren’t administrative interviews but preventative safety precautions. Didi has already become an essential part of China’s internet traffic infrastructure. Didi’s datasets of driving records, and driver and passenger security information pose a massive security risk. 

According to China’s multi-level protection scheme, we can infer that Didi’s network has been classified as vital information infrastructure, thus prompting the cybersecurity investigation.

It might take a few months for Chinese regulators to elaborate on what the Didi data in question includes. In the meantime, Chinese media reports show that Didi’s massive collection of mapping and traffic data, and its ability to provide big data analysis using its data, may have alerted the country’s regulators.

Proposed revisions to China’s cybersecurity review process would require companies that control data of more than 1 million users to seek permission from regulators before filing for IPOs overseas. China’s cyberspace authority proposed a series of revisions to the cybersecurity review rules Saturday.

Why it matters: The proposal came a week after regulators launched a cybersecurity review on ride-hailing giant Didi. The changes proposed align with a recent decision from senior Party and government bodies to increase scrutiny on companies seeking overseas listing. 

• The revision “would make it very difficult or even impossible for Chinese internet firms to get listed in foreign exchanges,” Henry Gao, a law professor at Singapore Management University, told TechNode. “Many of them would probably choose Hong Kong or domestic listing due to the tedious regulatory approval process,” he added.

Details: The CAC proposed to revise the Measures for Cybersecurity Review, a regulation that came into effect in June 2020, adding a new article on overseas IPOs. One key purpose for overseas IPO reviews is to control the risk of companies exporting “core” and “important” data, or being “influenced, controlled, or abused” by foreign governments during the listing process, according to the draft provision (in Chinese). 

• The revision added China Securities Regulatory Commission, the securities industry regulator, to a list of 14 government agencies tasked to set up the cybersecurity review mechanism.
• The revision also extended the period for special security review from 45 working days to three months or longer. 
• The proposed mandatory overseas IPO reviews do not apply to IPOs in Hong Kong. Hong Kong is a popular destination for Chinese tech companies to raise funds, alongside the US. 
• Henry Gao said under these new regulatory changes, tech companies should prioritize “potential cyber security risks, especially those relating to the cross-border transfer of data, and make sure that there are regulatory approvals well in advance of major decisions.”
• The CAC is seeking public comments on the draft revision until July 25.

Context: The proposal came four days after the Chinese Communist Party and government officials issued a guiding opinion (in Chinese) asking regulators to heighten scrutiny on Chinese companies listing overseas.

• Most, if not all, Chinese tech companies seeking overseas IPOs reach the 1 million user threshold. Recently listed Didi has about 156 million monthly active users, while Daojia, a lesser-known home service platform that filed for a US IPO in July, has more than 16 million (in Chinese) registered users. At the end of 2020, China had 989 million internet users, according to the government body China Internet Network Information Center (in Chinese).
• Former US President Donald Trump in December signed into law the Holding Foreign Companies Accountable Act, banning companies from trading on US exchanges if they don’t allow US accounting regulators to review and audit documents for three consecutive years.

Top market regulators in China announced on Wednesday night a large batch of antitrust punishment. Tech majors Didi, Alibaba, Tencent, Suning, and Meituan were fined the maximum penalty under current law for violating the Anti-Monopoly Law by not declaring deals to the regulators.

Why it matters: Wednesday’s punishment involves 22 investment deals (in Chinese). Although the fines of RMB 500,000 ($77,350) each are trivial to the tech giants, it’s the largest batch since Chinese regulators began to crack down on major tech companies late last year. 

Details: The State Administration for Market Regulation fined at least five tech companies over 22 investment deals for violating market concentration rules. The earliest deal dates to 2011, the most recent closed in September 2020. 

• Didi accounts for eight of the 22 fined deals, Alibaba six, Tencent five, Suning two, and Meituan one. Many of the deals are made through subsidiaries of these majors. 
• These deals span the past decade. The earliest deal goes back to 2011, involving Tencent acquiring parts of Cheetah Mobile, a Beijing-based software company. 
• The most recent deal closed is a 2020 deal of Tencent buying 32.4% equity of the classify site 58.com. 

Attorneys’ take: Despite having the power to enforce divestment, regulators are unlikely to push for companies to retract these deals, legal experts told TechNode. 

• Zhu Bao, a Beijing-based corporate compliance lawyer, told TechNode that these fines should alert internet companies to brace for a tightening regulatory environment. But it would be complicated for regulators to force a retract because some of the deals are compliant with existing regulations. 
• “I find some of the fines puzzling, such as Alibaba’s for acquiring 50% equity of Guangzhou Evergrande Football Club in 2014. We didn’t think these kinds of deals would require declaring since the two companies are in vastly different fields,” Zhu added. 
• Deng Jingyu, a Shanghai-based company and finance lawyer from Win Zone Law Firm, agreed. She said regulators rarely nullify closed deals. 

Context: The antitrust fines came within a week after the Chinese cyberspace watchdog launched a data security investigation on the ride-hailing giant Didi and several other Chinese internet companies listed overseas. 

• While the number of deals fined is the largest yet, more companies were affected in a March ruling that fined 12 companies over 10 deals.  

READ MORE: How did Didi get in trouble with data regulators?

Chinese firms, especially those dealing with data, may have to submit every overseas IPO to regulators for a data security review, experts told TechNode. 

China’s top leaders called for increased supervision of data during international IPOs on Tuesday, days after ride-hailing giant Didi Chuxing and two other recently US-listed firms were banned from registering new users during a “cybersecurity review.”

Senior party and government officials issued a directive (in Chinese) on Tuesday night, calling for an increased crackdown on “illegal securities activities.” The directive was jointly issued by the General Office of the Central Committee, the administrative branch for the party’s top leading groups, and the General Office of the State Council, the Chinese cabinet. 

The document appears to confirm that Beijing is worried about data security during the overseas IPOs process. Taken together with the Data Security Law passed on June 10, these new documents provide clues that data may be a key factor in the decision to launch an investigation on Didi. 

Three newly US-listed firms have been blocked from registering new users since Friday by China’s data watchdog, the Cyberspace Administration of China. The CAC has cited concerns about data and national security and the collection and handling of personal private information, but has not published specific reasons.

READ MORE: How did Didi get in trouble with data regulators?

One of the document’s sections focus on overseas listings. Article 19 directs regulators to “improve relevant laws and regulations on data security, cross-border data flow, and confidential information management.” Article 20 asks regulators to increase scrutiny on Chinese companies listing overseas, which refers to China concepts stocks, and “clarify regulatory responsibilities in China and strengthen cross-department cooperation.”

‘Data practices that used to be legal might become illegal’

Zhu Bao, a Beijing-based attorney specializing in corporate compliance, said the directive’s focus on tightening data management is new and signals a shift in priorities. 

“I don’t think this prohibits all Chinese companies from going public overseas. It signals that internet companies, especially those dealing with data and seeking an overseas listing, will face much stricter regulation and approval processes,” Zhu said. 

“Certain data practices that used to be legal might become illegal now,” Zhu added. He said companies that collect users’ information should consider seeking legal advice and review their data servers to make sure they are compliant with the directive. 

Yang Zhaoquan, director of Beijing Vlaw Law Firm, told TechNode that “data could be leaked during the review and auditing procedures in a IPO process.” 

“In the age of big data, internet companies can collect massive amounts of sensitive data, including citizen’s personal information, state agency data, and operation data of other companies,” Yang added. 

More than Didi

Chen Long, a partner at Plenum, an independent research firm on Chinese politics and economy, told TechNode that the documents clearly relate to Didi’s investigation, but reflect concerns broader than this case. 

Apart from data security issues, the directive also asks to increase punishment for accounting fraud cases like Luckin Coffee’s 2020 fraud scandal, Chen said. “The directive is a culmination of the past year’s events and providing clarity on regulatory responsibility,” he added. 

The directive didn’t specify a government body to take charge of the data review. Chen said China needs to clarify which government body should be responsible for reviewing Chinese companies filing for overseas IPO. Currently, it’s a gray area, he added. 

Chen expects the Chinese government will task the China Securities Regulatory Commission (CSRC) and the Cyberspace Administration of China (CAC) to review the data of companies seeking overseas IPOs. 

Bloomberg reported in May that China is considering rules that would require firms to seek formal approval before listing in overseas markets. 

Zhu said he expects the CSRC will work with the Ministry of Public Security in the future to review these cases. He added it will probably take about six months for the government to finalize all the details and responsibilities. Still, tech and data companies seeking to list overseas should brace for a stricter review process from now on. 

Translation of directive excerpts

Article 19: Strengthen cross-border supervision cooperation. Improve relevant laws and regulations on data security, cross-border data flow, and confidential information management. Regulation needs to be revised to strengthen the confidentiality and file management related to the issuance and listing of securities overseas, and consolidate the main responsibility of information security of overseas listed companies. Strengthen the standardized management of cross-border information provision mechanisms and procedures. Adhere to the principle of law and reciprocity, and further deepen cross-border audit supervision cooperation. Explore effective ways and methods to strengthen international securities law enforcement cooperation, actively participate in global financial governance, and promote the establishment of law enforcement alliances to combat cross-border securities violations and crimes.

Article 20: Strengthen the supervision of China’s concept stocks. Effective measures will be taken to deal with risks and emergencies of Chinese concept stock companies, and push to set up relevant regulatory systems. Amend State Council’s special regulation on companies raising funds and listing overseasing. Clarify which domestic industry supervisors will be responsible and strengthen cross-departmental supervisory coordination.

It has been a rollercoaster week for Didi Global. Last Wednesday, Didi raised $4.4 billion in a behemoth US IPO. Two days later on Friday evening, China’s cybersecurity regulator announced an investigation into the company. Then on Sunday night, less than a week after Didi went public on the New York Stock Exchange, the regulator asked app stores in China to remove Didi’s app.

The probe of China’s dominant ride-hailer follows other large penalties for Chinese tech majors, such as the abrupt suspension of Ant Group’s giant $34 billion dual IPO listing in Shanghai and Hong Kong in November 2020 and a $2.8 billion antitrust fine for Alibaba in April. 

Authorities at the Cyberspace Administration of China (CAC), a cyberspace watchdog, said on July 2 that they launched a “cybersecurity review” of Didi to “guard against risks to national data security” and “protect the public interest.” Citing national security law and cybersecurity law, they also asked Didi to stop registering new users. Two days later, they ordered operators to pull Didi’s app from all app stores for issues concerning user data protection, saying the app “seriously violated Chinese laws and regulation on personal information collection and usage.”

The app store suspension, although dramatic, hasn’t stopped Didi from operating. Didi’s service is still widely available in China. The ban means new users cannot download Didi’s app and use its service. Yet new users, at the time of this writing, can still register for the service through Didi’s mini-program embedded in apps like WeChat, a popular Chinese messaging app, according to our observations. Also, existing users, which account for most Chinese ride-hailing customers as the company holds 90% of the market share, can still use the service, either through Didi’s app or its mini-program on WeChat. 

On Monday, the CAC expanded its probe, announcing that it also launched similar cybersecurity investigations into three other companies and asked them to stop registering new users. All these companies have recently debuted on US stock exchanges. Job recruitment platform Boss ZhiPin debuted on Nasdaq under Kanzhun, a Tencent-backed company, on June 11. Partner transport companies Huo Chebang and Yun Manman went public together on the New York Stock Exchange on June 22 as a single company called Full Truck Alliance. 

The actions are a notable step up for privacy regulation. But they come as part of a long-term effort to regulate data use during an ongoing crackdown on big tech, experts told TechNode.

Business may be… fine?

Didi said in a July 4 statement that it expects that the app takedown may have “an adverse impact on its revenue in China.” 

According to a 2020 regulation for the review process, a cybersecurity review should be completed within 45 days. However, it can be extended if “the situation is complicated.”

James Hull, analyst and portfolio manager at Hullx Capital, said a suspension of 45 days or longer isn’t “that bad for the company,” because most Chinese users already have the Didi app and could access Didi through WeChat mini-programs. The Chinese version of the app was downloaded about 900,000 times in June, according to SensorTower, or 30,000 times per day.

Michael Tan, a partner with international law firm Taylor Wessing Shanghai Office, told TechNode that he thinks the investigation could take six months. Didi’s stock price is likely to take a hit, but the company is unlikely to be delisted from the US, he added, because Chinese regulators will focus on data security more than the listing.

But Tu Le, founder and managing director of business intelligence firm Sino Auto Insights, told TechNode that he thinks US investors may demand more information. “If I were a US investor in Didi, I’d like to know what Cheng Wei, Jean Liu, and the rest of the management team ‘knew,’ if anything at all, and ‘when’ they knew it.”

“If there was prior knowledge that Cyberspace Administration of China would block new users due to security issues, then it should’ve been disclosed prior to the IPO,” Le added.

Didi shares on the New York Stock Exchange fell 5.3% on Friday, following the CAC announcement of a cybersecurity review of the company. The US market had not opened on Monday at the time of this publication. 

Both Le and Michael Tan say Didi’s probe could have broader implications for Chinese data companies planning to raise money in the US.

Le said the Didi probe “should really freak out any data company planning to IPO in the US.” Data companies need to make sure that their data management strategy is bulletproof if they decide to list in the US later this year, he said. “I’d say they’ll still do it, but this should give them pause, if only for a brief moment,” he added.

Why is Didi being investigated?

It’s not entirely clear what got Didi in trouble. The notices refer to national security and to “serious problems with illegal and irregular collection and use of personal data.” Timing suggests that the recent US IPO could also be a factor. All three firms that were penalized this past week have been listed on US markets since early June 11. 

The company says that all information related to Chinese users is stored in China, in response to speculation of Didi sharing sensitive data. Company Vice President Li Meng wrote on Weibo Saturday that the company was willing to sue over speculation that it had shared sensitive information during its IPO process.

Tan said that alleged data privacy abuse is the main reason for Didi’s investigation. Didi’s US IPO likely accelerated the probe but didn’t trigger it.

In 2015, Chinese state news agency Xinhua collaborated with Didi’s big data analytics department on a report focusing on commuting patterns of state staff working for different Chinese ministries. “Almost all ministries work overtime,” the report said, “The Ministry of Land and Resources is the busiest. There were 298 rides hailed between 6 p.m. to 2 a.m. in two days,” Xinhua said. China could deem data like this as sensitive.

The investigation targets Didi’s potential privacy breach activities in China, Tan said. “US IPO will result in disclosure of much business-related information to the US markets and other third parties in the US,” he said. “This will inevitably lead to some speculation, such as Didi being investigated due to national security concerns or providing access to sensitive data,” he added.

Legal background 

The investigations are based on a relatively new CAC power called a “cybersecurity review.” This review process was created by the 2016 Cybersecurity Law, but has never previously been implemented, according to the Beijing News. According to the law and 2020 implementation measures, the review system focuses on operators of “critical information infrastructure,” and their purchases of “network products and services that might impact national security.” The Cybersecurity Law, along with landmark laws on privacy and data security, is part of an ongoing effort to regulate the use of personal data by companies in China. Cross-border data transfers are a focus of these laws, but the laws also require companies to implement best practices for collecting and storing data.

“That could cover anything from Didi’s servers to cloud computing to basic network equipment,” said Tiffany Wong, a consultant at research-based consultancy Sinolytics.

Wong said that it’s also possible for companies to get in trouble under these laws due to how they store and process important data. “It could be that Didi hasn’t segmented their personal information to the CAC’s liking, or don’t have good data protection mechanisms in place as required, and the state wants Didi to have full compliance before collecting any more personal information,” Wong added. 

Moreover, Xie Maosong, a senior politics and governance researcher at the Chinese Academy of Sciences, told TechNode that he thinks Didi and other internet companies need to develop a better sense of social responsibility in China instead of focusing only on making money. Xie studies Chinese governmental policies and he gave lectures a few weeks ago to the Cybersecurity Administration in Hangzhou on regulating Chinese internet companies. 

“In the western society, capital takes priority,” said Xie, “but in China, politics always takes priority. Here, politics doesn’t refer to the Chinese government, and it refers to the interests of the nation, a collective interest, in contrast to the interests of a few capitalists,” he added.

Tech crackdowns in China

The investigation into Didi came as China widened an ongoing crackdown on tech companies. The crackdown started in November when authorities halted Chinese fintech giant Ant Group’s plans for a mega dual IPO, citing “changing regulatory environment.” Since then, regulators have abandoned their laissez-faire approach to tech firms and put them under the microscope.

In December, the State Administration for Market Regulation (SAMR) announced an anti-monopoly investigation into e-commerce behemoth Alibaba. The probe was closed in April as the market regulator imposed a record RMB 18.2 billion ($2.8 billion) fine on Alibaba. 

Anti-monopoly has been the most active area of the campaign, hitting tech titans like Tencent, Alibaba, Meituan, and Didi itself, according to TechNode’s Techlash Tracker database. But the campaign also involves privacy protection, data security, and financial de-risking. Over the past year, hundreds of companies have been hit with small fines over privacy and data security violations.

READ MORE: INSIGHTS | Making sense of China’s big tech crackdown

The Didi probe is the first major case in the privacy and data security section of the campaign. 

In the past, companies like Tencent, search engine Sogou, and smartphone maker Xiaomi were fined small amounts of money for collecting excessive or unnecessary data from their app users. Those enforcements usually cite China’s 2017 Cybersecurity Law and regulations on how apps should collect and store user data. 

The investigation into Didi, however, probably involves national security issues, according to the CAC. In addition to the Cybersecurity Law, the CAC also cited China’s National Security Law in announcing the Didi probe. The 2015 National Security Law has a clause (in Chinese) vowing to “safeguard the nation’s cyberspace sovereignty, security, and interests.”

“The state attaches great importance to cybersecurity and data security. The Cybersecurity Law passed in 2017, the Cybersecurity Review Measures issued in 2020, and the Data Security Law that is taking effect in September are all signs of the government’s determination to protect cybersecurity and data security,” said Qi Aimin, a professor at Chongqing University’s School of Law.

Recent cybersecurity reviews on tech firms, including probes into Boss Zhipin, Huo Chebang, and Yun Manman announced on Monday, proving that “large-scale cybersecurity and data security investigations of internet companies will become a trend,” said Qi.

A timeline of Didi’s regulatory woes

Dec. 24, 2020: Chinese transport minister Li Xiaopeng pledges to ramp up antitrust enforcement as one of the ministry’s priorities in 2021. The head of Chinese transport watchdog made the comment a month after the release of the draft anti-monopoly guidelines targeting the country’s big tech companies by the SAMR.

March 12, 2021: China’s top market watchdog SAMR fines (in Chinese) Didi Mobility Pte. Ltd., a subsidiary of the Chinese ride-hailing giant, RMB 500,000 ($77,400) for failing to seek antitrust clearance for the establishment of a joint venture with Softbank. In the current antitrust law framework, companies need to receive approval for mergers or acquisitions involving firms with annual revenues of RMB 10 billion and above globally or more than RMB 2 billion in China.

April 30, 2021: Didi is again ordered (in Chinese) to pay a penalty after insufficiently disclosing three acquisitions and investments for antitrust reviews, including a takeover of a Shenzhen-based car rental firm. Chinese gaming powerhouse Tencent and retail giant Suning were also punished for the same reasons, with each fined RMB 500,000, the highest amount stipulated by the law.

May 12, 2021: China’s cyberspace administration issues new draft rules on data collection applying to both carmakers and ride-hailing platforms, stipulating that companies need to gain regulatory approval before providing “important and private data” to foreign entities (our translation). Coming after growing concerns about vehicle cameras and where the car data is going, CAC writes in the announcement (in Chinese) that the rules have been drafted to safeguard national security and the public interest.

May 14, 2021: Chinese antitrust regulators order ride-hailing platform Didi and online services giant Meituan to rectify their ride-hailing practices, reports Bloomberg. The two companies were among 10 online on-demand services ordered to make changes to their operations, including increasing drivers’ commission fees.

June 17, 2021: Reuters reports that China’s market regulator is investigating whether Didi violated antitrust rules. Didi dismisses the report as “unsubstantiated speculation from unnamed sources.” However, the company acknowledged that it has just completed a one-month self-inspection to correct monopolistic practices, along with dozens of other companies, as required by regulators, in its IPO prospectus filed last month.  

Chinese ride-hailer Didi went public on Wednesday on the New York Stock Exchange in a much anticipated US IPO, raising $4.4 billion. 

Why it matters: Didi is the biggest Chinese IPO in the US since Alibaba’s $25 billion listing in 2014.

Details: The company priced its IPO at $14, the top of the expected range. It opened at $16.65 per share on Wednesday, and closed at $14.14, a modest 1% up from the initial offering price. 

• Two days before Didi’s debut, CNBC’s Jim Cramer recommended the stock on his show “Mad Money.” “If you want to speculate on a Chinese IPO, you’ve got my blessing to bet on Didi. I would try to get as many shares as you can,” Cramer said.
• David Trainer, founder of New Constructs, a US-based investment research company wrote that Didi is overvalued and worth “no more than $37 billion,” a little over half of its current valuation in a Wednesday analysis. He worries that Chinese regulatory risks and an “unprofitable” business model will hurt the company’s performance, despite Didi having a 90% market dominance in China. 
• Didi reported losses of $1.6 billion on $21.6 billion in revenue in 2020. The company turned a profit of $800 million on $6.4 billion in revenue in the first quarter of 2021, according to its IPO filing. 

Context: Didi performed better than its US counterparts on the first trading day. Uber fell below its initial offering price in its 2019 debut. 

• In May 2019, Uber opened below its initial offering price of $45 and dropped more than 7% on the first trading day. 
• Like many other leading tech companies in China, Didi faces increased regulatory scrutiny. Reuters reported in June that Didi is facing antitrust investigations from the country’s top market watchdog on whether the company had used unfair practices to squeeze out smaller competitors. 

READ MORE: The Chinese gaming startup outperforming Tencent overseas

With contributions from Jill Shen.

Chinese ride-hailing company Shouqi apologized on Monday for a safety incident in which a woman exited a moving car in an alleged attempt to escape her driver. Police found the driver violated the official regulation governing the taxi sector in the region, but his actions did not amount to a criminal offense, according to a Monday statement. 

Why it matters: The incident became the talk of the Chinese internet over the weekend, prompting a widespread backlash against the state-backed ride-hailer and spurring a discussion on women’s safety in China. 

• Ahead of the police report, Shouqi Limousine & Chauffeur (Shouqi Yueche) and the woman surnamed Gao released contradictory statements regarding the incident. Shouqi said the incident was caused by “miscommunication,” while the woman said she felt threatened by the driver. 

Details: Police in Hangzhou’s Fuyang district said the driver violated driver’s regulation in Hangzhou but he did not commit a criminal offense. The transportation department will determine the punishment for the driver and Shouqi. 

• Police said the driver violated regulations by changing routes twice without getting Gao’s permission. The police said both the driver and Gao called the police after the incident. 
• Police interviewed the driver and Gao, watched surveillance footage, and listened to recordings from the drive. Chinese ride-hailing companies regularly record rides for safety reasons. 
• Police said the driver and Gao had several short exchanges and the two parties disagreed about route changes. 
• Fuyang government officials set up a dedicated investigation team to look into the incident. The team includes members of the police and the transportation department, according to the police statement. 
• Shouqi promised to offer more communication training to drivers in a Monday statement (in Chinese), released hours after the police statement. 
• At the time of the publication, Gao has not made any new public statements. 
• The incident happened on June 12. The public first heard of it over the weekend. 

Context: Shouqi is the latest ride-hailing company to become embroiled in controversy over safety issues. Despite efforts made by ride-hailers and lawmakers, such as mandating ride recordings and adding call-police functions into their apps, the public is still sensitive to the issue. 

• In 2018, two women were murdered by their drivers during separate rides on China’s dominant ride-hailing platform Didi, forcing the company and other ride-hailers to suspend their carpooling services. When Didi resumed the service in November 2019, the company initially barred women from booking carpool rides after 8:00 p.m. for safety reasons. Didi quickly backtracked the decision and made carpool rides past 8:00 p.m. unavailable to all people after public outrage. 

Chinese ride-hailing company Shouqi is under fire for safety issues after a woman in Hangzhou claimed she injured herself by falling out of a moving car while attempting to escape a dangerous situation.

On June 12, a passenger surnamed Gao jumped or fell out of a moving taxi during a ride provided by Shouqi Limousine & Chauffeur (Shouqi Yueche) in the eastern city of Hangzhou.

Gao said she attempted to escape because she was afraid her driver was going to attack her. She suffered a bone fracture and multiple scrapes from the incident, according to her statement.

Gao and Shouqi have since released contradictory statements online regarding the incident, prompting wide debate online over what happened during the ride. 

Why it matters: The incident raises questions about the state-backed luxury ride-hailing company’s ability to provide a safe, premium ride. 

• Shouqi has presented itself as a safer, upmarket alternative to competitors like Didi, making its name by providing rides to high-level officials, such as employees of the State Secrets Protection Administration in Beijing. 

Shouqi’s statement: The ride-hailing company released a Weibo statement on Saturday (in Chinese), saying the incident was due to a “miscommunication.” 

• Shouqi apologized for the incident and said Gao jumped out due to misunderstanding with the driver, promising to cover Gao’s medical expenses. Shouqi said the driver called the police after Gao jumped out. 
• According to Shouqi’s account, police told the company that the incident was caused by poor communication between Gao and the driver, which led to Gao getting out of the car. The police have not issued a public statement.
• Shouqi added that the recording of the ride showed no arguments and minimal interaction between Gao and the driver.
• A Shouqi staff who asked not to be named told TechNode that the company is in the process of addressing the situation. 

Gao’s statement: A day later, Gao described the company’s statement as a “fabrication,” publishing her own account of the incident (in Chinese). Gao added that she didn’t have access to the recording, and Shouqi refused to share it with her. 

• Gao said the driver began “checking her out and trying to start a conversation with her” as soon as she entered the car. After the driver changed the routes twice without asking her for permission, she started to “panic,” she said. She then resorted to opening the door to force the driver to stop the car, according to her statment.
• As the driver continued to drive, Gao “fell out of the open car and rolled a couple of times on the ground … crying out for help hysterically,” said the statement. 
• Gao wrote that passersby, rather than the driver, called the police.
• She also wrote that she had not heard from the company about medical expenses.
• Gao did not reply to TechNode’s requests for comment. 

Context: Ride-hailing companies in China have long faced scrutiny over safety concerns, forcing market leader Didi to suspend a popular service in 2018 and introduce new safety features in a bid to regain trust.

• Founded in 2015, Shouqi is a premium ride-hailing company focused on affluent clients in government and large companies. Unlike Didi, which still operates at a loss, Shouqi said in a 2020 press release that it had turned a profit in July 2019 in Shenzhen and Shanghai. In April 2020, the company has reached profitability nationwide. 
• In 2018, ride-hailing giant Didi faced public outrage after two women were murdered by their drivers on separate occasions. One of the drivers was sentenced to death, while the other committed suicide after the crime. Following the incidents, Didi fired senior executives and suspended its carpooling service. 

China’s market regulator is investigating Didi on whether it violated antitrust rules, Reuters reported Wednesday night. Didi called the report “unsubstantiated speculation.”

Why it matters: The probe report comes less than a week after the ride-hailing giant filed for a US IPO on Thursday. It remains to be seen whether the news will affect the company’s plan to go public. 

• A slew of tech major Chinese companies have faced antitrust scrutiny in the last year as part of a broad push to regulate the country’s powerful tech sector. 

READ MORE: The Chinese gaming startup outperforming Tencent overseas

Details: Unnamed sources told Reuters that China’s market regulator, the State Administration for Market Regulation (SAMR), is looking at Didi on suspicion of anti-competitive practices. 

• Regulators are also investigating whether Didi used anti-competitive practices to squeeze out smaller rivals, and whether Didi manipulated the price of rides, Reuters wrote. 
• The probe is in early stages, and the regulator has not yet given detailed instructions to Didi, according to Reuters’ report.
• A Didi spokesperson told TechNode on Friday that it refused to comment on “unsubstantiated speculation from Reuters’ unnamed sources.”

Context: Didi, dominant in China’s ride-hailing market, has been fined several times this year by market regulators for antitrust violations. 

• In March and April, SAMR fined Didi’s subsidiaries a combined RMB 2 million (around $310,000) for insufficiently disclosing past acquisitions and investments for antitrust reviews. 
• Didi was punished in April alongside several other Chinese tech giants, including Tencent and Meituan, for failing to seek antitrust clearance for their investments.
• Didi has dominated the ride-hailing market since merging with Alibaba-backed Kuaidi in 2015. A year later, Didi bought out Uber’s China business as the American rival left the market. 

Chinese ride-hailing platform Didi filed for an initial public offering on Thursday. The company plans to trade on either the New York Stock Exchange or Nasdaq. 

Why it matters: Valued at $62 billion, Didi is among the world’s five highest-valued unicorns. The company’s listing could be one of the biggest IPO this year. 

• The Beijing-based startup is also the world’s biggest mobility platform, with around 156 million monthly active users (MAUs) in the three months ended March 31, 2021, according to its prospectus. To compare, Uber had 98 million MAUs during the same period.

Details: Didi’s IPO filing highlights its quick recovery from the impact of the Covid-19 pandemic. The company reported a net income of RMB 196 million ($30 million) in the three months ended March 31, up from a net loss of nearly RMB 4 billion a year earlier.

• Didi’s revenue for the first quarter of this year was RMB 42.2 billion, doubling its figures from the same period in 2020. The company reported a RMB 10.7 billion loss on RMB 141.7 billion in revenue for 2020. 
• Didi plans to use 30% of the proceeds from its IPO to fund its international expansion. The company intends to spend another 30% on technology development, including electric vehicles and autonomous driving, according to the filing.
• Didi is ramping up its push into electric vehicles (EVs) to cut operational costs. Last November, the company released its first EV, the D1, with Chinese carmaker BYD. It also partnered with Guangzhou Automobile Group Co Ltd (GAC Group) to develop self-driving cars last month.
• Didi didn’t disclose how much money it seeks to raise, but listed a placeholder amount of $100 million on the filing.

Context: As part of its rapid expansion plan for the next three years, Didi is expanding into overseas markets and aggressively entering new verticals. 

• In November, the Chinese mobility giant launched its ride-hailing service in Auckland, New Zealand, three months after making its debut in Russia. It is also reportedly eyeing western Europe, where it seeks to enter the UK, France, and Germany.
• Domestically, Didi has been diversifying its business by expanding into grocery delivery and mini-van services for logistics. In January, the company reportedly closed a $1.5 billion round of funding for its mini-van service. It plans to spin off its grocery delivery service in a separate listing as early as next year.

Chinese ride-hailing giant Didi Chuxing is reportedly gearing up to carve out its grocery delivery unit for a separate listing as early as 2022, a year after a planned listing for its core business slated for this summer, The Information reported on Thursday.

Why it matters: The Beijing-based transportation giant is gearing up its grocery delivery business, a community-based group-buy platform, as a new revenue source amid slowing growth in its core ride-hailing business.

READ MORE: INSIGHTS | As ridesharing market plateaus, Didi tries everything

• Major tech companies, from Alibaba to Meituan, are pushing aggressively into the community group-buy sector despite tightening regulatory control.
• Chinese tech giants often manage different business lines that are too complicated to operate under a single entity, and tend to spin off their non-core businesses via IPOs. JD.com affiliate JD Health debuted on the Hong Kong stock exchange in December, while the bourse just approved JD Logistics for a separate IPO. Fintech arm JD Digits withdrew its application to list on Shanghai’s STAR Market in April.
• The Didi news comes shortly after it reportedly filed confidentially with the US Securities and Exchange Commission for an initial public offering that could raise several billion dollars at a valuation of at least $100 billion.

Details: In a discussion with investors, Didi executives said that they intend to take its community group-buy unit Chengxin Youxuan public sometime between 2022 and 2023 , The Information reported citing people with knowledge of the matter. The exact timing hasn’t been finalized.

• The report said the discussion took place during recent fundraising talks for the unit.
• For the round, existing investors Citic Private Equity and angel investor Wang Gang will contribute $1.2 billion, while Didi purchased $3 billion of Chengxin’s convertible bonds, according to the report.
• The news echoed Bloomberg’s February report of a $4 billion round for the grocery arm, which is intended to boost its growth amid increase demand.
• The report did not specify the location for the potential listing.
• Didi spokeswoman declined to comment on the news when contacted by TechNode on Friday afternoon.

Context: Community group-buying firms, including Tencent-backed Xingsheng Youxuan and MissFresh, have attracted billions in startup investment.

• In March, China’s top market regulator levied fines totaling RMB 6.5 million (around $1 million) on five community group-buy platforms, including Chengxin Youxuan and rival platforms backed by Pinduoduo, Meituan, and Alibaba, for price dumping.

China’s top antitrust regulator said Friday it has issued fines to companies including social media giant Tencent, ride-hailing platform Didi Chuxing, and search engine Baidu over 10 investment deals in the internet sector that were in violation of the Anti-Monopoly Law.

Why it matters: China has in recent months stepped up scrutiny of tech firms over antitrust regulations. Friday’s disciplinary action involves the largest number of companies so far and the fines issued were the maximum amount allowed by China’s existing legal framework.

• A proposed overhaul to China’s Anti-Monopoly Law will allow regulators to issue fines up to 10% of the offending company’s annual revenue.

Details: The State Administration for Market Regulation (SAMR) said in a statement (in Chinese) on Friday that the deals include Tencent’s 2018 investment in edtech firm Yuanfudao, Baidu’s 2014 acquisition of smart home equipment maker Ainemo, and a joint venture set up by Didi and Japanese conglomerate SoftBank.

• Other deals include a merger deal involving a subsidiary of Alibaba, and a joint venture set up by TikTok parent ByteDance and a Shanghai newspaper group.
• Twelve companies including Tencent and Baidu were each fined RMB 500,000 (around $77,000) for their involvement in the deals. The penalty is the maximum for unreported anti-competitive deals according to China’s current antitrust law.
• China’s Anti-Monopoly Law requires companies to report investment or acquisition and merger deals that could create a “market dominant player,” or one that will hold more than 50% share of its relevant market. 

Context: In December, SAMR issued fines to Alibaba and affiliates of Tencent and logistics giant SF Express over three separate acquisition deals, a move that legal experts said was the country’s first batch of antitrust enforcements against tech firms.

• In February, China put into effect new antitrust guidelines targeting internet platforms, which bans internet platforms from forcing merchants into exclusivity deals, offering different prices based on user data, and using algorithms to manipulate the market.

Curbing community group-buy

China’s top market regulator levied fines totaling RMB 6.5 million (around $1 million) on five community group-buy platforms for price dumping, reinforcing Beijing’s efforts to regulate the red hot industry.

The companies subject to the penalty are Didi’s Chengxin Youxuan, Pinduoduo’s Duoduo Maicai, Meituan’s Meituan Youxuan, Alibaba-backed Nicetuan, and Wuhan-based Shixianghui. (TechNode)

Female consumers power growth

• Chinese female shoppers make household purchasing decisions in 75% of homes, according to a report released by online retailer JD.com, and are spending increasingly more on themselves as a proportion to the household. The report was released on International Women’s Day, which falls on March 8. Women are driving growth in a diverse range of categories such as cosmetics, baby products, luxury goods, alcohol, cars, and mobile gaming, the report said citing Meha Verghese, executive at agency MediaCom. (JD)
• A Pinduoduo consumption report identified the same trend, saying that the female users are spending more on products and services to “please themselves.” The sale of lipstick, skincare products, and apparel top the sales growth chart, according to the report. (Tencent Tech, in Chinese)
• A total of 2.72 million female drivers work for Didi across Asia, Latin America, Russia, and Australia, according to a report from the ride-hailing giant. China accounts for 2.37 million of the total. Many women, who are often also caregivers and homemakers, turned to gig economy apps due to economic uncertainty caused by the pandemic, the report said. (Ifeng, in Chinese)

Earnings season

• Chinese online grocer JD Daojia reported RMB 2.02 billion ($308.62 million) in revenue during the fourth quarter, an increase of 69.9% year on year. The revenue missed the $309.18 million average estimate compiled by Yahoo Finance. The company’s full-year net revenues in 2020 amounted to RMB 5.74 billion, a year-over-year increase of 85.2%. Total gross merchandise volume for the year of RMB 25.3 billion more than doubled compared with 2019. (Ebrun, in Chinese)
• Fourth quarter revenue for China’s online travel platform Trip.com dropped 40% year on year to RMB 5 billion, which the company attributed to the pandemic. The decline in revenue slowed compared with 48% year-on-year drop in Q3 and 64% in Q2, signaling a gradual recovery of domestic travel market. (KrAsia)

This week in funding

• Ymatou, the Chinese cross-border e-commerce site backed by microblogging platform Weibo, has closed a Series D Plus worth hundreds of millions of RMB from Prosperity Investment, local media reported. (36kr, in Chinese)
• Chinese beverage chain Manner Coffee received investment from investors including Singapore sovereign wealth fund Temasek Holdings at a valuation of $1.3 billion. The Luckin rival operates more than 100 stores across the country, mostly located in Shanghai. (Ebrun, in Chinese) 

China has imposed fines totaling RMB 6.5 million (around $1 million) on five community group-buy platforms for irregular pricing.

Why it matters: Beijing is moving to regulate the red hot community group-buy industry as part of a recent campaign to curb the power of China’s internet giants.

• Fines targeting the growing sector comes as the state has stepped up regulation of internet giants over the past few months. China has extended various degrees of penalties on tech majors including Alibaba, Tencent, JD.com, and Vipshop.

READ MORE: Friendly neighbors are the key to China’s community group-buying craze

Details: The State Administration of Market Regulation (SAMR) said Wednesday that it decided to levy fines on five community group-buy companies after more than two months of investigation. The platforms are some of the biggest in the sector, and hold “a large share of the group-buy market,” according to regulator.

• Didi’s Chengxin Youxuan, Pinduoduo’s Duoduo Maicai, Meituan’s Meituan Youxuan, and Alibaba-backed Nicetuan are each subject to a fine of RMB 1.5 million. Wuhan-based Shixianghui was fined RMB 500,000, according to the notice.
• The investigation showed Chengxin Youxuan, Duoduo Maicai, Meituan Youxuan, and Nicetuan leverage their capital advantage to compete for market share by selling products at prices lower than cost, according to SAMR. All of the five falsely advertised discounted prices to boost orders.
• The companies were fined the maximum penalties due to the negative impact of their practices, a SAMR spokesperson said in a press conference (in Chinese) on Wednesday.
• The spokesperson said that using irregular measures to squeeze offline community economies will create market disorder and lead to social instability. At the same time, unfair competition among the tech firms will hurt consumer interests in the long run.

Context: The government summoned representatives from tech majors including Alibaba, JD.com, Meituan, Tencent, Pinduoduo, and Didi for a meeting in December to discuss oversight of the group-buy sector.

• Regulators issued a list of restrictions on group-buy businesses, forbidding predatory pricing to beat out competition as well as falsely advertising discounted prices and posting misleading product information.
• The state-run People’s Daily said in a commentary that tech companies should focus on innovation for bigger benefits instead of “thinking about the traffic of a few bundles of cabbage and a few pounds of fruits” (our translation).

TikTok bets on social shopping

TikTok, Beijing-based ByteDance’s short video app, is reportedly planning several new features for its e-commerce expansion in the US. The move builds on the success of a similar push from its Chinese version Douyin, now a major player in China’s livestream e-commerce market.

Livestream shopping has become widely popular in China. Another features allows TikTok users to share links to products and automatically earn a commission. The viral short video app piloted a shoppable experience with Walmart in December. (Financial Times)

Luckin bankruptcy

Luckin Coffee filed for bankruptcy protection in the US on Friday to fend off US creditors during a liquidation process that is already underway in the Cayman Islands, where it is registered. The company will continue its China operations, “including paying suppliers, vendors, and employees.” The filing comes almost a year after the company admitted falsifying RMB 2.2 billion ($310 million) in 2019 sales. (TechNode)

Regulator scrutiny

Beijing has imposed a RMB 3 million fine on the operator of Vipshop.com for unfair competition, just a month after the flash sale online retailer was penalized RMB 500,000 for irregular pricing. (TechNode)

Didi boosts group-buy unit

Ride-hailing giant Didi Chuxing is planning to raise $4 billion for its community group-buying unit, doubling down on the rising sector to diversify its revenue streams amid slowing growth in its core business. Didi could chip in $3 billion while seeking about $1 billion from external investors. (Bloomberg)

READ MORE: Friendly neighbors are the key to China’s community group-buying craze

Fresh produce e-commerce

Suning Logistics, part of omni-channel retailer Suning Group, rolled out Su Xian Da, a new fully linked cold chain solution from warehousing to distribution. The service offers cold-chain delivery service to consumers within 48 hours. Suning, along with a group of online sellers and delivery services, will continue its logistics and delivery services during the weeklong Spring Festival holiday, generally a low season for China’s logistics industry. (Tencent, in Chinese)

GGV Capital, an investor behind some of China’s most successful tech startups including ByteDance and Didi Chuxing, said Thursday it had closed a $2.5 billion funding round—the largest in its 20-year history.

The US- and China-based venture capital firm’s latest capital raise comes amid an uptick in inflows to VCs from domestic and international limited partners (LPs) looking to profit from China’s tech growth. On Tuesday, Qiming Venture Partners, a Beijing-based VC firm that has invested in food delivery app Meituan and smartphone maker Xiaomi, said it had closed a new RMB 2.9 billion (around $448 million) financing round, following a $1.2 billion capital raise in September.

The two deals are part of a trend: foreign investors are increasingly injecting funds into China’s growing tech sector, as the global economy slows. Investors and analysts have said that foreign LPs are optimistic about China’s tech startups following last year’s initial public offering (IPO) boom. China, meanwhile, is gradually opening its finance market, increasing its appeal to international investors, they said.

Two big fundraising deals

GGV said it had raised in this financing round $1.46 billion for its GGV Capital VIII fund, $366 million for the GGV Capital VIII Plus fund, $610 million for its Discovery III fund, and $80 million for its Entrepreneur VIII fund. The firm said it will focus on investment in sectors such as new retail, cloud-based enterprise services, and social media.

The firm said it also expects to soon close a separate financing round of RMB 3.4 billion, increasing its total assets under management to around $9.2 billion.

The company did not disclose the names of its backers in this round. It has previously raised US dollar funds from North America-based pension funds, family asset management firms, and universities. A GGV representative declined to comment.

Qiming’s latest financing round was backed by two government-led guidance funds in Shanghai and Beijing, as well as several domestic insurance companies, TechNode has learned. The firm’s $1.2 billion financing round closed in September was mainly backed by American university endowments and pension funds.

“Top domestic and international LPs are optimistic about our investment strategy to invest in China’s innovative and developing science and technology, even during the challenging global Covid-19 epidemic as well as changing global environments,” (our translation) Duane Kuang, Qiming’s founding managing partner, said in a company statement on Tuesday.

US dollar funds become more active

In 2020, Chinese US dollar funds raised 12% more money than the previous year, even though total capital flowing into the market dropped nearly 39%, according to data from PE Data, which tracks China’s VC activities.

“US dollar funds into Chinese VC firms increased in 2020 both because the Chinese government had loosened its regulations of foreign investment and because overseas LPs are a lot more confident about the Chinese market,” (our translation) Liu Xiaoqing, research director at Itjuzi, a Chinese VC activity database, told TechNode.

American LPs are finding Chinese tech firms increasingly attractive and the market is rapidly developing after some Chinese tech firms went public in 2020 and offered investors high returns, she added. Some of the largest Chinese tech IPOs last year included electric vehicle maker Xpeng and Li Auto, as well as gaming giant Netease’s dual listing in Hong Kong.

VC-backed Chinese video-sharing app Kuaishou is preparing for what is expected to be the world’s largest public listing since the pandemic. The company is seeking to raise around $5 billion on the Hong Kong stock exchange, implying a market capitalization of as much as $60.9 billion. The firm was valued at $18 billion in a funding round in January 2018, meaning early investors are expected to net returns of nearly 233%.

A clearer picture

US investor interest in Chinese tech firms was hampered last year by two Trump-era policies, but signs from the Biden administration, which has thus far indicated an aversion to over-broad and arbitrary restrictions on Chinese tech firms, are stoking optimism.

In May, the US Labor Department advised US federal pension funds—important backers of Chinese USD VC firms—against investing in Chinese companies. In November, former US President Donald Trump signed an executive order which banned starting Jan. 28 American investment in companies that are deemed related to the Chinese military. Smartphone maker Xiaomi, China’s three biggest telecommunications operators, and Chinese chipmaker SMIC are on the blacklist.

However, in a sign that it is easing Trump’s “tough-on-China” tech policies, the newly inaugurated Biden government said on Wednesday it is delaying the investment ban on certain Chinese firms to May 27.

China’s economy expanded 2.3% in 2020 according to government data (in Chinese) released last week, as economies in the rest of the world grapple with the stranglehold on business brought by the coronavirus pandemic.

China brought in $163 billion in foreign investment in 2020, surpassing the US as the world’s hottest destination of foreign direct investment, according to a report by the United Nations Conference on Trade and Development released on Sunday. In 2019, the US took $251 billion in foreign inflows and China got $140 billion.

“LPs are planning for the longer term,” said Liu of Itjuzi. “They are not only confident about China’s economy in 2021. They are at least confident about China in the next 10 years.”

Alipay, JD Digits, and Didi Finance have completely removed all interest-bearing time deposit products from their apps, just days after authorities released relevant regulations. TechNode has independently confirmed that bank deposit products have been banished from Alipay.

Why it matters: The move is the culmination of a month-long crackdown on time deposits sold through third-party fintech platforms, which is part of a wider regulatory clampdown on fintech as regulators try to rein in China’s Big Tech.

• China’s Banking and Insurance Regulatory Commission (CBIRC) said on Jan. 27 that it will further scrutinize the cooperation of banks and insurers with fintech companies.

Full measures: As of Dec. 27, Alipay, JD Digits, and Didi Finance closed the app portals through which users could increase their existing deposits with banks, Chinese media reported. The outstanding balances will be returned to their accounts once the deposits have matured.

Half measures: On Dec. 15, Sun Tianqi, head of the central bank’s financial stability department, likened the partnership between banks and fintech platforms on deposit products to “driving without a license” and warned that regulatory supervision would intensify.

• On Dec. 18, Ant Group was the first of China’s biggest internet platforms to stop selling bank deposit products on the Alipay financial marketplace. The company said it was following regulator demands.
• Tencent, JD Digits, and Baidu’s Du Xiaoman followed three days later.
• The relevant portals could still be accessed by app users who had purchased the time deposits in the past.
• The CBIRC completely banned on Jan. 15 the sale of bank deposit products, including fixed-time deposits, on third-party internet platforms.

The risk: Small regional banks had been advertising time deposits with interest rates as high as 7% through fintech platforms.

• Regulators have said that these banks are high-risk and use online platforms to pump liquidity on their balance sheets and release pressure from their liabilities, without going through the more stringent process of interbank lending.
• After the Jan. 15 rules were implemented, small regional banks are still allowed to sell time deposits, but they must use their own channels to advertise and sell. Xin’an Bank, Blue Ocean Bank, and Wuxi Xishang Bank announced that they are moving their time deposits to their own apps, the Global Times reported.

READ MORE: CHINA VOICES | The unsigned op-eds that foreshadowed Ant Group IPO suspension

Shares of the electric vehicle unit of Chinese property giant Evergrande surged nearly 50% on Monday after announcing that it had raised $3.35 billion from six investors in an add-on share sale to support its plan to become “the world’s largest EV maker.”

Why it matters: The sale, one of the biggest for a listed electric vehicle maker, are part of a broader trend in global stock markets as investors make big bets on EV players thought to be the next Tesla.

• Chinese EV maker NIO recently raised more than $3 billion in its recent upsized follow-on offering which closed in mid-December. Meanwhile, Xpeng Motors and Li Auto secured war chests of around $2.5 billion and $1.5 billion, respectively, with their new stock offerings early last month.

Details: China Evergrande New Energy Vehicle Group closed the sale of 952 million shares at HK$27.3 each, representing a discount of 8.7% to Friday’s closing price of HK$29.9, for a total of HK$26.0 billion (around $3.35 billion), according to a statement released Sunday.

• The add-on offering raised HK$5 billion each from four private investors, including Cosmic Success Holdings and Upper World Limited, subsidiaries of Chinese real estate developers Kingkey Group and Zhongzhou Group, respectively.
• Investors also included Chan Hoi-wan, practical controller of Chinese Estates Holdings and wife of Hong Kong billionaire Lau Luen-hung, as well as Liu Minghui, founder of Hong Kong-listed China Gas Holdings. Chan and Liu each purchased shares worth HK$3 billion.
• All of the investors have close ties with Evergrande, which is the EV unit’s biggest shareholder. Some had invested in Evergrande’s property management arm which went public in Hong Kong in December.
• The company’s stock price jumped 48% to HK$44.5 by Monday afternoon, expanding its market capitalization beyond $50.6 billion, easily eclipsing some of China’s biggest automakers such as SAIC and Geely.
• The company plans to put the funds toward research and development, debt repayment, and production, according to the statement.

Context: Evergrande’s EV subsidiary said it will start mass production of its electric car portfolio of six models ranging from sedans to crossovers in its Shanghai and Guangzhou facilities by September. It has said that it expects its core business to reach profitability in 2022.

• However, the would-be EV maker has yet to start trial production, according to a Caixin report (in Chinese) last month. The company has also faced ongoing criticism for grabbing land under the guise of making cars, according to a Financial Times report.
• The company raised in September $516 million in fresh funding from Chinese tech giant Tencent and ride-hailing unicorn Didi Chuxing, among others, and revealed plans for a secondary listing on Shanghai’s Nasdaq-style STAR Market tech board.

One of the prime industries slammed by the pandemic-induced economic downturn, China’s ride-hailing market is unlikely to recover its freewheeling, easy money ways.

Even before the coronavirus lockdowns, ride-hailing platforms in China struggled with increasing competition, as their usage slowed significantly in the country’s maturing transportation market.

The safety measures may not have been enough. Giant players seek to thrive, not just to survive, in a post-coronavirus world. To ensure growth, they have been introducing low-cost services and entering smaller cities. But the road to recovery of ridership could be slow and bumpy. 

Standing at a crossroads, China’s ride-hailing industry faces economic uncertainty, increased competition, and more regulation as the government steps up to offset the disruption caused by Covid-19. Looking ahead, as Chinese taxi companies and automakers ramp up, ride-hailing giant Didi could pay a heavy price to maintain its dominance.

This month, we review what happened in 2020 and what these trends mean for the future of ride-hailing in China.

Taxis vs ride-hailing

China’s ride-hailing and taxi sectors are converging after years of clashes, as both sides seek a level playing field and additional room for growth amid a deep economic downturn.

• Traditional taxi services have battered heads with Didi, charging the country’s biggest ride-hailing platform with unfair competition, partly because Didi’s ride-hailing drivers could offer cheaper fares with a dynamic pricing model. Taxi drivers have also been angered by Didi’s dispatch algorithms. These are the real-time mechanisms that match drivers with passengers; taxi drivers believe they favor Didi’s own vehicles over taxis, especially for long trips.
• A Didi spokesperson told TechNode that its technology facilitates matching of demand and supply and therefore helps drivers to grow their income, by dispatching, for example, a ride in the same direction as a driver’s route home when he comes off duty.
• Didi has offered taxi-hailing services since its inception, but it now only facilitates 3 million taxi rides per day. That’s only around 6% of the country’s daily taxi trips, suggesting massive growth potential. Until recently, the company didn’t charge state-backed taxi fleets that offered rides on its platform, while Didi drivers pay the company a 20% commission for every ride.
• Things started to change last summer, when Didi for the first time announced plans to charge taxi drivers. The company introduced the charges in lower-tier cities in August and then extended them to some of the country’s biggest cities. In Shanghai, Didi takes a fee of at least RMB 1,000 ($153) from a cab driver each month, around 10% of the driver’s monthly income. This made some drivers unhappy, a driver surnamed He told TechNode in late December.
• Didi explained that revenue from taxis will cover costs and boost demand by offering subsidies to drivers and passengers, and add an IT system for taxi fleets that helps with efficiency. Meanwhile, Alibaba’s mobility service, AutoNavi, has said that taxis and private vehicles will be treated equally on its platform, although drivers like He remain skeptical of the claims.

Untapped markets

Chinese mobility giants are hoping that expansion in the country’s hinterland will compensate for the steady chilling of the once red-hot markets of major cities.

• Didi has launched a budget ride-hailing app called Huaxiaozhu. The platform takes a leaf out of social e-commerce giant Pinduoduo’s book: It offers discounted rides to people who share the app with their friends on social networks. 
• Didi expects Huaxiaozhu to carve out a niche by winning the hearts of young, price-sensitive passengers in the 300 or so lower-tier cities where it operates. Currently, around 20 of China’s biggest cities account for 60% of Didi’s ride volume in its home market, but growth of its core business has been stagnating since 2017. The company’s woes were compounded by a drastic drop in rides early last year due to Covid-19.
• Looking ahead, another round of subsidy wars seems inevitable for Didi: more big tech companies are looking to tap new growth opportunities by offering cheaper services. In December, Alibaba-backed bike rental platform Hellobike launched a ride-hailing service in China’s southern Guangdong province. It claims its fares are 40% cheaper than its competitors. Early last year, Didi launched a RMB 10 billion subsidy program to attract drivers and riders in more than 130 cities across China.

Traditional automakers

Chinese automakers are collectively pushing into the ride-hailing market in order to gain a foothold in a world where vehicle ownership would no longer be a preferred choice for customers. 

• Volkswagen’s Chinese partner SAIC Motor is one of the automakers that could become a contender for Didi. Last month, the company closed a RMB 300 million Series A round from Alibaba and China’s top battery supplier CATL for its mobility service platform Xiangdao Chuxing. The platform offers on-demand ride-hailing and car rental for individual and enterprise customers, among other services.
• State-owned SAIC says its premium ride-hailing service has 20 million users after two years of operation, although its number of active users is only 1% of Didi’s, according to market research firm Analysys.
• Still, Didi has reason to worry. In September, SAIC launched a separate online taxi-hailing service in Shanghai with the support of the city government. Each driver is currently given as much as RMB 200 per day for taking orders on the platform, local taxi driver He told TechNode. Nearly every licensed taxi in the city is accessible through the app, SAIC said.
• More automakers are nibbling away market share from Didi. T3, a ride-hailing service launched by three state-owned automakers, last month said it plans to triple its order volume by entering 48 cities around China this year. The service currently offers 1 million rides a day after going live in mid-2019.

Regulation

Ride-hailing services face increased government intervention and regulatory uncertainty, as Beijing seeks more control to boost an economy hard hit by the pandemic and its aftermath.

• As the central government tightens the reins on big tech firms with anti-monopoly measures, a regulatory storm might be brewing for Didi. The China Taxi Industry Alliance last month called for regulators to review Didi’s 2016 acquisition of Uber’s China unit, according to an open letter published on its WeChat account (in Chinese).
• The industry group, formed by more than 50 licensed taxi companies, also called for Didi to be punished for its alleged monopolistic practices including offering expensive subsidies to promote Huaxiaozhu. A week after the proposal, Minister of Transport Li Xiaopeng pledged to enhance anti-monopoly regulation in China’s transportation sector as one of his ministry’s top priorities in 2021.
• Beijing is also looking to increase its influence in the technology sector as part of its five-year plan to boost its domestic market, last month requiring ride-hailing services to develop “hailing by one-click” features to accelerate adoption among senior citizens.
• Experts believe such moves could help reduce government expenditures for seniors’ medical care and unlock new sources of economic growth. Didi and seven ride-hailing platforms are now required to simplify their apps and launch the specially-designed feature before the upcoming Chinese New Year holidays in February, reported Chinese media.

Capital

Chinese ride-hailing companies are flocking to mainland and Hong Kong stock markets for IPOs, hoping to build their war chests to weather economic uncertainties and strengthen their balance sheets.

• Didi has finally resumed its efforts to go public, two years after putting the plan on hold following the murders of two female passengers using its popular carpooling service, Hitch. Claiming back in May that its “core business” was finally profitable, the company is reportedly (in Chinese) looking to list this year in Hong Kong at a valuation of HK$600 million ($80 billion). Didi has been in early talks with Goldman Sachs among other banks about possibly underwriting the offering.
• Didi has been diversifying businesses outside of its ride-hailing roots in search of new growth markets to justify its valuation, when its core business still struggles due to Covid-19. Its grocery delivery business in late 2020 exceeded 10 million orders per day, putting it at odds with Meituan, Pinduoduo, and more giants rushing into the grocery delivery sector.
• NIO-backed Dida, a distant second to Didi in China’s massive ride-hailing market, in October raced ahead by filing in Hong Kong for what looks to be Asia’s first ride-hailing IPO. Meanwhile, Geely’s ride-share unit Caocao in November hired UBS to raise its Series B and finally list on the public market, without revealing further details.

Lucky winners of Suzhou’s digital yuan lottery can spend their digital currency on JD.com, Meituan, Bilibili, and Didi, depending on their bank card, a look at the wallet app reveals. TechNode has seen the app in action through screen recordings sent by a user in Suzhou.

TechNode is the first English language outlet to see the digital yuan wallet in action during the Suzhou trial.

The trials are still limited: The winners received only RMB 200—about $30, enough to buy 10 coffees at Luckin or five at Starbucks. There’s no way to load more money on the digital yuan wallet. Users only have access to a few online shopping platforms, with the exact options depending on which bank card they used to register with the app. They can also spend the currency in some offline stores in the city.

The digital yuan also knows a trick that cash doesn’t: It has to be used by Dec. 27 otherwise, it pulls a disappearing act. Poof. It’s gone.

Why it matters: This is the first time consumers can use the digital currency to pay directly on e-commerce apps in the digital yuan’s public trials.

• The Suzhou lottery is only the second time the digital currency has been made available to the public. Another lottery took place in Shenzhen in October.

Connected to bank cards: Users are asked to link their bank cards to the digital wallet to get the digital currency. Only cards from China’s big five banks are eligible: Bank of China (BOC), Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (ABC), China Construction Bank (CCB), and Postal Savings Bank.

• The local government said users don’t have to register a bank card to use the digital wallet. If they do register a bank card, it has to be one of the five.

Where to spend it: All bank cards can connect to e-commerce platform JD.com, where users can spend their money. ICBC cards also connect to ride-hailing platform Didi and lifestyle app Meituan. BOC cardholders can connect to streaming platform Bilibili, and users of CCB cards can use the digital yuan on own CCB’s e-commerce platform.

• The city said it will enable nearly 10,000 offline merchants to accept the digital yuan. A list can be queried through the city’s app.
• The app has a button to pay Communist Party dues. But when TechNode tried, the app said that it was not available for the user’s Party branch.

No withdrawals: The digital currency cannot be transferred to other users’ digital wallets. It also cannot be converted to ordinary RMB in the bank account of the owner. If users wind up returning goods they buy with the digital currency, the Suzhou government said, they will be refunded only for regular currency used in the purchase.

Context: In a lottery (in Chinese) announced on Dec. 4, Suzhou distributed RMB 200 million ($30.6 million) of the digital yuan to 100,000 people in digital red envelopes of RMB 200. Only residents of the city who have paid monthly social security at least once in the last three years are eligible to participate in the lottery.

• The results of the lottery were announced today, and winners can spend their winning from 8 p.m. on Dec. 11 to Dec. 27. They money will be taken back from the account if it is not spent within this time window. The Suzhou government said the unspent red envelopes will be “recycled,” but did not clarify how.
• Prior to the Suzhou and Shenzhen lotteries, only a few whitelisted individuals were taking part in the digital currency trials.

READ MORE: INSIGHTS | China’s digital currency has a long way to go

Luckin fined, rolls out a new strategy

• Chinese authorities imposed a RMB 61 million ($9 million) fine on Luckin and a group of affiliated companies for creating unfair competition by engaging in sales fraud. This is the first fine the Chinese coffee chain operator has received after admitting to financial fraud in early April. (TechNode)
• Luckin, still reeling from the scandal, adjusted its growth strategy to focus on shoring up the repurchase rate for existing users rather than attracting new users. To cut costs, it is using privately managed groups on Tencent’s enterprise communication app Wechat Work to push coupons, encouraging repeat business. Users scan QR codes displayed in its offline stores or WeChat official account posts. Luckin has reportedly amassed over 180,000 private traffic users, and the figure is growing at around 60,000 per month. (Iresearch, in Chinese)

VCs investing into China’s new brands

New Chinese brands are capitalizing on growing consumer interest in domestic brands and products, especially those featuring traditional Chinese styles and cultural elements. E-commerce giants like Alibaba and short video apps like Kuaishou are beefing up support for such brands with more online traffic as well as updated supply chains.

• Perfect Diary, China’s hit e-commerce-based cosmetic brand, reportedly received $140 million investment at a valuation of $4 billion, double the $2 billion market cap it was rumored as having earlier this year. Private equity firms Warburg Pincus and The Carlyle Group invested $70 million each in the round as the company prepares a US listing reportedly slated before year-end. Zhang Donghao, chief financial officer of e-commerce site Vip.com, will reportedly join the three-year-old company to oversee stock market debut protocols. (All Weather TMT, in Chinese)
• Jiangxiaobai, a Chinese liquor brand, announced Sept. 24 the completion of a Series C for an undisclosed amount led by China Renaissance’s Huaxing Growth Capital. Baillie Gifford, Loyal Valley Capital, CMB International, Kunyan Investment Management, and Wens Investment joined the round. (Xinhua, in Chinese)
• Miniso, a Tencent-backed household product brand, filed its prospectus with the US Securities and Exchange Commission on Sept. 24 for a New York listing. In the same week, the company facing scrutiny over product safety concerns. The Shanghai medical product regulator found that chloroform levels in a nail care product sold by the company was 1,400 times higher than the standard allowed by the state.  (Sina Tech, in Chinese)

Grocery delivery battle, now even hotter

• Users of Alibaba’s food delivery platform Eleme will soon be able to order from Tmall Supermarket, Alibaba’s online grocery marketplace. Orders will deliver to users within an hour for some locations or a half-day for others, rather than the previous 1 to 2 day delivery window for orders placed via the Taobao or Tmall apps. The move follows shortly after Alibaba made products from Freshippo available on the platform, as the e-commerce giant further integrates its local lifestyle services. (Krasia)
• Chinese ride-hailing giant Didi rolled out last Friday an independent app for its grocery delivery platform Chengxin Youxuan, a program it began piloting in June. The company said the service had more than 550,000 orders per day in three cities within China’s southwestern Sichuan province. The pilot will expand to more provinces in September. Entering the market means the company will be competing with grocery delivery giants ranging from Meituan to Alibaba. (Tech Globe, in Chinese)

For the past two years, ride hailing giant Didi Chuxing has laid low, waiting out a storm of public outrage that followed incidents when two female passengers who used the platform were killed by their drivers.

Now, the days of biding its time are over. The company has launched a slew of new brands and continued its push abroad, going up against Uber in more markets (and entering Russia).

Didi also recently restructured, creating a maze of sub-brands that cover diverse consumer groups in higher- and lower- tier cities across China, most notably launching a low-cost ride hailing service and rebranding its taxi-hailing app.

Since spring, the company has even made a foray into logistics and grocery delivery, in a bid to provide a range of mobility services within a mega ecosystem.

So what prompted this sudden flurry of activity?

Bottom line: Didi, the world’s second biggest tech unicorn, has a problem: growth in China’s ride-hailing market has plateaued, while the company faces price competition from dozens of well-funded smaller rivals willing to subsidize rides. With the company looking forward to a much-rumored IPO, it needs new sources of growth to justify its $56 billion valuation.

• Didi has three big ideas about how to stimulate new growth: new services, lower tier markets, and going global.
• Didi targets more than 100 million orders per day and reach 800 million monthly active users (MAUs) worldwide over the next three years, which would be more than five times Uber’s 2019 figures. Didi saw about 10 billion rides a year, or an average of 27 million per day, a spokesperson told TechNode in November.

Slow growth

After years of double-digit growth, China’s ride-hailing market expanded an anemic 3.42% in 2019, according to figures from China Internet Network Information Center, partly due to a government crackdown on unlicensed drivers.

Didi, China’s largest ride-hailing platform, has been affected. Ride volume fluctuated between 20 and 30 million trips per day from 2017 to 2019, an unnamed Didi investor told Caixin (in Chinese), and reportedly fell to a nadir of 5 million during the Covid-19 outbreak.

However, there are positive signs for the company. In June, Didi said that its ride-hailing business had returned to its pre-pandemic level, still far off its three-year target of 100 million daily orders. The company set a new daily record last month—CEO Cheng Wei announced that total volume surpassed 50 million on Aug. 25, China’s Valentine’s Day.

After years of losses, the company’s ride-hailing business also recently turned a profit for the first time, Didi President Jean Liu said in May.

Ride-hailing challenges

Didi is a clear winner in China’s ride-hailing market, controlling more than 80% of the market since its 2016 merger with Uber China, but it faces challenges at home.

The company has little control over the price of rides, since it competes with dozens of small players, mostly backed by tech giants and legacy automakers. Many offer generous subsidies to users, including occasional free rides.

Even network effects don’t give Didi as much of an edge as you might think, since apps including Alibaba map service Autonavi, Baidu Map, and Didi’s old rival Meituan all offer ride-hailing aggregation services, leveling the playing field between the giant and its Lilliputian rivals. Earlier this week, Didi entered a partnership with Chinese tech behemoth Tencent, a long-time backer.

Didi’s troubles have also been compounded by increasingly tight rules over hiring after the high-profile murders, leading to a significant shortage of drivers able to operate on its platform.

Nevertheless, there is still a huge space for growth in China’s ride-hailing market. More than 90% of Chinese passengers hail a cab on the streets rather than through ride-hailing apps, according to Didi (in Chinese). Didi currently facilitates 3 million taxi rides each day, just 6% of the country’s daily taxi trips, Latepost reported.

More cities

In a bid to capture more of China’s rides, Didi launched a new budget ride-hailing app earlier this year, and rebranded its licensed taxi service to meet varying demands from users in higher- and lower-tier cities across China.

Budget rides: Huaxiaozhu (which literally translates to “flower piglet”) targets users from lower-tier cities with cheap rides. The platform offers cheaper rides than Didi’s core service, and includes gamified social features.

• Featuring fixed, rock-bottom prices and coupons for early adopters who promote the app online, Huaxiaozhu became known as the “Pinduoduo of ride-hailing” immediately after launch.
• First launched in Linyi, a third-tier city in the eastern Shandong province, and the southwestern city of Zunyi in late March, the service quickly gained traction thanks to a campaign that charged only RMB 1 ($0.15) for a user’s first trip.
• Even without discounts, a 100 km or above journey on Huaxiaozhu is at least RMB 30 cheaper than that on Didi, Chinese media has reported.
• Didi has since announced an RMB 10 billion subsidy program in bid to enter an additional 130 small- and medium-sized cities.

Licensing questions: The pig has been forced to suspend services a dozen cities over a pretty basic issue: regulators say it hasn’t got a license to offer rides, according to multiple Chinese media reports.

• In a statement earlier this month, Didi argued that since Huaxiaozhu is a product developed by Didi, it shares the parent operating license. But some legal experts have argued that in China a parent company does not always share operating licenses with its subsidiaries.

Kuaidi New Taxi: Aside from ride-hailing, Didi also rebranded taxi-hailing service Kuaidi New Taxi, and reshuffled to spin off its taxi business unit from its ride-sharing group, with the head reporting directly to CEO Cheng Wei. The move appears to be part of preparation to monetize the service. Currently, Didi offers government-backed taxi-fleets commission free traffic.

• As part of the rebranding effort, in September Didi began dishing out RMB 100 million in subsidies to taxi riders.
• The move appears to have been put on hold. Didi CEO Cheng Wei told Chinese media this month that there will be no “profit goals” for Didi’s taxi business “for some time to come” (our translation).

Ride-hailing platforms have low penetration in China’s lower-tier cities, and residents in these areas are more accustomed to hailing a taxi on the street than through an app. Not everyone welcomes disruptive innovation—Didi’s success depends on whether it can navigate regulators’ demands in these areas in order to avoid its services being suspended.

More Didi services

In its hunt for growth, Didi has also dived into China’s grocery delivery industry, and started deploying delivery vans in cities around the country.

The company has taken the same approach it has consistently used for ride hailing–offering heavy subsidies to users and drivers to crack the market open. But in these new industries, Didi, a leviathan in ride-hailing, is a small fish.

The company faces relentless competition from dominant companies including Meituan, China’s mega-lifestyle platform, and Kuaigou Dache, the logistics arm of Chinese online classifieds marketplace 58.com.

Delivery vans: In May, Didi started hiring van drivers in the eastern city of Hangzhou and Chengdu, capital of the southwestern Sichuan province. The service targets urban people who are moving homes and businesses that need commercial deliveries. Didi began offering drivers commission-free use of the platform for thirty days.

• Within a month, Didi launched the service with 8,000 drivers, Chinese media reported, citing a company representative. The company said order volume in Hangzhou and Chengdu surpassed 10,000 collectively in its first day of operation.
• That figure doubled by mid-July, and Didi expanded the service to six major cities including Shanghai and Nanjing, capital city of the eastern Jiangsu province in August.
• The company is up against cutthroat rivals. Kuaigou Dache and Lalamove, a Hong Kong-based startup backed by Sequoia China and Hillhouse Capital, currently lead the market. The two companies account for 80% of the sector, with a collective 1.5 million drivers and 15 million active users as of March.
• By comparison, so far over 130,000 drivers registered on Didi’s logistics service platform. Daily orders are now over 100,000.

Delivering essentials: Didi has vied for a piece of the country’s food delivery market since 2018, when it launched Didi Waimai. That service was eventually suspended after a protracted price war with Meituan. Now, Didi is trying again.

• The company launched a new home delivery service called “Paotui,” meaning “running errands” in Chinese, in 21 domestic cities during the Covid-19 outbreak earlier this year.
• The majority of drivers from Didi’s chauffeur service—which previously employed more than 100,000 drivers—have varied their roles since March, either by delivering groceries or picking up laundry, according to Latepost. At the time, a Didi employee told Chinese media that the company would wait to see market reaction before deciding whether to make an all-out push.
• However, in the company’s latest growth plan the priority of the grocery delivery business has reportedly (in Chinese) been downplayed. Didi has struggled to get traction, with some couriers securing only two orders a day, Chinese media reported. In contrast, the order volume of Meituan’s grocery delivery business surpassed 1 million per day as of May.
• Didi declined to reveal the order volume of its home delivery service, known as “Paotui” in Chinese, but said that its grocery delivery platform “Chengxin Youxuan” completes more than 550,000 orders per day in three cities in China’s southwestern Sichuan province.

Didi has sought to overhaul its app by adding a raft of new services in an ambitious bid to make it an all-in-one app for various mobility demands. But Didi’s approach has been met with skepticism. Industry insiders question whether subsidies can work in a market like intra-city delivery, where users place orders less frequently than hailing a cab.

Didi goes global

Third, Didi has stepped up efforts to expand its international footprint, intensifying competition with US rival Uber. Didi so far operates in nine countries including Brazil, Mexico, Australia, and Japan—all of which Uber is already established in. Uber has already pushed its way into 65 nations around the globe, and more than 40% of the US company’s revenue now comes from international markets.

Having seen mixed results across countries, the company is promising a fivefold increase in overseas order volume over the next three years—requiring massive investments to scale.

• Didi plans to reach 5 billion orders annually by the end of 2022, including bookings on its ride-hailing and food delivery services.
• The company last year hit a major milestone, completing 1 billion trips across rides and deliveries from 50 million overseas users. Daily trips on its ride-hailing platform reached a peak of 5 million globally, but averaged at 3 million in 2019.
• Didi’s overseas business was hit hard by the pandemic this year, with order volume down by 20% from pre-pandemic levels, according to Chinese media LatePost.
• A Didi spokesperson told TechNode on Friday said its international markets have started to recover in the past three months, with Brazil and Mexico now “very close to pre-COVID levels.”

Betting on new markets: In its fight with Uber, Didi has sought out key markets to drive its expansion. Latin America is expected to be a battleground for ride-hailing platforms, as a populous area without anefficient public transit systems. Market research company Statista estimates the ride-sharing revenue of the region will surpass $1 billion by 2023.

• Didi saw initial success in Mexico after entering the country in 2018, grabbing around 30% market share in cities including Mexico City, the nation’s capital, and Monterrey.
• Some analysts are positive about Didi’s international prospects. A Pitchbook analyst told the SCMP that Didi has an edge because it takes more tailored approaches to entering different markets, while Uber’s strategy is more one-size-fits-all.
• Didi also made a foray into Russia last month—where it does not compete with Uber, but faces homegrown Yandex Taxi—and is expanding its reach in Australia, but this progress could come at a high price.
• A Didi spokesperson told Business Insider that its ride-hailing service was up to 10% cheaper than other ones in Australia. Uber has long ruled the country’s roads after eight years of operation.
• Also, Didi recently scaled back efforts in Japan by suspending services in ten prefectures, facing major headwinds from both the pandemic and stringent regulations, reported Nikkei. Ride-sharing using private cars is currently forbidden in Japan, forcing Didi to focus on taxi-hailing services.
• A Didi spokesperson told TechNode that is expanding rapidly, adding that it is now recruiting drivers in New Zealand and is ready to launch in more Latin American countries by the end of this year.

As it heads for an IPO, Didi aims to challenge Uber as the world leader of transportation by expanding in the overseas market. While the company boasts a more tailored approach to individual countries than Uber, it faces regulations as varied as the counties in which it operates. As its home market slows, its global business is expected to drive growth.

The future

Didi has ruled China’s ride-hailing market for years, but has never enjoyed a secure position in its home market, as a result of challenges from numerous smaller players. Now, the company faces its biggest trial yet—justifying a valuation of at least $56 billion ahead of a much-anticipated IPO, while competing with Uber for dominance in the global ride-hailing market.

Didi said it is encouraged by its “strong results so far and remains confident” about achieving its three-year target. “Globally, we see definitely more demand for affordable, safer, and more diversified on-demand services post-COVID,” a spokesperson said.

Didi will likely further expand its dominance in China’s mobility market—but the cost will be huge. As mobility services continue to grapple with the lingering effects of the post-Covid-19 era, Didi could face more bumps on its road toward capital markets.

Correction: An earlier version of this article incorrectly cited figures from Chinese media relating to the number of van drivers Didi hired at the launch of its intra-city logistics service. Additionally, the story misquoted a Didi spokesperson regarding order volume on the company’s home delivery service.

Chinese tech giant Tencent and ride-hailing platform Didi Chuxing will join a $516 million investment into an electric vehicle business belonging to the country’s biggest property developer, Evergrande Group.

Why it matters: By forging an alliance with tech giants and prominent venture funds, Evergrande is gradually becoming a contender in China’s crowded EV market.

Details: China Evergrande New Energy Vehicle Group, the EV unit of the property developer, said on Tuesday that it aims to raise around HK$4 billion (around $516 million) in a private placement of shares from at least six investors including Tencent and Didi.

• The investor group will purchase a total of 176 million shares of the Hong Kong-listed EV unit, accounting for 2% of the company’s enlarged share pool. The shares will be priced at HK$22.65 each, a 20% discount to closing prices on Monday.
• The company’s shares dropped 11.5% to HK$25.05 with a market capitalization of around HK$216 billion as of market close on Tuesday.
• Top venture capital firms will also participate, including Sequoia Capital and YF Capital, a private equity firm co-founded by Chinese billionaire Jack Ma.
• Evergrande said the proceeds will be used to finance its electric car-making business without revealing details. The Guangzhou-based real estate developer had recently set an ambitious annual production target of 1 million EVs over the next five years. It plans to launch six EV models ranging from sedans to crossovers in the second half of 2021.
• Tencent has been a long-time investor in Chinese EV maker Nio.
• Around 1 million EVs offered ride services on Didi’s platform as of last year.

Context: Evergrande marched into the automotive industry in mid-2018 with a $2 billion investment plan in the once-promising EV startup Faraday Future. The two companies soon fell into a dispute later that year before ultimately dropping litigation against one another in early 2019.

• China’s EV market is starting to thaw after a year-long slump triggered by a drastic reduction in purchase subsidies and the Covid-19 outbreak. The industry recorded a 43% year-on-year jump in sales in August, thanks to strong sales from Tesla and cars from local EV makers.
• Legacy automakers have initiated their EV offensive moves. BMW is planning to launch in China by year-end its first all-electric model iX3, a crossover with a driving range of 500 kilometers (310 miles) and a starting price of RMB 470,000 ($69,300).

Ye Jieping, the head of Didi Chuxing’s artificial intelligence research team, is stepping down after five years in the role as the Chinese ride-hailing platform sharpens focus on sustainable growth and profitability.

Why it matters: Ye is the latest in a series of departures from Didi this year. The country’s biggest ride-share app is streamlining its businesses to focus on revenue growth and efficiency, and scaling back on non-core projects.

• Didi was hit hard during the Covid-19 outbreak, and it is seeking out new revenue streams such as logistics and grocery deliveries. Didi president Jean Liu in May said its ride volume had recovered to 60% to 70% of pre-Covid levels in an interview with CNBC.

Details: Didi chief technology officer Zhang Bo is taking over to lead AI Labs, a team of around 200 scientists and engineers, from departing director Ye, Chinese media reported Monday citing people familiar to the matter.

• A fellow of the Institute of Electrical and Electronics Engineers (IEEE) and an associate professor at the University of Michigan, Ye joined Didi in 2015 when the company was in urgent need of top-tier AI talent in its head-to-head competition with Uber China.
• The AI academic led the deployment of machine-learning algorithms to manage dispatching vehicles on Didi’s ride-hailing platform to improve demand forecasts.
• Ye was named a deputy head of Didi Research Institute in April 2016, months before Didi merged with Uber China. Its oversight of AI Labs, which focuses on developing AI use cases for urban mobility services, came two years later.
• In an announcement sent to TechNode on Tuesday, Didi thanked Ye for his service to the company, saying that his work helped DiDi “break many new trails in AI application to transportation.”
• China’s ambition for wide AI applications has been hindered by security issues and a lack of high-quality data, among other challenges, according to a SCMP report, with scientists returning to academia from roles with local tech giants.

Contexts: Rumors linked Ye’s departure with the recent shift in positioning AI Labs as engineering-driven rather than research-led. Previously, the company’s new growth goals for the next three years triggered a series of management departures.

• Tiger Qie, a former Google scientist and the CTO of Didi’s ride-hailing business, recently left the company after being assigned to lead research collaboration earlier this year, Chinese media LatePost last month reported citing people familiar with the matter.
• Other executives who had left the company this year include Fu Junhua, senior vice president overseeing Didi’s public transport services; Tony Qiu, COO of its global business group; and Jia Zhaoyin, chief architect of the self-driving business.
• As it prepares for a potential listing in Hong Kong, the Chinese ride-hailing giant has reportedly refreshed its core values in recent months, calling for greater responsiveness to change.

China’s biggest ride-hailing platform Didi Chuxing said on Tuesday that it has launched ride-hailing services in the Tatarstan Republic, part of the Russian Federation, as it resumes its global expansion following the onset of the Covid-19 pandemic.

Why it matters: This marks Didi’s first expansion into the European market after concentrating global expansion efforts in South America over the past three years. Overseas expansion is a key driver for its business growth given slowing momentum in its domestic market.

Details: Didi has launched a ride-hailing service in Kazan, the capital city of the Tatarstan Republic, through partnerships with local commercial fleets and hiring self-employed drivers, a company spokeswoman said on Wednesday.

• Driver recruitment started in late July, according to an announcement. It did not disclose its local partners or the size of its fleet.
• Didi began searching this year for local talent across Russia, including in St. Petersburg, Russian media reported citing persons familiar with the matter, and is looking to expand operations to cities including Moscow and Yekaterinburg by year-end.
• The ride-hailing giant is reportedly (in Chinese) taking an aggressive approach, undercutting rivals with a low commission rate of 5% during the launch period starting late July, compared with the average 15% to 20% in the Russian market. Didi declined to reveal further details about the launch campaign.
• Chinese companies are well-known for their aggressive pricing policies, according to Anatoly Smorgonskiy, the Russia head of Israeli mobility startup Gett, who spoke with TechNode on Wednesday.
• He expects that Didi’s launch in Russia will lead to increased competition in the market over the medium term, and small local players will leave or consolidate.
• Didi will go head-to-head with its archrival Uber, which in early 2018 formed a ride-hailing joint venture with Yandex.Taxi, a subsidiary of the country’s search engine giant Yandex, through a merger, according to a Reuters report.
• “Russia is a large market for taxi services… but the competition is also quite high,” said Viktor Dima, senior analyst at Russian investment company Aton. Moscow-based Aton has been a Didi investor since 2019.  
• Given the pool of well-established players in the market, Didi’s success in Russia may depend on how much it intends to invest. “We should not exclude that Didi will probably have to partner with one of the local majors, just as Uber did with Yandex,” Dima said.
• Sovereign wealth fund, Russian Direct Investment Fund (RDIF), is a Didi investor. RDIF’s CEO Kirill Dmitriev told CNBC earlier this year that it was looking at the Russian market with Didi.
• Analysts view Russia to be among the most dynamic ride-hailing markets in the world, due to the poor public transportation infrastructure in a vast territory, Russian financial newspaper Kommersant reported last July based on an HSBC study.
• Tatarstan Republic is one of Russia’s most economically developed regions. Didi’s senior vice president Stephen Zhu said a better and safer ride-hailing service will help rebuild the post-pandemic local economy.  

Context: Didi is accelerating its overseas expansion. The company set ambitious global targets including 100 million daily trips and 800 million monthly active users as part of its three-year growth plan.

• CEO Cheng Wei in April said Didi had clocked more than 1 billion rides in overseas markets as of early this year. It has operations in nine countries including Mexico, Costa Rica, Australia, and Japan.
• The company marched into Latin America with a $100 million investment in Brazil-based taxi on-demand service 99 in early 2017, followed by a $1 billion acquisition one year later.
• In 2017, Didi invested in an Estonia-based ride-hailing startup, Bolt, but its presence in the Russian ride-sharing market is barely noticeable, according to Smorgonskiy.

Updated: The story was updated on Aug. 28 to include Didi’s response on the commission rate and comments from Anatoly Smorgonskiy of Gett and Viktor Dima of Aton. 

Despite what you may have heard, bike rental is not dead.

The great Chinese bike sharing bubble popped a long time ago. Like a horde of syphilitic conquistadors, some 80 startups (including two unicorns) charged into the jungle in search of a city of bike-share gold, challenging the dominance of the car and bringing mobs of bikes back to China’s major cities. Few ever emerged, and those that did are mostly known by new names.

They got greedy, fighting price wars and spending user deposits on operations, and it brought them down. Ofo, of the yellow bikes, collapsed in a blaze of lost deposits, with CEO Dai Wei placed on a consumption blacklist that prevented him from traveling by train or buying cars. The next two players, Mobike (in orange) and Bluegogo (blue), exited with sales to tech giants Meituan and Didi Chuxing. 

But under the wing of deep-pocketed giants, share biking is very much alive. It’s not the Wild West anymore—the sidewalk-blocking piles of bikes are rare, prices are a little higher, and there are rules about parking—but in a major city there’s almost always a bike available. Could this be—wonders—a sustainable industry?

Bottom line: No one ever found El Dorado, but it looks like bike rental is close to breaking even. The three remaining dominant players—Ant Group-backed Hellobike, ride-hailing service Didi’s Qingju, and lifestyle services giant Meituan’s Meituan Bike—have survived the bust by raising prices and looking for ways to develop sustainable businesses.

• These companies have replaced unbridled hyperscaling with a focus on profit. 
• Previously cautious investors appear to have picked up on these signals, and signs are emerging that the bike rental’s capital winter is beginning to thaw. 

What went wrong

It was 2016, and bike rental was booming. Startups piled into the market, and by the end of the year, nearly 30 companies had set up shop. Investors followed, and almost overnight, millions of bicycles appeared on sidewalks across China. 

At its peak, 80 companies operated around China. In 2018 the industry was worth RMB 17.8 billion ($2.58 billion), up from RMB 1.2 billion in 2016, according to data from Equalocean. But the bubble popped as quickly as it grew.

• Bike rental companies soon found that putting more bikes on the street doesn’t mean more profit—quite the opposite.
• Underpriced rides, price wars, and mounting maintenance costs began to take their toll. Companies burned through investors’ cash, while stiff competition and a saturated market quickly led to consolidation. 

Consolidation begins: Mounting regulation and costs started to take a toll, and   companies began to drop like flies. Ofo, once the darling of the industry, saw its cash reserves dwindle amid mounting lawsuits and a run on deposits. 

• At the end of 2017, once-popular Bluegogo shut down. The company’s operations were quickly snapped up, in part by Didi.
• Others followed suit. Coolqi and Xiaoming Bike struggled to pay back their users’ deposits and disappeared. In the space of five months, six bike rental companies shut down across China.
• At the beginning of 2018, as Mobike reeled from the fallout of increased regulations and the price war, lifestyle services giant Meituan swept in to acquire the company for $2.7 billion. 

‘Bike rental 3.0’

Now, just three companies dominate the sector—Hellobike, Didi’s Qingju (or Orange), and Meituan Bike. 

Two of the three—Qingju and Meituan Bike—are run by companies with deep pockets. Hellobike is backed by Ant Group, the world’s largest fintech company. Their focus has shifted from hyperscaling to profitability.

New business models, new bikes

Gen 1.0

Gen 2.0

Gen 3.0

---

• While Mobike and Ofo sought to scale rapidly across the globe, the surviving bike rental trifecta has narrowed in on the Chinese market. 
• The days of cash-burning subsidy wars have come to an end and an era of increased prices has begun. 
• Hellobike, Meituan, and Didi have all raised their prices. Hellobike is the most expensive at RMB 4.50 an hour, while Meituan Bike and Qingju Bike cost RMB 3 for the length of a ride. Companies charge in either 15-minute or 30-minute intervals. Prices vary across cities in China
• Companies are focusing on user retention rather than growth. They’ve attempted to improve user stickiness by offering discounted longer-term bundles.
• The build quality of the bikes has also improved, a far cry from the Ofo days. Ofo users used to complain that their bikes broke easily and were frequently in poor repair.

Attempts at profit: For the first time in the industry’s history, companies are talking seriously about bike rental turning a profit. Hellobike, China’s biggest bike-rental firm, said in September (in Chinese) last year that it was profitable in 200 cities across China. The company claimed 400 million cumulative registrations as of July. 

• Meanwhile, Meituan has managed to narrow its losses but is still unprofitable. 
• Amid the Covid-19 pandemic, Meituan saw losses from its bike rental business decrease dramatically year on year amid the pandemic. Second-quarter costs from its bike-rental division fell by RMB 1 billion compared to the same period in 2019, mainly due to a “significant decrease in depreciation of bikes.”
• It is unclear whether Didi, which is unlisted and not required to disclose its financials, has been able to break even in bike rental. 
• Nevertheless, talk of profit is a stark contrast to Ofo and Mobike. According to Dongxing Securities, the two companies’ blind pursuit of scale meant they burned through cash faster than they could raise it from investors. Today’s bike rental trifecta is at least trying to avoid this mistake. 
• The industry saw a significant spike in China as it locked down to prevent the spread of Covid-19. Hellobike saw its trips double nationwide in the few days after Wuhan, the city at the centre of China’s outbreak, was cut off from the rest of the country. Meanwhile, Didi’s Qingju Bike saw usage increase by 150% between the beginning of February and the beginning of March. 

Varying approaches: Platforms have sought novel ways to eke out profits and reduce losses. Hellobike, Meituan, and Qingju charge riders who park bicycles in unpopular places extra to reduce the costs of collecting them. A slew of other fees also exist, including for bikes parked outside designated parking areas. 

• Hellobike survived the great cull by taking a different approach to other bike rental platforms, initially focusing on lower-tier cities where public transport systems aren’t as well developed. Now, the company has dominated the markets in these cities and is expanding to challenge Meituan and Didi in China’s first-tier cities. 
• In June 2019, Didi created a two-wheel business department, merging its bicycle and e-bike divisions. The move was aimed at increasing efficiency, while improving cooperation with local governments and bicycle suppliers, both key to the company’s ability to operate effectively. 
• Didi has taken the opposite geographic approach to Hellobike, with plans to expand to China’s lower-tier cities from a metropolitan base.

Appeasing the powers that be: With increasingly strict rules, navigating government regulations aimed at reducing bikes cluttering city walks has become increasingly important. 

• Cities around China have introduced rules to limit the number of bicycles on their streets and also to ensure bikes are parked in specified areas. Shanghai was one of the first cities to do so, and requires companies to be licensed in order to operate a bike rental platform in the city. 
• Bike rental companies have turned to technology to enforce these rules. Hellobike’s bicycles and e-bikes have since late June used the Beidou navigation system, China’s equivalent to GPS, in order to monitor where its bikes are located and where users park them. 
• Companies have also used other technologies like Bluetooth and RFID for the same purpose. 
• Companies are increasingly working with local governments, as opposed to butting heads with them, to create an integrated public transport system. Dubbed “Bike rental 3.0,” new emphasis is being put on these companies working more closely with local governments. 

Increased confidence: As surviving companies learn from the mistakes of their predecessors, confidence among investors has shown signs of rebounding. In April, Didi’s Qingju reportedly raised a whopping $1 billion from Lenovo-backed investment firm Legend Capital and an unnamed international venture capital firm. 

• During the same month, Hellobike raised $200 million from Shenzhen-listed electric product maker Hangzhou Zhongheng Electric to build charging stations for electric bikes. 
• In December 2018, Hellobike raised RMB 4 billion in a round led by Ant Financial. 

China’s bike rental saga is a familiar story. A new field opens up, pundits declare it to be the future, dozens of startups start and investors overheat the sector. Pretty soon, the fire runs out of oxygen and burns out. Finally, tech giants step in to create something modest and sustainable from the ashes. 

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

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China’s Didi Chuxing is in the early stages of preparation for an initial public offering in Hong Kong, three sources close to the matter told TechNode on Wednesday, confirming reports in Chinese media.

Why it matters: Didi is the latest Chinese tech behemoth to push ahead with a multi-billion dollar initial or secondary listing in Hong Kong since Alibaba started the trend in with a November 2019 secondary listing. Chinese companies increasingly favor the Hong Kong markets, due in part to the increasingly strained relationship between China and the US.

READ MORE: As China tech stocks surge, a fundraising window opens

Details: Didi is seeking to hire investment banks to advise on a potential IPO in Hong Kong, said people familiar with the matter. They added that changes could occur in details of the plan, since deliberations are at an early stage. TechNode’s sources did not comment on the company’s valuation.

• A company spokesman on Wednesday told TechNode that an IPO was not the company’s “top priority,” and that it did not have such plans for the moment.
• News first broke on Monday that Didi was seeking a public listing at a target valuation of up to HKD 600 billion ($80 billion) in the Hong Kong stock market, according to a Chinese media report.
• On Tuesday, Caixin also reported (in Chinese) that Didi was proceeding a Hong Kong listing plan, adding that institutional investors had requested a chance to exit through an IPO.
• Caixin cast doubt upon the $80 billion figure, writing that the company is currently valued at around $56 billion. Citing an early investor in the company, Caixin wrote that recent harsh regulatory scrutiny from the Chinese authorities will make the $80 billion figure unlikely.

Context: After a difficult year, during which its business was hit first by public outrage over two customers murdered by Didi drivers, and then by the global Covid-19 outbreak, Didi is now looking to make up for losses in core businesses while diversifying its revenue in a bid to boost its valuation.

• Didi has been piloting a home delivery business in over 20 domestic cities since March, but is reportedly (in Chinese) struggling to take market share from industry giants such as Meituan and JD.
• The Chinese ride-hailing giant is also pushing into the freight logistics industry with the launch of a pilot service in the eastern city of Hangzhou and Chengdu, the capital of southwestern Sichuan province, late last month.
• Around 8,000 van drivers were recruited for the freight service, and more than 10,000 orders were secured, in its first day of operation, the company said.
• Speaking on a Bloomberg TV show in April, Didi president Jean Liu said the company has no “specific IPO timetable.”

Correction: An earlier version of this article incorrectly quoted comments by Didi President Jean Liu from an interview with Bloomberg.

Chinese ride-hailing platform Didi Chuxing on Monday suspended inter-city transport to and from Beijing only weeks after the service resumed in late May, as the capital banned inter-city ride-hailing amid rising Covid-19 cases.

Why it matters: Didi’s recent move is the latest to stem a second wave of coronavirus infections in Beijing. A rollback in the demand for urban transit including ride-hailing is expected, as authorities re-impose strict bans on travel and public events.

• Chinese mobility services including Alibaba’s online mapper Autonavi, Hellobike, and Nio-backed Dida have taken similar moves at the request of local regulators.
• Local health authorities reported 31 newly identified coronavirus cases for June 16, bringing the accumulated number of infections since Thursday to 137. Total cases have reached 557 as of Tuesday, reported CGTN.

Details: Beijing Municipal Commission of Transport on Monday issued a notice to local ride-hailing platforms to halt inter-city operations immediately, without revealing a date to resume operation.

• A Didi spokeswoman said the company has suspended the services in response to the government, while passenger transport within the national capital, including Express and carpooling service Hitch remain in operation.
• The suspension came after only a few days of resuming as the city’s public transit system “returned to normal,” which means vehicles, buses, and metros could be fully loaded beginning on June 1, according to a government notice (in Chinese).
• Previously, Didi’s inter-city services to and from Beijing had ground to a halt for months since late January when coronavirus cases started climbing across China.

READ MORE: Didi has resumed late night hours for carpooling service Hitch

Context: The Beijing municipal government on late Tuesday announced it has raised its emergency response level from three to two, re-imposing measures that forbid public gatherings and shut school, as well as applying strict travel restrictions to local residents. The load factor for the city’s public transit was lowered from 100% to 75%.

• The global mobility-as-a-service market has been hit hard due to the Covid-19 outbreak, with market value expected to reach $69 billion this year, a 39% slash from pre-Covid estimates, consultancy AlixPartners wrote in a recent report.
• Didi also reportedly suspended ride-hailing services in at least more than 20 domestic cities and counties, including Wuhan, in late January.
• In mid-February, ride-hailing platforms took a series of measures in an effort to resume operation, including installing protective plastic sheets in taxis, daily temperature checks for drivers, and regular vehicle disinfection.
• China’s Ministry of Transport in early April said all domestic cities and counties from 31 Chinese provinces have fully resumed road public transit. Didi restarted ride-hailing services in Wuhan, the central Chinese city at the heart of the coronavirus pandemic on April 30, ending its three-month stoppage.

Correction: an earlier version of this story incorrectly stated that Didi suspended its inter-city service to and from Beijing only a week after resumption in late May. It should have read “only weeks.”

Ride-hailing platform Didi Chuxing is piloting a new grocery e-commerce project in Chengdu as it looks to diversify its revenue streams.

Why it matters: The e-commerce pilot is Didi’s latest push to expand beyond its core ride-hailing business, which has been hit hard by the Covid-19 epidemic.

• Grocery e-commerce was one of the few business segments that saw strong demand during the coronavirus outbreak.
• Entering the market means the company will be competing in a cutthroat industry against grocery delivery giants ranging from Meituan to JD Daojia.

Details: Chengxin Youxuan is a fresh produce and grocery “community e-commerce platform” for shoppers who live within a certain vicinity of one another, local media reported.

• Users can access the service through a WeChat mini-program, which offers flash sales of daily groceries and basic supplies including vegetables, fruits, paper products, and snacks.
• Without a courier fleet, the service only supports next-day pick-up at nearby offline stores, putting it at a disadvantage compared with grocery delivery rivals.
• Didi is operating the service through partnerships with third-party warehouses and stores.
• The service is currently active for residents in Chengdu, which has lower operating costs and less competition compared with megacities like Beijing and Shanghai.
• The company on Tuesday confirmed to TechNode that the project is under small-scale pilot testing, calling it “one of Didi’s new efforts to address the new demand of users in the post-Covid-19 era.”

Context: The company in March launched home delivery service “Paotui,” where users can request couriers to run errands, from picking up laundry to delivering groceries.

• Didi is also began hiring van drivers in May in two provincial capitals as part of an early-stage move into the logistics industry.
• The “community e-commerce” concept isn’t new but gained traction during the Covid-19 lockdown.
• The company sells to shoppers who live within the same communities to save on distribution costs, helping to keep prices low. Shoppers can also band together for group buys.

Didi Chuxing, China’s largest ride-hailing company, is hiring van drivers in two provincial capitals as part of its early push into logistics. This is the latest move into more general mobility services like home delivery and public transit.

Why it matters: Didi’s push to establish itself in the wider mobility market may drive the company’s valuation even higher, but the competition with existing players ranging from Meituan to freight service giant Manbang Group will be intense.

• Also backed by SoftBank’s Vision Fund, Manbang has been the largest player since early 2018 when the company claimed 5.2 million out of China’s total 7 million truckers as part of its league of registered freighters.

Details: Didi on Monday started recruiting van drivers for its intra-city freight delivery pilot project in the eastern Chinese city of Hangzhou, and Chengdu, the capital of the southwestern Sichuan province, according to a job posting on Didi’s official account on Chinese popular instant messaging platform Wechat.

• Didi said that an undisclosed amount of commission fee will be waived to around 600 early freighters for the first 30 days.
• Currently only those who own vehicles, from mini pickups to moving vans, are being considered. A deposit of RMB 800 and a fee of RMB 50 for on-van marketing are required for each driver.
• Didi has already invested RMB 100 million ($14 million) as registered capital in two cargo delivery and packaging companies each.
• Zhao Hui, general manager of Didi’s chauffeuring business unit is the legal representative of the two companies, according to information on Chinese business research platform Tianyancha.com.
• Two local logistics companies are responsible for hiring and training drivers on behalf of Didi, according to a Chinese media report.
• Didi did not respond to a request for comment.

Context: Didi has been expanding its presence with a goal of becoming a “one-stop mobility platform” offering 100 million daily trips with 800 million monthly active users globally over the next three years.

• Already China’s largest ride-hailing platform, Didi is doubling down on bike rentals, public bus services, and home delivery, seeking new growth engines in a more general mobility market.
• The company is reportedly struggling, however, to get new users in these new businesses.
• Chinese media last month reported couriers sometimes only drove about 20 kilometers (13 miles) for taking two orders a day on Didi platform, while they estimated a bottom line of driving 100 kilometers per day to make a living.
• In an interview with CNBC, Didi president Jean Liu said the company currently has neither restructuring nor funding plans given “a very strong balance sheet.”

Chinese ride-hailing platform Didi Chuxing has reportedly secured a $1 billion round of fresh funding for its bike rental business Qingju, as the company seeks to diversify growth in the Chinese mobility market with a target of 100 million daily trips for the next three years. People familiar with the deal told LatePost (in Chinese) that Didi poached part of the investment away from Ant Financial’s Hellobike.

Why it matters: Already the biggest ride-hailing platform in its home country, Didi is digging a wide yet deep competitive moat around the broader Chinese mobility market. The company sees bike rentals as one of its main growth drivers.

• Didi on Friday announced it has shifted focus for a new round of growth from an “all-in-safety” strategy, with a list of goals called “188.” It refers to more than 100 million daily trips and 800 million monthly active users (MAUs) globally, and 8% penetration rate in the mobility market over the next three years, according to an announcement.

Details: Investors in the round include Lenovo-backed investment firm Legend Capital and an unnamed international venture capital firm, according to LatePost.

• LatePost added the overseas capital fund, whose name was not revealed, initially planned to invest in Ant Financial-backed Hellobike, but was later won over by Didi.
• In an announcement sent to TechNode on Monday, Li Kaizhu, co-founder of Hellobike said the recent funding to Qingju will not have a big impact on the market landscape. “[We] are acquiring shares respectively in a growth market,” Li added.
• Didi is now planning to further boost its growth at home and abroad, with goals of becoming a “one-stop mobility platform” offering two-wheeler (bike and electric bike) and public transport services, it wrote in an earlier announcement.
• Two-wheelers will take a large proportion of the company’s goal to achieve 100 million daily trips, LatePost reported citing an insider, who added the company is expanding the reach in Chinese lower-tier cities while improving efficiency and exploring revenue streams.
• Didi declined to comment. Legend Capital did not respond to a request for comment.

Context: Chinese bike rental services have struggled to break even and the recent cash infusion is expected to bring changes to the market.

• Qingju was incubated in-house and started operations in early 2018 after Didi was rumored to have tried and failed to acquire erstwhile star company Ofo. Qingju has been under the company’s two-wheeler business group along with Jietu, a motor scooter rental platform since mid-last year.
• Hellobike is currently the biggest market player with half of the market share since April 2018, Li Kaizhu told Bloomberg early last year. The company earlier this month said it had closed an RMB 200 million ($28 million) round from Shenzhen-listed electric product maker Hangzhou Zhongheng Electric to build charging piles for electric bikes.
• Hellobikes user base declined 11.5% month-on-month to 3.17 million monthly active users as of January, followed by Mobike with 2.8 million MAUs, according to recent figures from Chinese mobile internet research firm Trustdata (in Chinese).

China’s push to lead the world self-driving race is making another step forward: Didi Chuxing and AutoX are both about to launch their own autonomous ride-hailing pilot projects on the outskirts of Shanghai in late May, two sources familiar with the matter told TechNode on Tuesday. The projects are separate. The companies started their partnerships with the Shanghai government around the same time.

Why it matters: As Chinese local governments continue to support road testing, Didi and AutoX, among other newcomers, are attempting to elbow further into the crowded race led by Pony.ai and Baidu.

• The news comes days after Didi’s self-driving unit was reportedly closing a $300 million investment deal with its main backer SoftBank, only a month after another Didi’s investor Toyota poured $400 million in Pony.ai, the biggest funding round in Chinese autonomous driving arena.

Read more: Didi is close to $300 million deal with Softbank

Details: Ride-hailing giant Didi is planning to launch a robot ride-hailing pilot service in Shanghai as early as May and so is AutoX, two persons with direct knowledge confirmed to TechNode on Tuesday.

• “Didi is actively testing robo-taxi in Shanghai and we hope to launch the pilot service as soon as possible,” a company spokesperson told TechNode.
• AutoX on Friday announced the opening of what it claimed the Asia’s largest robotaxi operations center in Shanghai.
• Covering an area of around 750 square meter in the northwestern Jiading district, the Shanghai operation is expected to collect and process “petabytes” of driving data from road testing in Shanghai each week, AutoX said in an announcement.
• The operation will also be used for performance training simulations in a virtual traffic environment, while offering facilities to test hardware in climate conditions such as high-pressure water, and high temperature.
• The company claims that users “will soon be able to hail a ride” in its AVs, although the app is yet to be revealed. Business partners in making this operation center were also undisclosed.
• AutoX is backed by China’s biggest automakers SAIC and Dongfeng, as well as Alibaba.

Context: Shanghai government in September issued China’s first licenses for passenger-carrying self-driving cars in an area of 65 square kilometers to Volkswagen’s partner SAIC, BMW and Didi, followed by AutoX in December.

• Little progress has been revealed since then, as the official greenlight has not been given for testing, according to people close to the matter.
• Didi and AutoX late last year revealed plans to roll out 30 and 100 robotaxis in Shanghai as early as year-end, or early in 2020, respectively, as part of their efforts to lead the driverless mobility future.

China’s Beijing Automotive Group (BAIC) is expanding its partnership with the country’s largest ride-hailing platform Didi Chuxing on a car-leasing platform for consumers, a move aimed to revive business in a flagging market amid the global Covid-19 outbreak.

Why it matters: BAIC’s attempt to embrace shared mobility comes amid weak demand in new car sales—particularly in major cities—after decades of super-charged growth.

• China’s total car sales fell in 2019 for a second straight year, sliding 8.2% to around 25.8 million vehicles after declining 3% in the previous year. The central government early last year introduced subsidies to boost trade-ins nationwide and new car sales in rural areas, Nikkei reported.

Details: Daimler partner BAIC on Saturday announced a car-leasing program in partnership with Didi’s auto service division Xiaoju along with other industry players. The aim is to exceed 100 million car trips using 100,000 vehicles over the next three years.

• BAIC will initiate more than RMB 10 billion ($1.41 billion) in lines of credit available to customers, and plans to open brick-and-mortar shops in 100 domestic cities with industry partners by the end of 2022.
• State Grid EV Service, battery supplier CATL, and the Postal Savings Bank of China are among the bigger players involved in the deal.
• The companies see great potential in the country’s nascent car-leasing market, where “hundreds of millions” of customers hold driving licenses without owning cars, Chinese media reported citing Li Yixiu, director of BAIC’s sales and marketing committee.
• Didi has been a long-time partner to BAIC. The 2018 in 2018 formed a RMB 400 million joint venture with BJEV, a BAIC EV unit, to develop electric vehicles, car connectivity systems, and fleet operation solutions for next-generation shared mobility.
• The ride-hailing giant forged similar alliance last year with BYD, launching a car-sharing service with a fleet of 200 EVs and a network of 60 service stations in Shenzhen. A Didi executive in January said its fleet of 500,000 vehicles had been in service 80% of the working hours as of last year.
• BAIC on Thursday reported a 15% year-on-year increase in revenues to more than RMB 175 billion in 2019, with nearly 90% of sales coming from its joint venture with Mercedes Benz.
• However, sales for its self-made electric vehicles fell 4.7% on an annual basis to around 150,000 units last year. It has sold a mere 3,008 EVs in the first two months of 2020, a 60% drop from the same period a year ago due to outbreak.

Context: The novel coronavirus is accelerating an already rapid downward trend in China’s auto sales.

• Credit-rating firm Moody’s Investors Service on Friday slashed its annual car sales forecast to a 14% decline for the global market in 2020, much worse than its predication made last year of a 2.5% decrease, according to a Reuters report.
• Moody’s expects China’s auto sales to drop 10% by volume this year, and placed BAIC on negative credit watch along with four other automakers, and in July cut the credit rating to Baa2 with the possibility of further downgrades.

Ride-hailing giant Didi has resumed limited nighttime operations of its carpooling service Hitch in some cities across China, while implementing stricter identity checks for drivers and passengers.

Why it matters: Didi suspended Hitch indefinitely in 2018 following two separate incidents in which drivers on the platform raped and murdered their female passengers.

• The murders sparked public outrage, prompting regulators to launch an industry-wide crackdown aimed at improving safety in the ride-hailing sector.
• Didi relaunched the service in November, though passengers could only hail rides between 5 a.m. and 8 p.m.

Details: Passengers in cities including Beijing, Shanghai, and Hangzhou will now be able to use Hitch until 11 p.m., Didi said in a post on microblogging platform Weibo on Friday.

• The late-night service comes with heightened safety measures, including more frequent identity checks, improved ability to detect route abnormalities, and more stringent trip recording requirements for drivers.
• Only passengers and drivers who have verified their identities on the platform, have not received any safety complaints in the past year, and have taken Didi’s nighttime safety exam will be permitted to use the late-night service, a Didi spokesperson told TechNode on Monday. For passengers, the exam takes the form of an online questionnaire.
• In November, the company relaunched Hitch in seven cities across China, including Beijing, eastern China’s Nantong and Changzhou, and the northern cities of Harbin and Taiyuan, among others.
• The reinstated service didn’t come without controversy. The service only allowed women to travel until 8 p.m., while for men the service extended to 11 p.m. Didi standardized the 8 p.m. cutoff for everyone following complaints that the gender-based hours were unfair.
• Hitch still appears to only be available for transport within urban areas. When requesting rides between cities in Didi’s app, TechNode found that the system said intercity trips are not currently available.

Context: China’s ride-hailing industry has faced compounding issues over the past two years. Apart from safety concerns, the Covid-19 outbreak as resulted in flagging demand since the beginning of the year.

• Didi removed more than 300,000 unqualified drivers from its platforms following the government crackdown on the industry in the wake of the murders.
• The company reportedly lost RMB 10.9 billion in 2018 as a result, as it sought to meet regulator demands and recruit drivers that met government requirements.

Chinese biggest ride-hailing platform Didi Chuxing is planning to expand its presence in public transport sector over the next three years outlined in a set of new growth targets, according to a Chinese media report.

Why it matters: Didi’s recent moves are a signal that it is refocusing on growth and profitability after tinkering with its safety policies after the murders of two passengers by Didi drivers in 2018.

• The ride-hailing platform urgently needs to turn a profit after losing money for the more than six years its business has been operating, including a reported RMB 10 billion ($1.48 billion) loss in 2018. It spun off its self-driving unit in August to share the heavy development costs with external investors.

Details: Didi on Tuesday informed employees about a series of targets for the next three years, including daily orders of more than 100 million and monthly active user base of 800 million globally, according to an internal letter obtained by Chinese media Late Post.

• Meanwhile, Didi said it is targeting an ambitious 8% penetration rate for the broader mobility market, including public transport like bus rides and private transport like ride-hailing.
• The Softbank-backed mobility platform is the leader in China’s ride-hailing industry with more than 27 million rides on average each day last year, far outpacing of its rivals. It has also been ramping up businesses in shared bikes and private chauffeurs, two major private transport segments.
• However, it has made little headway in public transport such as bus service, an area mainly controlled by local governments. A company insider told Late Post that a 8% penetration rate could be “challenging” given the company’s limited involvement in the market.

Context: Didi launched in July 2015 the “Didi Bus,” an on-demand shuttle bus service in Beijing and Shenzhen, according to TechCrunch. It then formed a RMB 16 million joint venture with state-owned Shenzhen Bus Group in March 2016.

• Armed with a massive trove of transport data processed in real time on cloud servers, the company said its services were more flexible and demand-responsive with peer-to-peer pick-up and one-stop rides, in contrast with the fixed routes and limited schedules provided by traditional bus operators.
• The initial target was wildly optimistic: expansion into more than 30 domestic cities with a budget of RMB 500 million by the end of 2015. However, riders from just a dozen or so cities so far have used the service, including residents of Qingdao in eastern Shandong province and Xi’an, capital of northwestern Shaanxi province.
• Didi did not respond to a request for a comment when contacted by TechNode on Wednesday.

Chinese mobility service provider Didi Chuxing has reportedly been in talks with Softbank for $300 million in fresh funding for its autonomous driving unit.

Why it matters: The investment is a vote of confidence in a Chinese AV startup during a low point in investment activity compounded by the Covid-19 outbreak.

• China’s deal-making activity for startups reached its lowest point, shrinking by more than half year on year to 168 deals worth $1.79 billion as of February, according to the South China Morning Post citing figures from financial research firm Preqin.
• Expectations about widespread AV adoption has flagged in recent years, as the development of the technology proves to be more difficult and time-consuming as initially thought.

Details: Softbank is expanding its commitment to Didi and is on the brink of reaching a deal to lead a $300 million investment into the ride-hailing startup’s self-driving unit for an undisclosed valuation, The Information first reported Monday citing people with knowledge of the situation. TechNode verified Softbank’s investment in Didi with a person close to the matter on Tuesday.

• The other investors involved in the deal are unknown. SoftBank did not respond to a request for comment and Didi declined to comment.
• Rumors of Didi seeking funds for its AV unit have been circulating since July, just a month before the ride-hailing platform spun off its self-driving car department to transfer some of the considerable cost to external investors.
• Didi has been playing catch-up in the global self-driving race. It began testing robocars in California in June 2018, two years after Baidu and lagging Pony.ai by a year. It reported one disengagement from a human driver every 1,535 miles on California public roads last year, a decent result for a first-timer.
• Industry insiders TechNode spoke with view the company as having significant potential to succeed in light of the huge volumes of human driving and public transport data it is able to feed into its algorithm. Didi late last year unveiled plans to launch a robotaxi pilot service in Shanghai, though there has been no progress since then due to regulatory hurdles.
• Softbank has invested aggressively in AV. It poured $2.25 billion into General Motors-backed Cruise for a 20% stake in May 2018, making it the largest deal at the time for the nascent industry.
• This was followed by a $1 billion deal a year later from the Japanese investment giant and other investors including Toyota with Uber’s autonomous driving team, which also became an independent business soon after the investment was unveiled.

Context: Softbank has had a rough past several months. It has been sharply criticized over its once-hyped investment strategy, following the downfall of two of its biggest rising stars, WeWork and OYO, which face falling revenues and plunging valuations.

• The Japanese tech investor wrote down its Wework investment by $3.4 billion late last year, and reported its first quarterly loss in 14 years during the quarter ended Sept. 30, totaling $6.5 billion. It announced plans on Monday to sell $41 billion in assets to buy back shares and reduce debts.

Ride-hailing platform Didi Chuxing said on Monday it has worked with a state-backed industry group to create China’s first nationwide guidelines for ride-hailing platforms dealing to prevent transmission of Covid-19 during rides. The guidelines are closely based on measures Didi has already adopted, promoting a Didi model for safe ride-hailing that includes AI-based mask checks using open source software published by Didi.

Why it matters: The standards, coming at a time when China has brought outbreaks under control, could provide guidance to other platforms and countries now facing the deadly coronavirus outbreak.

• Hit hard by a nationwide halt due to the epidemic, Didi has introduced a series measures in an effort to return to business as usual, including installing plastic barriers in drivers’ cars, temperature checks, and vehicle disinfection.

Details: Didi, China’s biggest ride-hailing platform, plans to issue recommendations for ride hailing drivers and passengers to avoid and contain the pandemic, working with China Urban Public Transport Association (CUPTA) later this month, the company said in a post on its official WeChat account Monday (in Chinese).

• The guidelines suggest ride-hailing platforms adopt a variety of strict measures, including requiring masks for both riders and drivers, daily temperature checks for drivers, and regular disinfection and ventilation for vehicles.
• Didi drivers are now being checked for masks multiple times before and during working hours, while being exempted from penalties for cancelling rides if passengers refuse to wear masks.
• The company recently open-sourced an AI platform to detect mask wearing for free use.
• Installing of plastic sheets in vehicles is also recommended to help prevent the virus spreading through the air. In late February, Didi announced a RMB 100 million ($14.3 million) initiative to install barriers in ride-sharing cars across more than 200 domestic cities.
• Founded by a former minister of construction in early 1990s, CUPTA is an industry group for public transport services currently supervised by a working committee of the central government, according to its website.

Context: The global ride-hailing market is taking a hit from the coronavirus outbreak.

• Didi’s daily active user base shrank by more than half in February from a month earlier after China took serious containment and social distancing measures to slow the spread of virus, according to figures from Chinese research firm Aurora Mobile.
• Uber admitted for the first time earlier this month that the pandemic could result in a material decline in its number of platform users and disruption in its operations outside the US, according to an SEC filing.
• The US ride-hailing giant this week expanded its sick pay policy to all driver accounts suspended for services caused by public health measures against the outbreak, while drivers have asked to halt pooled rides to further ensure their safety, reported The Verge.

China’s biggest ride-hailing platform Didi Chuxing took a 32% stake in Hyundai Insurance China, according to a regulatory filing released Tuesday, ramping up with the move its prospects in the Chinese online insurance market.

Why it matters: The recent deal could help Didi widen its line of auto financial offerings and expand its footprint in the lucrative Chinese online insurance industry, which the country’s biggest technology firms are vying to enter.

• Didi gained with the sale not only the right to sell insurance but also to issue and price insurance products in the Korean insurer’s China operations, according to Chinese media reports citing industry insiders.

Details: The regulator recently approved the RMB 1.1 billion ($158 million) investment in Hyundai Insurance China, the total for four stakes going to Chinese investors, with Lenovo and Didi subsidiary Dirun Tianjin Technology taking the lions share.

• Didi and electronics company Lenovo each bought 32% of the Beijing-based insurer, and are now the second-largest shareholders after Hyundai Marine and Fire Insurance, which holds 33%, according to filings released Tuesday by China Banking and Insurance Regulatory Commission.
• The Hyundai subsidiary mainly operates property insurance, liability coverage, and cargo insurance, and was granted the permit to sell mandatory auto insurance by Chinese regulators in 2013.
• Didi’s move into the auto finance sector is not new. The company has been offering financial services such as insurance and car loans with partners for five years, and began issuing loans to ride-hailing drivers as of February 2018, according to a Chinese media report.
• The China mobility giant in late 2017 won an online payment license through the acquisition of a Shanghai-based fintech company 19Pay for RMB 300 million, reported Caixin.
• This was followed by the launch of several financial services including crowdfunding for critical illness protection in its ride-hailing app, and a car leasing and fleet management platform early last year.

Context: Chinese internet heavyweights including Alibaba and Tencent have all been jostling for a position in the country’s online insurance market.

• Alibaba and Tencent joined forces to establish China’s first online-only insurer Zhongan with the country’s second biggest insurer Pingan in 2013. Ant Financial had 16% stake of the company, followed by Tencent and Pingan’s 12.08% before the company listed on the Hong Kong stock market in 2017.
• Baidu in June 2016 forged an alliance with China Pacific Property Insurance with plans to form a joint venture for auto insurance products. The application for an insurance license became mired in the process, and the two companies abandoned the JV plan in October 2018.

China’s massive ride-hailing platform Didi Chuxing has introduced home delivery options to its app in two major cities amid the Covid-19 outbreak which has weighed heavily on its core mobility businesses.

Why it matters: As many Chinese citizens remain home-bound, Didi’s push into home delivery could expand the company’s existing revenue streams and offset the impact of the pandemic on its disrupted ride-hailing business.

• Didi’s daily active user base shrank 54% during the Spring Festival holiday from more than 15 million early January, recent figures from Chinese research firm Aurora Mobile showed.
• The number of daily rides on Didi Express, the company’s standard-level ride-hailing service, sank by more than four-fifths sequentially in some major Chinese second-tier cities in February, Chinese media reported citing company insiders.

Details: Didi has quietly launched earlier this week a home delivery service, “Paotui,” a word which means running errands. The service is active for dwellers in the southwestern Chinese city of Chengdu as well as Hangzhou, capital city of eastern Hangzhou province, Chinese media LatePost reported.

• Unlike food delivery services, Didi users can request couriers to run errands for more general door-to-door tasks from picking up laundry to delivering groceries, according to a TechNode reporter’s observations on Wednesday.
• Didi will typically charge users between RMB 12 and RMB 20 (around $1.70 to $2.90) within a distance of 10 kilometers (around six miles). An errand request which exceeds 10 kilometers will cost more than RMB 30.
• The company on Wednesday confirmed to TechNode that professional chauffeurs from its Designated Driver business are currently offering the service and it plans to roll out the trial business nationwide, though it did not reveal further details.
• The company’s Designated Driving service which offers chauffeurs to safely bring users home in their own vehicles, is reportedly one of the company’s few profit-making businesses other than its struggling carpool service. The Designated Driving service has a daily order volume of 380,000 on average, although it has been hit hard due to the coronavirus outbreak.
• A designated driver could earn around RMB 4,000 a month offering home delivery services, according to the LatePost report, which may help offset lost income from Didi’s ride-hailing services, and help the platform with driver retention rates.

Context: Didi made its first foray into the lifestyle services market with the launch of its food delivery service in a number of Chinese cities in March, 2018, partly a preemptive measure against Meituan which began trial operations of its ride-hailing services in early 2017.

• Didi put a halt to the business in China a year later, after two female passengers were killed by drivers on its platform in separate incidents in mid-2018. The company reportedly incurred an annual loss of RMB 11 billion for the year, and announced a 2,000 job cuts early last year.
• The Toyota and Soft Bank-backed ride-hailing platform is on track to launch food delivery service in Japan starting April, Reuters reported citing a representative.

Beijing regulatory agencies reprimanded ride-hailing platform Dida Chuxing for resuming inter-city services to and from Beijing as the current novel coronavirus outbreak lingers on.

Why it matters: The spread of the Covid-19 virus has drastically constrained business for Chinese ride-hailing platforms. Regulators halted the service in more than 50 cities after the outbreak.

• The number of daily active users for China’s biggest mobility service provider Didi Chuxing cratered during the Spring Festival holiday, more than halving on an annual basis between Jan. 20 to Feb. 13, according to the latest figures from Chinese research firm Aurora Mobile.  

Details: Beijing regulators reprimanded ride-hailing platform Dida for offering inter-city rides to and from the nation’s capital. Dida has since halted the service, according to a statement from the city’s Commission of Transport and obtained by Chinese media on Friday.

• Meanwhile, the Didi rival was fined RMB 150,000 (around $21,500) for running the service with unqualified drivers. China began requiring all ride-hailing vehicles and drivers register for specific permits in order to operate on Jan. 1, 2019.
• A notice from the Ministry of Transport followed a day later, which underlined government restrictions on all inter-city ride-hailing services to and from both Beijing and Wuhan.
• The government agency did not give a timeframe for the ban, and stressed that the safety and stability of Beijing has a direct bearing on the leadership of the central government, warning that the penalty would be severe to violators including removal from Chinese app stores.
• Dida did not respond to requests for comment on Monday.
• Toyota-backed Didi said it suspended inter-city rides in Beijing beginning Jan. 26, as required by the local government. It did not say when it would restart the service.

Context: Other than Beijing and Wuhan, the epicenter of the virus outbreak, local governments have started to ease limits on public transit to support the country’s millions of workers returning to work.

• The Ministry of Industry and Information Technology in mid-February called for more concerted efforts to support work resumption especially from internet-connected transport services and freight deliveries in order to restore traffic and maintain supplies.
• Ride-hailing has since reopened in a dozen Chinese cities including Xi’an, capital of northwestern Shaanxi province, and the southwestern municipality of Chongqing, according to a statement Dida released on Thursday.
• China’s second largest ride-hailing platform, Dida falls well behind Didi in size. It records upwards of 3.65 million rides per day, around one-tenth that of Didi, according to an investor document cited by Bloomberg early this year.
• Dida’s user base declined 8% sequentially to 5.19 million monthly active users (MAU) as of January. Its MAU count is about one-fifth the size of Didi’s, figures from Chinese mobile internet research firm Trustdata show.

The bike rental sector in China is making a comeback after a steep decline as a result of the Covid-19 outbreak as city dwellers returning to work are opting for hiring bikes over other transportation.

Why it matters: The number of daily active users for short-distance transportation apps including ride-hailing and map navigation fell an average of 36% year on year during the Spring Festival holiday as a result of the epidemic after the state imposed lockdowns across much of China, according to data from Quest Mobile. Bike rentals have been rebounding since work resumed after the holiday.

• Rental bikes were ranked (in Chinese) the safest means of public transportation during the epidemic by a popular health information app, Dingxiang Doctor. Bus, subway, ride-hailing, and bikes were ranked in descending order by infection risk, according to the report.

Details: The number of rides on Didi’s bike rental app Qingju surged beginning Feb. 10, the first day back to work after the holiday, compared with rides during the holiday, according to the company. In southern Guangdong province for example, the company’s bike rides on Monday were 30% higher than those on Feb 10. Rides in key areas, including bus stops, metro stations, and supermarkets were higher by around half.

• Rides peaked on Feb. 10 for Hello Global, which surged 63% to 104% day on day in top-tier cities Beijing, Shanghai, Guangzhou, and Shenzhen.
• On Feb. 17, China Urban Public Transport Association announced it is drafting a new hygiene standard for bike rental industry. Co-authored by some of the industry’s largest companies including Meituan—formerly Mobike, Hello Global, and Didi’s Qingju, the industry guideline is expected to be released by the end of March.
• The sector’s biggest players are teaming up on bike disinfection efforts. Operations and maintenance teams for different companies will sanitize bikes belonging to all companies across more than 100 cities nationwide.
• Meituan Bike launched on Feb. 14 a new “contactless biking” initiative, urging riders to don protective gear and bring disinfectant to sanitize bikes for “safe and healthy.”
• The surge in rides is noteworthy particularly in winter, usually a low season for the bike rental industry which is highly influenced by weather.

Context: Like its tech peers, Chinese bike-rental firms are contributing to the fight against the virus by donating relief supplies, offering free rides to users, and opening up hiring.

• Chinese bike-rental firms began hiking fees late last year to bolster profitability following a prolonged period of major losses and severe cash flow constraints in the industry.
• Hello Global claims it is the largest two-wheel transportation app in China with more than 300 million registered users, according its 2019 annual report released in early January.

Didi Chuxing, China’s biggest ride-hailing service platform, on Tuesday said it was launching a RMB 100 million initiative to install protective plastic sheets between driver and passenger seats to minimize the spread of the Covid-19 virus.

Why it matters: The program could help ease widespread fears among Chinese users, who have been avoiding public transportation including ride-hailing amid the outbreak, and assist the company with recouping some of its hugely disrupted business.

• The ride-hailing sector has been a vertical which has taken a significant hit from the recent Covid-19 outbreak on shrinking demand.
• A female driver from Geely’s ride-hailing service Caocao in the eastern Chinese city of Hangzhou said her earnings dropped by around four-fifths over the week-long Spring Festival holiday compared with the holiday season last year, reported Chinese media.
• Didi on Monday announced it was expanding its February lease payment waiver to all drivers with its 3,000 leasing partners nationwide.

Details: Didi is ramping up its response to the virus, investing an initial RMB 30 million ($4.3 million) to install protective plastic sheets in rise-sharing cars, the company said in an announcement released Tuesday.

• Didi said multiple medical experts have agreed that the protective sheeting will help prevent the spread of the disease via airborne droplets from infected individuals.
• The ride-hailing giant began piloting the initiative beginning Feb. 8 in a dozen cities including Wuhan, the center of the outbreak, and Zhengzhou, capital of central Henan province, and is now rolling it out nationally, as it has been “welcomed by both passengers and drivers.”
• Drivers can now buy plastic sheets themselves, install it according to direction provided in the Didi app, and request reimbursement from the platform. The reimbursement is about RMB 15 for the first installation, Didi said in the statement.
• The sheeting may need to be replaced from time to time, the company said, and it plans to invest a total of RMB 100 million to cover the costs for the initiative.

Context: Didi has implemented a series of measures to support Beijing’s efforts in controlling the epidemic.

• Drivers are not allowed to offer rides without wearing a mask. Other rules in place include daily temperature checks and regular vehicle disinfection, the company said.
• The ride-hailing platform has been providing transport services for more than 20,000 medical workers in six Chinese cities including Beijing and Shanghai, bearing the cost of the service during the outbreak.

Didi Chuxing announced on Feb 10 that it has set up a “medical support team” in Ningbo. The support team will provide free shuttle services for medical workers at 8 designated hospitals in Ningbo.

 At present, Didi has set up medical support teams in Wuhan, Shanghai, Beijing, Xiamen, and Ningbo, providing services to a total of approximately 17,000 people. Didi said that they are planning to set up medical support teams in other cities in the following days to come.

The following is the full text of the Didi announcement (our translation):

In order to support the Ningbo epidemic prevention and control work effectively, Didi Chuxing formed a “medical support team” in Ningbo yesterday with the support and guidance of the Ningbo Municipal Epidemic Prevention and Control Work Leading Team. According to the announcement, the support team will provide free shuttle services for medical workers at 8 designated hospitals in Ningbo.

According to the guidance of the Ningbo Epidemic Prevention and Control Leading Team, Didi contacted the medical workers of the 8 designated hospitals to meet their travel needs. The establishment of the “medical support team” has received a positive response from the Ningbo Didi driver. The first drivers of the fleet have been equipped with protective equipment and disinfectants. They have started their support services, and are on call 24 hours a day.

As of now, Didi has set up “medical support teams” in Wuhan, Shanghai, Beijing, Xiamen, and Ningbo. It has transported front-line medical workers, covering a total of nearly 17,000 people, free of charge while medical support teams in other cities are being formed. At the same time, in response to the Wuhan government’s call, a medical support team of 1,336 drivers was established in Wuhan. The team is managed by the urban community (chengshi shequ) and is dispatched to local residents free of charge. 

Didi and their medical support teams will take precautions of disinfection and epidemic prevention during the services to fully protect the health and safety of passengers and drivers. Didi also encourages drivers to rest well, wash their hands and nose frequently, and report to the platform in time if they have experienced fever and cough.

Thank you to all medical workers and drivers for your support and professionalism. I hope you will take good care of yourself while fighting the epidemic. 

Didi Chuxing

2020.2.10

Editor’s note: This is part of our ongoing Tech for Good series, highlighting how Chinese tech companies are helping fight the impact of the coronavirus. This was originally written by Liu Wenxuan, a writer for our sister site, TechNode Chinese. Read the Chinese version here.

Editor’s note: This post on life inside Wuhan originally appeared in our members’ only weekly newsletter. Sign up so you don’t miss the next one. 

As most people stay inside, delivery drivers are on the front lines of the battle against coronavirus in Wuhan. This week, TechNode’s translation column brings you a gripping article profiling the volunteers, translated in full by courtesy of GQ Reports. This article was co-authored by Jordan Schneider.

The 2019 novel coronavirus exposed the fragility of various Chinese institutions. Local government and Wuhan hospitals have found themselves overwhelmed and unable to rise to the occasion.

Private logistics firms, on the other hand, have proven themselves essential. In a state of lockdown, the state has largely turned to the private sector to provide life’s necessities for those under order to stay inside. 

A team effort, this article published by GQ Reports profiles the experience and sacrifice of those individuals delivering food, opening their hotels to medical staff people. It describes at a human level the heroism and trauma of those caught in Wuhan. Given the strength and importance of this article, we’re running it at full length.  

On the ninth day of the city’s lockdown, food delivery workers, taxi drivers, express delivery workers, and volunteers maintain Wuhan’s lifeblood

Liu Chuchu, Ouyang Shilei, Zhang Jiajing, Luo Fangdan, Ge Shurun, Chen Rubing

GQ Reports, Feb. 3, 2020

At the request of interviewees, some of the names in this article are pseudonyms.

The people who move supplies

Since the city was sealed off, Wuhan has been like a movie playing on mute. Most delivery companies have stopped operation, and a large number of goods from other regions are languishing in warehouses. A small number of Tmall Express, emergency medical services, and Shun Feng delivery workers [Tmall is an ecommerce platform and Shun Feng is a delivery service] are still active. Sometimes one delivery worker has to deliver to two different districts, thus the mountains of accumulated goods are slow to be disseminated from the warehouses.

On Jan. 26, a volunteer named Zhang Che called Xiao Wang, a deliveryman, to help him find a box of surgical masks from Cangzhou, Hebei that had arrived four days prior. Zhang Che promised to give Xiao Wang a bag of face masks in exchange for helping him find the package.

Upon receiving the face masks, Zhang immediately rushed to the hospital. As an individual volunteer, the amount of supplies he is able to get his hands on is limited. From Jan. 25 to 26, he only found 200 sets of protective clothing, 100 masks, and 100 goggles. The limited supply must be divided for a hospital with more than five different departments. No matter how much they get, doctors and hospital staff are very grateful. Each additional item is a lifesaver.

Almost all of the shops in the formerly bustling streets have closed. In the supermarket, most vegetables are gone. Only one convenience store in Wuhan’s main shopping street is open. The doorframe is filled with instant hot pot kits, instant noodles, and other easy-to-cook foods. Many blue-helmeted delivery drivers were at the door, waiting to grab a meal [Trans: Blue helmets are the uniform of delivery service Eleme]. A number of people are not brave enough, or even able, to go out. They rely completely on the delivery workers shuttling throughout the city. 

Since becoming a delivery driver, this is the first time deliveryman Wu Bang has been asked by a customer to be added on WeChat. Every few days the customer sent Wu a list of dishes and daily necessities, paying him RMB 20 (about $2.87) for the errands. Wu walks slowly, with a crutch, because of a previous knee fracture. On Jan. 28, Wu Bang spends two hours in the Zhongbai supermarket to buy all the goods the customer needs. That night after returning home Wu Bang is so tired he “couldn’t even keep his eyes open”.  

While the city is sealed off, Wu’s errand-running fee does not change. The money he earns in a day is no more than normal. However, different platforms have different policies. According to a report by inSight, a young delivery rider said that delivery fees have risen by at least RMB 12 since Jan. 21. He calculated that he could earn RMB 3,000 to 5,000 in three days. However, many delivery drivers are still afraid to go out, and when the delivery workers who do continue working receive an order to a hospital, few are willing to accept it.

When delivery worker Liu Gang delivered abalone rice to Wuhan University’s Zhongnan hospital, he was surprised at how lonely the hospital was. Remembering a Weibo post stating that New Year’s dinner in the hospital was only instant noodles, Liu decided to make more deliveries to the hospital. Liu felt that to those still working during the lockdown, the motivation to help people others outweighs fear of infection. On Jan. 29, Liu photographed a sanitation worker in orange overalls he encounters on the road, a traffic policeman in a fluorescent green vest under an overpass, a rider eating a meal on the side of the road in a yellow hazmat suit, and a pharmacy still open. “They are superheroes,” he says. 

Express delivery within the city is still running. Li Zaigui, a delivery worker with Dada Zhongbao [a crowdsourcing-based delivery company] has been working around the clock for the last few days.  Of the original nine delivery workers at his site, three returned home for the New Year holiday, but none of the remaining workers left because of the outbreak. On the third or fourth day of the city being sealed, several unscheduled local colleagues felt bored staying at home and also came out to run deliveries.

Currently, Li delivers goods for Jingdong, daily necessities such as masks, rice, noodles, oil, instant noodles, and mineral water. The platform specifically asked the delivery workers to not come in contact with customers when delivering goods, but instead to let the customers come down and pick them up themselves or place the goods in delivery cabinets. 

Every day, Li receives a mask from Jingdong. Sometimes it is an N95 mask [Note: an N95 mask is one that blocks at least 95% of very small test particles], sometimes it is a surgical mask. This is considered very good in the industry. In fact, many of these service workers who are carrying people their life necessities and medical supplies have very little protection of their own. Lin Chen, a video blogger who has been shooting outside for several days, said that most delivery drivers on streets were not wearing masks. Wu Bang, mentioned above, wears a face mask and changes it daily, but doesn’t disinfect his clothes when he gets home even though he often delivers to the hospital.

Some lack access to and screening for the latest outbreak information. On the fourth day of Wuhan’s lockdown, volunteer Zhang Che added a RMB 10 tip to get a driver to accept his request for a rideshare. When he got in the taxi, he found that the driver was wearing no mask but a scarf looped twice around her face. He quickly gave her the mask in his bag. Seeing him so nervous, the driver asked, “Is the current situation dangerous? I heard two hundred people were infected?”

The dark cloud of inadequate supplies hangs over everyone in the city. Every time Zhang went to the hospital to give doctors and nurses supplies, he communicated with the doctors for a very short time, left physical space between them, and repeated one agreement over and over—an agreement he had made with more than 30 doctors: “We will come out to eat together after we are well!” No one dares to think about whether those agreements can be fulfilled. Among Zhang ‘s doctor friends, there have been a lot of people infected.

The people who help spontaneously

“The medical staff are fighting for their lives and I want to help them with logistics as much as possible,” said hotel volunteer Wang Hongyun.

When they began to seal off Wuhan’s, so did the battle of logistics to support frontline medical staff. On the second day of the new year, when the city was closed, the hotel industry in Wuhan organized the “Wuhan Medical Hotel Support Group” to provide free accommodation for medical staff.

Wang Huan is one of the leaders in the group, working as the hotel’s “clinical inspector.” In recent days, she felt more and more frustrated. At the same time, bills are piling up, disinfection and protection materials are increasingly scarce, and there is a service personnel shortage. Businesses wanted to help medical workers struggling to get home in the event of a traffic shutdown, but only for a few days. They hoped that a government or charity would take over after that.

It turns out that civilian-originated support will last longer than anticipated. More and more medical staff are checking into these hotels.

Wang Hongyun is the only hotel staff staying at the Aisikai Fine Hotel in Wuchang district. Now employees can’t be found even for three times the pay. He simultaneously serves as receptionist, cleaner, store manager, and manager. Every day, he disinfects public areas every three hours. The rooms are furnished and the sheets are changed by the medical staff themselves—as is the case at most of the hotels in the cluster.

This raises the question: How to disinfect? Lack of sufficient protective equipment for cleaning has become the most serious problem that these hotels face. Wang only wears a mask. He doesn’t have professional disinfection required isolation clothing, isolation shoes, or spray instrument, not to mention an ultraviolet lamp, or an air sterilizer. The medical staff sent him two pairs of disposable gloves, which he still refuses to use.

How the frontline medical staff travel has also become one of the most concerned issues. Zhou Xianwang, the mayor of Wuhan, said the government initially tried to provide three to five taxis for each community to pick up medical workers, but this effort failed.

Currently, some medical workers have solved the commuting problem by staying in hotels near the hospital, while others drive themselves to work. The rest of the medical workers mainly solve the commuting problem through a volunteer team organized by Didi Express and a private volunteer fleet.

After the city sealed-off, Wuhan-based vlog blogger Zhi Zhu Hou Mian Bao joined the volunteer group. He also recorded an instructional video about getting out of a car which describes disinfection processes.

The people who protect their jobs

After the lockdown, the number of people going out dropped. For the Wuhan police, the people calling 110 [Note: This is the police emergency number] also dropped. On Jan. 27, the Wuhan public security bureau received 165 calls to the 110 number, down 67.8% from normal. 

“There’s no one who wants to start with those trivial issues.” Wang Xing, a Hankou police officer said that in the past the police often had to solve fights that broke out due to trifles. But under the epidemic, there are fewer thieves. On the second day of sealing off, Hankou had zero police alerts. Even accidental deaths are declining, as there are no traffic accidents that used to happen daily.

The police are still on duty. As the epidemic situation took a downward turn, the police took on the responsibility of picking up and dropping off patients. 

There are still many problems to be solved in the community. Chronically ill and the elderly are worried about how to go to the doctor on time and how to buy food and supplies. At present, the voluntary fleet of municipal taxis does some of the supporting work for such situations. Yu Huahui, a taxi driver, is one of those who has volunteered to join the 6,000 taxis in the community scheme. 

The night before, Yu told his family “If I don’t do this, I’ll regret it for the rest of my life.” His wife and daughter finally showed their support and told him to take precautions.

Every day, the community committee investigates the purpose of travel, location and test results of its residents and informs the drivers. Before getting on the cars, temperatures are checked. Passengers with fevers cannot get on.

A portion of the vehicles go to the hospital, taking pregnant women for physical examinations, dialysis patients to get dialysis, and the elderly for physical examinations. The other portion goes to help old people who have no children to buy things for them. On a regular basis, community workers keep a list of the food and supplies they need and go out with drivers to do their shopping. Sometimes Yu Huahui and his colleagues have to run a few supermarkets and pharmacies to buy what residents need.

The taxi company provided only surgical masks and 84-brand disinfectant for the drivers, while Yu added gloves, disposable raincoats and plenty of Chinese medicine. Mr. Yu felt that the company should do more to keep drivers safe. He suggested to the company that he “can provide as many N95 professional masks as the company needs,” and tried to convince the leader that he “has at least a few hundred in stock that can be used by everyone for the time being.” But the leader ignored him.

The people who defend the city

Zhang Che decided to have a rest. While volunteering at hospitals to deliver supplies, he thought he had developed symptoms of PTSD. Sometimes when he closed his eyes, he saw thousands of hands looking for a mask, and he had only one bag.

The road used to transport supplies is blocked. Zhang ’s friends from Fuyang, Anhui Province sent more than 1,000 sets of protective clothing and some face masks over. In the middle of the night the car drove to Wuhan entrance gate, but wasn’t allowed to enter as the road was broken with a several meters wide deep hole, the goods could only be sent back to the factory. Zhang didn’t tell anyone close to him he was a volunteer and had to deal with his personal anxieties himself. 

This only made Zhang more anxious. A doctor friend at People’s Hospital has been diagnosed with a strong positive infection and is being quarantined. Another doctor friend decided to go back to work when he should have been quarantined because of a shortage of staff.

Zhang never expected to become a volunteer. On New Year’s Eve, he was chatting with a doctor friend who casually said the hospital did not have food for New Year’s Eve. Zhang went to send them food. On Jan. 24, at the height of the panic, huge crowds rushed to hospitals to be tested for infection. Zhang was in the hospital hall and saw all the elderly, some people close to the body, some people not wearing masks, some people wearing cloth masks. Zhang was about to make a detour to leave when a pair of hands seized him, a scarf wrapped around the mouth and nose of a middle-aged woman almost kneeling: “Please sell me the mask.” Then another pair of hands caught him. Soon, Zhang ’s bag of masks was finished.

People getting the masks were ecstatic, and Zhang’s heart clenched as he saw red-faced patients interspersed throughout the hospital. Before leaving, the doctor advised him not to deliver things. He nodded, turned, and drove back up the road, calling contacts to let them know he’d deliver things. 

“We want to live, too.” Said Zhou Qinghui, owner of the Yishang Garden Hotel. The cost of rent, water and electricity is about RMB 6,500 a day. “Our current situation cannot maintain long-term free service. It’s not clear how long we can last.” Zhou said. All the hotel staff in Wuhan that Wang Hongyun knew were not comfortable. “Most of the owners are not fully invested, and many of them are simultaneously paying off their loans while operating their stores. They are paying off that money each month.”

In the early morning of Jan. 29, the fifth day after its establishment, the “Wuhan 123 Rescue Convoy” published a “Letter to Drivers,” announcing that due to a shortage of protective resources such as protective clothing and masks, it would suspend order collection. In the past five days, the 123 aid convoy faced the risk of infection to pick up nearly 1,000 medical staff and deliver more than 100 supplies. 

On Jan. 30, Wuhan Union Hospital made a post on Weibo asking for help. “We defend Wuhan, we ask you to support us! We just got the news that we’re running out of supplies!” Seeing this message, Zhang decided not to rest and soon set out to find supplies.

They keep rushing around, they keep waiting, waiting for the Huoshen Shan and Leishen Shan hospitals to be built, waiting for the turning point in the epidemic, waiting for the lockdown of the city to end, waiting for the moment this city grows brightly and comes back to life. 

[Translator: As of Feb. 8, both of the hospitals mentioned above have been completed. Wuhan is still battling the epidemic.]

This article was co-authored by Wei Sheng.

China’s tech stocks have dropped sharply since Jan. 13, when an epidemic disease known as novel coronavirus went global. On Tuesday Feb. 3, they started to recover, but most have a long way to recover from January losses.

E-commerce giant Meituan Dianping opened at HK$109.20 (about $14) on Jan. 13, dropped to HK$99.50 by the end of the day Feb. 3, and has climbed back to HK$100.50.

The stock rise coincided with a strong monetary boost from Beijing on Tuesday. The People’s Bank of China injected RMB 400 billion (about $57 billion) of liquidity to the banking system and strengthened the yuan exchange rate to support the economy.

The liquidity injection was the largest in the past year, sending a strong message to markets that the government will support the Chinese economy during the virus outbreak.

Manufacturers of surgical masks, now widely used and sometimes mandated in China for protection against airborne viruses, have seen a surge in share prices. Stock for three Chinese firms TechNode analyzed have gained 40% in share price since Jan. 13, indicating that investors expect a prolonged health crisis.

But things are looking up this week in tech. Stocks on Shanghai’s tech board started to climb on Tuesday, gaining back on the past few weeks’ losses. The benchmark SSE Composite Index, in which the STAR Market is listed, has gained close to 3% since Tuesday.

China’s Nasdaq-style STAR Market has been on a roller coaster ride after it reopened on Monday. Most shares dropped during the first day of trading after the week-long break with 43 out of 79 listing companies seeing their share prices reach the tech board’s daily limit of 20% downside.

E-commerce bounceback

The e-commerce sector has been hit the hardest among those analyzed, as expectations for consumption were low in the past few weeks. Share prices of the six companies TechNode analyzed saw a 9.4% decrease on average until Feb. 3, and have since won back 5.4%.

Millions of people are staying at home this week due to obligatory work-from-home policies, adding on the fact that fears of the virus spreading is running high. But fear of the virus might prove beneficial for e-commerce companies.

“Alibaba and Meituan’s share prices dipped slightly, but are now on an upward trajectory, as investors price in how important e-commerce will be over the coming months,” Michael Norris, leader of research and strategy at AgencyChina, told TechNode.

Cities across China have ordered entertainment venues to shut down and shopping malls to take strict entry measures during the Spring Festival break which went from Jan. 23 through Feb. 2 after a last-minute extension.

“Over the coming weeks, the default for many folks’ consumption will be e-commerce,” Norris said. E-commerce and delivery platforms have already implemented “no-contact delivery,” meaning the delivery driver doesn’t come in person with the person receiving the goods. This scheme meets consumer desires and “the stock market has responded positively to these developments,” Norris said.

Luckin Coffee shares have dropped by 29%, from $44.17 on Jan. 13 to $31.35 on Feb. 3, the biggest drop among the companies analyzed. On Saturday, the US investment firm Muddy Waters delivered a further blow to China’s largest coffee chain, saying that it believes the company is inflating sales numbers. Luckin Coffee stock has increased by 24.56% this week, recovering to $39.05.

Luckin shares dip further despite refuting fraud claims

Shoppers going online

Smartphones and telecommunications companies have also seen a drop. The five companies TechNode analyzed showed a 2.3% decrease since Feb. 13.

“We predict the overall smartphone shipment in China to drop by 15% to 20% year on year in the first quarter,” said Fang Jing, chief analyst at Cinda Securities, a Beijing-based investment firm.

The drop is attributable to the government’s calls remain during the Spring Festival holiday in an effort to contain the spread of the virus, Fang said.

The holiday is usually considered a barometer of Chinese private consumption because of the traditions of gift-giving and family reunions. However, fears of the deadly coronavirus that has killed 491 people and sickened 24,363, based on official data, have kept shoppers away from the streets.

“We have seen shipments of smartphones through offline channels drop by 70% during the Spring Festival holiday,” said Fang. “If the situation is not going to take a turn for the better, the percentage will likely increase.”

Instead, people are going online for electronics consumption. Online shipments of smartphones are expected to account for as much as 40% in the first quarter, Fang said, adding that the proportion was only 28% in the same period last year.

With a small store footprint, Xiaomi relies on online sales, which makes it a strong contender for the coming months when e-commerce will become an even bigger pillar of consumption. Its stock climbed 3.29% in the time period analyzed, making it the only rising stock in the smartphones and telcos category.

Compounding on Xiaomi’s relatively good outlook in China, are good results in India. The Beijing-based company remains the top smartphone brand in India, according to research by market intelligence firm Canalys published on Jan. 29.

Supply chain delays

The epidemic also creates challenges and disruptions for supply chains in China, especially after authorities in some big cities announced rules barring companies from resuming operations for a certain period of time following the break.

Companies in Shanghai, for example, are not allowed to re-open offices before Feb. 10, meaning either remote work or a longer holiday. In the meantime, jobs that require the physical presence of employees, like factories, remain closed.

DingTalk, WeChat Work overburdened as hundreds of millions work remotely

Car manufacturer Hyundai had to close all its factories in South Korea after it ran out of critical components coming from China. The world’s fifth-largest automaker said it would take three to four weeks to switch to parts made outside China.

“We expect that most consumer electronics manufacturers will resume operations on Feb. 9 or Feb. 10, which means a delay of roughly one week,” said Fang.

“But, given that the first quarter is always a low season for electronics consumption in the year, the impact is limited. We expect that orders affected by the delay will account for less than 2% of smartphone makers’ annual orders.”

CORRECTION: An earlier version of this article erroneously reported Meituan Dianping’s stock price as though it were listed in US dollars. The company’s shares are priced in Hong Kong dollars.

China’s ride-hailing platform Didi Chuxing is facing a shortage of protective gear including garments and face masks as the company expands its service for medical workers in Beijing amid a growing coronavirus outbreak in the country.

Why it matters: Didi is one of many firms facing protective gear shortages during the coronavirus epidemic, compounding fears about a deepening economic slowdown and financial strain on enterprises.

Details: China’s largest ride-hailing platform Didi is now running low on protective supplies including garments, face masks, and digital thermometers, company president Jean Liu said in a post on Chinese microblogging platform Weibo on Thursday.

• The company needs supplies “in large volume” to sufficiently protect its drivers, who are now required to wear face masks while in service, Liu said.
• Didi reminded drivers that they were all required to wear masks before taking orders or else suspend service, in an announcement released Monday on the company’s official Weibo account.
• The shortages are only affecting certain cities, according to the announcement, but the company declined to offer specifics when contacted by TechNode on Tuesday.
• In another announcement, Didi said it is offering transport services specifically for medical staff from two local hospitals—You’an and Ditan—in Beijing starting Tuesday by working with the city’s labor union.
• The expansion to Beijing follows similar measures in Wuhan and Shanghai implemented late last month.

Chinese tech firms ramp up support to battle outbreak

• On Jan. 26 the platform launched a feature allowing medical staff from three hospitals in Wuhan to hail cabs using its app after the city government banned most vehicles including private cars in the downtown area.
• The company claimed it has offered free transport services to more than 5,000 medical staff in Wuhan and 4,500 in Shanghai as of Feb. 2. Plans to roll out similar efforts for other cities are underway.
• Urged by the government, Didi recruited a total of 1,336 drivers in another move, offering free rides to local residents for non-coronavirus related medical emergencies and supply deliveries in Wuhan starting Jan.25.
• Didi is bearing the cost of the free rides services during the virus outbreak, a company spokesman told TechNode on Tuesday.

Context: In addition to offering free rides to medical workers, Didi has taken a series of measures to help contain the coronavirus outbreak as the impact causes widespread disruption to various business sectors in China.

• In an announcement released Monday, Didi said a total of 94 car leasing companies and 26 insurers have agreed to extend leases and waive February payments for drivers in 16 cities in Hubei province, an effort coordinated by Didi’s driver services division Xiaoju.
• It is also looking to scale up the program nationally with 3,000 leasing firms and dozens of insurance companies and financial institutions while offering a daily stipend of RMB 300 ($43) for Didi drivers infected with the virus.
• Didi suspended ride-hailing services in more than 20 local cities and counties other than Wuhan in a dozen of provinces since Jan. 26, as required by local governments, according to a notice obtained by Chinese media.
• As of writing, China reported 20,471 confirmed cases and 426 deaths, exceeding the death toll related to the SARS outbreak.

Updated: included information on mask requirements and shortages in Details section.

Chinese ride-hailing platform Dida Chuxing is seeking up to $300 million in pre-IPO funding from investors including Tencent, Chinese media reported Thursday.

Why it matters: Beijing-based Dida is the second-largest ride-hailing service in China and one of the few to say it is profitable.

• If able to raise the targeted amount, Dida is well-positioned to keep eroding Didi’s share of the market, which has been slowing along with the broader economy.

Details: Dida is looking to raise as much as $300 million in a last round of funding before filing for an initial public offering in the US, Chinese media reported Thursday citing people familiar with the matter.

• The company has been in talks with potential investors including Tencent with a pre-money valuation of $1 billion, the source said, adding that it is eyeing a US listing, though a date has not yet been set.
• The Didi rival expects to double the size of its business to 2 million orders per day this year. Currently around 70% of the traffic on its platform is for its carpooling service, which benefited from Didi’s nationwide suspension of its Hitch carpooling service following two passenger murders in 2018 by drivers. Dida’s carpool service increased tenfold in a year’s time as of mid-2019, according to the report.
• A spokeswoman from Dida Chuxing declined to comment when contacted by TechNode on Friday.
• Founded in 2014 by Song Zhongjie, a former HP executive, Dida provides taxi-hailing and carpooling services in 359 cities. Its user base of 5.64 million monthly active users (MAUs) as of December is one fifth the size of Didi’s, figures from Chinese mobile internet research firm Trustdata show.
• The company first claimed to be profitable in September, which it attributed primarily to its carpooling and value-added businesses including advertising, car maintenance, and auto insurance. A company executive said it charges RMB 1 to RMB 3 ($0.14 to $0.43) as a service fee from each carpooling order.
• Dida has so far recorded a total of four funding rounds including its latest, during which it raised an undisclosed amount from Nio Capital in March 2017.
• Its 2015 Series C raised $100 million, led by China Renaissance Capital Investment and followed by existing investors including Yiche, also known as BitAuto, a Nasdaq-listed auto information service provider formed by Nio founder William Li.
• Nio Capital is a mobility-focused venture capital firm formed by electric vehicle maker Nio, alongside Sequoia China and HillHouse Capital. Li has been the chairman of the Dida Chuxing board since 2018.

Context: China’s ride-hailing market has started to slow, reporting a 6.3% year-on-year decrease in total daily active usage in the third quarter of 2019, the fifth consecutive quarterly decline, analysts at Sanford C. Bernstein wrote in a report citing figures from Chinese research firm TalkingData.

• A reduction in user discounts and subsidies from ride-hailing platforms was the main driver for the decline, the report said.

Didi Chuxing unveils holiday measures to boost safety, car availability

Regulators released an update to rules governing the ride-hailing industry on Tuesday, including doing away with additional requirements for ride-hailing companies with foreign investment, and analysts say more regulation is to come.

Why it matters: The nullification of this requirement brings ride hailing in line with the Foreign Investment Law, which came into effect this year.

• Domestic companies have long enjoyed home advantages in ride hailing, creating enough of a competitive edge to sow doubt as to whether the change will lead to material change. “This announcement will not have a huge impact on industry, since we’ve already entered the second half of the game and there are already many players,” Xu Huxiong, principal at strategy firm Roland Berger, explained to TechNode.

Details: Regulators struck out a clause in regulations governing ride-hailing which required foreign-invested companies to contend with more red tape—such as additional permits and approvals—than domestic peers.

• The regulations (in Chinese), originally released in 2016, legitimized ride-hailing and also set standards for companies.
• State Council had already cut red tape for road transport service projects with foreign investment.

Local governments begin Foreign Investment Law rollout

Context: Regulations for ride-hailing continue to lag behind industry realities. The furor around Didi’s safety features following a series of incidents enabled by the ride-hailing platform, for example, highlight just one aspect of the challenge in regulating an industry with many small players, sometimes dozens in a single region.

• The speed at which the industry has developed leaves regulators struggling to keep up. “Governance of ride-hailing will become more detailed,” said Xu. There is already an alliance that consults with ride-hailing companies on regulations that will affect industry.
• Out of all of regulator priorities, “Safety is most discussed,” Xu said. That will mean operations become more standardized, vehicles may have cameras, and there will be more rules for different aspects of ride-hailing whether that be luxury cabs, or carpooling.
• Didi, one of the biggest players in ride-hailing, is already cooperating with local police in Guangdong to transfer evidence. It has been scrupulously adhering to requests, with some 98% of transfers (in Chinese) completed within 10 minutes.
• Whether platforms should be able to use location data to push tailored ads to users is also under debate, said Xu.

Didi Chuxing is rolling out a number of temporary measures aimed at ensuring an adequate number of cars on the road and passenger safety during the upcoming Spring Festival holiday, following meetings requested by Chinese authorities.

Why it matters: The latest requirements from authorities signal that Beijing is looking to tighten control over local ride-hailing platforms to improve security and broaden its availability to the public, which may drive mounting operating costs.

• In a recent announcement released by China’s Ministry of Transport, four central government departments on Monday warned ride-sharing platforms Didi and Nio founder William Li-backed Dida to guarantee driver supply and strengthen safety, especially for carpooling services, during the spring rush.

Details: To entice drivers to continue working through the holiday, Didi will impose a surcharge ranging from RMB 1 to RMB 9 (around $0.15 to $1.30) per trip during the two weeks starting Jan. 21. The surcharge will “go directly” to the driver, the company said in an announcement released Monday.

• Additional cash bonuses, in the form of red packets, will also be given to drivers in more than 280 domestic cities across China over the next three weeks to encourage them to work during the festival.
• The ride-hailing giant has poured money into such bonuses over the past three years, and in early 2018 spent RMB 1 billion ($158 million) on driver red packets for the holiday, according to a CGTN report. It has dropped mention of spending on Spring Festival bonuses since then.
• Meanwhile, Didi has established a “Holiday Season Safety Command Center” to operate for a 40-day period starting Jan. 10, the company said in a statement released Friday.
• Led by Didi CEO Cheng Wei and president Jean Liu, the interim working group will include team leaders, customer service team, and emergency management officers who will work on a 24-hour rotating shift schedule to handle urgent requests.
• As part of the initiative, Didi said it is looking into new ways to prevent safety issues especially for long road trips, including an artificial intelligence-powered driver fatigue detection system which alerts drivers with voice messages to take short breaks.

Didi to ask passengers to pay tips to drivers over Spring Festival

Context: Concerns about the safety issues on ride-hailing platforms have remained a public concern, with news headlines continuing to recall violent incidents inflicted on passengers.

• Chinese media reported in late October that a driver on transport platform Hellobike was arrested in the southern city of Foshan after allegedly threatening a female passenger with a knife for money.

On Thursday, Yan Baocai, the owner of a car fleet company, attempted to commit suicide (in Chinese). In his suicide note, he blamed Didi for putting his company out of business. The note called Didi out for their monopolistic practices and especially their use of unlicensed cars.

Why it matters: After Uber China was bought by Didi, the ride-hailing company controls more than 80% of the market. As with other giants, Didi has become a target for both user and regulatory complaints. Over the past two years, Didi has been shadowed by the murders perpetrated during its rides. Now, this attempted suicide has once again thrust them into public scrutiny.

Details:  Yan tried to end his life on December 26 by taking medicine and liquor at home, hoping his death would raise social and governmental awareness of Didi’s problems.

• Based out of Taiyuan of northern China’s Shanxi province, Yan’s company is mainly engaged in car leasing, vehicle and auto parts sales, and used car trading. Yan holds a 49% in the company, according to enterprise intelligence database Tianyancha.
• Yan claimed that even though his firm met Didi’s and regulatory requirements, his cars were not allowed to operate on the Didi platform. According to his note, this was a huge blow since Didi owns almost the entire market.
• The note also accused Didi of knowingly accepting unlicensed cars and drivers as well as covering the government fines incurred.
• Yan was sent to a nearby hospital after his family discovered him. According to reports, his life is no longer in danger but has lost his will to live.
• Didi responded with an open letter today, pledging to help Yan to solve his problem and improve the company’s services.
• Didi represents over 82% of the 16,843 illegal cars on ride-hailing platforms in Shanghai, while Meituan accounts for 15%, according to the transportation authority of the city.
• Tensions between Didi and local regulators has been escalating. Although the firm is quick to pay fines it’s been slow in removing the problematic vehicles.

Ride-hailers may face app store delisting over illegal drivers in Shanghai

Context: This is not the first entrepreneur suicide of recent note.

• In 2017, the maker of WePhone committed suicide after being blackmailed for  RMB 10 million (roughly $1.5 million). His blackmailer was an ex-wife he met on Jiayuan.com.
• More recently, a merchant on platform Taojiji committed suicide (in Chinese) after he was unable to get his money back from the bankrupt company.

Passengers aren’t buying a new Didi feature that trades privacy for safety.

Didi Chuxing is piloting mandatory audio recording as a safety feature during long rides on its Hitch service. Hitch is a carpooling service for private car owners and passengers going in the same direction.

Why it matters: Didi has been surrounded by controversy since the relaunch of its carpooling service Hitch in November. It is now struggling to reassure customers with a brand-new service with complex safety rules.

• The company earlier last month backtracked on its plans to impose gender-specific operating hours on the renewed Hitch. They replaced them with a standardized time slot from 5 a.m to 8 p.m for both men and women.
• The initial plan garnered accusations of gender bias. It was initially planned for the service to be available until 11 p.m. only for male passengers. Netizens decried this as setting a curfew on women.

Details: Didi expanded the relaunch of its carpooling service Hitch on Tuesday morning with the new safety feature in five Chinese major cities. The cities include Beijing, Wuhan, and Changsha.

• Most Hitch trips have an optional audio recording feature for both users and drivers.
• A ride longer than 30 kilometers (19 miles) total will automatically record audio from the drivers’ phone and can not be switched off, the company said in the user guide.
• After the first day in trial operation in Beijing, a number of local passengers refused to grant authorization. They were wary of the potential for eavesdropping on their private conversations.
• They added the measure helps to improve accountability but could not stop criminal activities per se, Chinese media reported citing some anonymous passengers.
• Didi claims all the audio recordings will be encrypted, retrieved in strict accordance to a set of rules, and “automatically deleted” after seven days if no disputes between rider and driver are reported.
• A Didi spokesperson told TechNode that customer agents never listen to recordings in real-time. Recordings are only accessible by Didi’s customer support team with the authorization from both customers and drivers, and by police with a proper legal mandate, the spokesperson added.

Context: Hitch was reportedly one of Didi’s only two products that had made a profit for a long time, alongside its high-end chauffeur-driven service.

• The Chinese mobility firm suspended the carpooling service following the murders of two female passengers by Didi Hitch drivers late last year, and recorded a staggering RMB 10.9 billion (roughly $1.48 billion) loss annually, according to an internal file obtained by Chinese media.
• Audio recordings were first used starting in September last year in Express and Premier rides as a required safety feature.
• The company launched the carpooling feature Pinche in 2015. Pinche offer rides from local ride-hailing fleets driven by drivers with government permits. Hitch drivers are private citizens not employed as drivers.

US chipmaker Nvidia has teamed up with Chinese ride-hailing giant Didi Chuxing to develop autonomous vehicles for a scalable ride-hailing service, as global companies join forces to accelerate autonomous car deployment.

Why it matters: Due to the immense amount of computing power needed for autonomous driving, automakers and mobility services have been seeking out partnerships with chip makers.

• The partnership echoes an earlier deal between Nvidia and Toyota, a major Didi backer, in which Toyota will use the chipmaker’s platform to test, validate, and deploy autonomous cars to the mass market.
• James Kuffner, chief of Toyota Research Institute-Advanced Development, told reporters on Tuesday that the company plans to first develop and deploy self-driving technologies in commercial vehicles for services including ride-hailing before producing highly autonomous passenger vehicles.

Details: Didi has selected Nvidia Drive, an end-to-end computing platform to develop, train, and validate its driverless technologies, Nvidia CEO Jensen Huang announced at its graphics processing unit (GPU) conference in the eastern Chinese city of Suzhou on Wednesday.

• Didi will enhance its autonomous driving technologies by using Nvidia’s platform to train deep neural networks, which powers a self-driving car with visuals of its surrounding environment and help it make decisions based on what it sees.
• The ride-hailing giant will also use Nvidia’s GPUs in the data center for training machine-learning algorithms, which the company uses for route planning more than 40 billion times each day.
• It follows an announcement Didi made in August of plans to launch a robotaxi service pilot with a fleet of 30 L4 self-driving vehicles in the outskirt of Shanghai early next year.
• The city government has yet to grant permission for a passenger transport program, people close to the matter told TechNode earlier this month.

Context: Robotaxis are seen as the most likely business application for self-driving technology given the high costs and strict regulations required to mass produce autonomous cars for personal use.

• Nvidia’s top competitor, Intel, also joined forces with an electric vehicle maker when it announced last month a partnership with Nio to release a highly automated model in China in 2022.
• Amnon Shashua, CEO of Intel’s automotive sensor company Mobileye, expressed a positive view about a rollout in China due to its centralized regulatory environment, adding that Chinese regulators were currently standardizing Mobileye’s safety model into law.

Japanese automaker Toyota has started operating a mobility company for car rental and ride services in the southern island province of Hainan in order to capture a piece of the massive Chinese ride-sharing market.

Why it matters: The move comes shortly after Toyota’s $600 million July investment in Chinese ride-hailing unicorn Didi Chuxing to offer car leasing, fleet management, and other vehicle-related services.

• Meanwhile, Didi expanded beyond ride-hailing on the island, forming a company to lease and sell electric vehicles (EVs) with two state-owned firms. Around 50,000 EV charging piles or more than a quarter of those in China are available to users on the platform.

Details: Toyota said it will first offer a range of mobility services including car leasing and higher-end ride-hailing services on the island along with two of its local dealers, Zhongsheng Group and Hainan Jiahua Group, according to an announcement released Friday.

• The Japanese automaker and the two companies formed a joint venture with registered capital of RMB 10 million ($1.42 million) on Friday in Hainan with Toyota Financial Services China the majority shareholder, according to corporate intelligence platform Qichacha.com.
• A fleet of new Camry, Avalon, and Highlander models will be available for short-term car rental, while Alphard and Lexus cars will be used for high-end ride services.
• Toyota’s local dealership will provide full-service staff including drivers as well as regular maintenance services.
• Tourists can rent cars using the company’s WeChat account, online travel platforms, or partner hotels, according to the statement.
• Toyota is shifting into mobility services to meet growing demand from Chinese mid- and higher-end users, the company added.

Context: Toyota is not the only automaker looking to transform itself into a key player in next-generation mobility.

• China’s largest automaker SAIC launched Evcard, an electric vehicle rental service with a local partner in 2013. The company said its fleet of 50,000 electric vehicles has serviced more than 6.5 million users in over 30 domestic cities as of November.
• Dubbed the “Hawaii of China,” Hainan welcomed more than 76 million tourists last year, and Beijing expects that number will exceed 100 million by the end of next year.
• Hainan has also emerged as an important region for EV companies as it pushes aggressively into the market, aiming to fully phase out all gasoline-powered vehicles by 2030.
• WM Motor in April 2018 also formed a partnership with a local, state-owned Hainan public transport company with plans to launch a fleet of 1,500 EVs by end-2021. It said in June that it had a fleet of 1,000 cars up and running in the province.

Hainan to massively expand electric vehicle charging infrastructure

Didi Chuxing is working with ride-hailing fleets in Shanghai to display ads on tablets attached to the back of passenger headrests as it explores ways to accelerate revenue growth.

Why it matters: The in-car screens are an attempt to expand the company’s existing revenue streams for more sustainable growth, after it pulled back under heavy scrutiny following the murders of two female passengers by drivers of its carpooling service Hitch in separate incidents last year.

• Since the incidents, Didi has pledged to focus on safety rather than profit and growth. It introduced a series of features including facial recognition for drivers to tackle safety issues on its platform.

Details: Didi is asking local ride-hailing fleets to place tablets inside vehicles as mobile advertising displays in Shanghai part of an extended trial, Chinese media on Monday reported citing several of the company’s partners as saying.

• The ads in addition to a route map and safety reminders display on a tablet which attaches to the back of the front passenger seat headrest, according to observations by a TechNode reporter in Shanghai last week. Restaurant recommendations and tourism pointers are also available via the touch screen.
• Didi procured the displays from a supplier in the southern Chinese city of Shenzhen at a cost of RMB 1,000 (roughly $142) per unit. Installation is not mandatory and ride-hailing drivers will not be charged for use, the report said.
• A trial has reportedly been running since mid-year 2018, but has been deployed on a limited scale and “very likely may end soon,” a person familiar with the matter told TechNode on Tuesday.
• Many local taxi operators and ride-hailing companies such as Yidao have tried this type of advertising and none have profited, the person added.
• A small-scale launch only has the potential to reach a limited audience, making it less attractive to advertisers, another person close to the company said. The initiative is likely to be short-lived as the company will have to bear the significant upfront hardware investment and risk minimal payoff, the person added.
• The company did not respond to questions regarding the size of the hardware purchase and covered areas and cities.

Context: Didi is not the only ride-hailing company looking to make extra cash from ads in a quest for profitability.

• Uber has worked with a New York-based startup Cargo on a “limited pilot” to put ad displays on its cars in Atlanta earlier this year. Drivers who accepted the offer could earn up to an extra $150 per week, according to an Axios report. Screen displays for digital ads have also been deployed in Lyft and Uber vehicles in major US cities by ride-hailing entertainment startup Octopus.
• Ride-hailing giants have been mired in a tide of red ink: Uber lost $6.2 billion in the first half of this year, and expects to turn an adjusted profit in 2021. Rival Lyft also promised profitability at the end of 2021, and last month estimated its net loss will be at least $700 million for all of 2019.

China’s top ride-hailing platform Didi Chuxing said Friday that nearly one million electric vehicles are registered on its platform, and that it is partnering with automakers to develop EVs designed for smart shared mobility services.

Why it matters: Didi is accelerating adoption of electrified cars on its platform, both in response to Beijing’s core initiatives as well as for its own profit growth.

• Fuel costs could potentially be reduced by 65% to offset a 15% additional overall cost associated with EVs, allowing operators to raise their commission rate without affecting driver income, Helen Liu, principal of Bain & Company said in a June interview, citing the case of a full-time ride-hailing driver who travels between 124 and 186 miles on average each day in Shanghai.

Details: Around 967,000 fully electric cars have been registered on Didi’s ride-hailing platforms as of end-June, more than a third of the 2.81 million EVs in the country, Chen Yuhong, a researcher at Didi’s research and development institute, said on Friday at this year’s International Smart Shared Mobility Congress in Guangzhou.

• Didi’s southern territory, including Shanghai, Zhejiang, and eight other provinces, has adopted green energy vehicles more widely than the others, with EVs accounting for more than one fifth of total completed rides in June. In the company’s northern China region, which includes Beijing and 10 provinces, electrified cars only completed 6.4% of rides during the same time frame.
• Guangdong, Zhejiang, and Beijing are the top three regions in terms of EV registration. EVs complete more than 40% of the total trips in four major cities within Didi’s southern territory including Guangzhou, Shenzhen, Hangzhou, and Xiamen.
• EV rides accounted for 14.7% of total completed rides on the platform in June, reflecting “consistent growth” from just under 4% in January last year. The company attributed the growth to lower operational costs, 67% to 81% of gasoline-powered vehicles.
• Chen told TechNode that rather than offering cash incentives, it was promoting EV adoption by improving its business processes and tools to address concerns specific to the auto technology, such as filtering for shorter rides, developing intelligent dispatch algorithms, and creating a comprehensive charging infrastructure map.
• The country’s largest ride-hailing platform is currently working with automakers including Toyota and BYD to develop more cost-effective EV models with enhanced dispatch algorithms specifically for smart mobility services. A company spokesman declined to offer details Friday about launch timing.

Context: Didi is ramping up efforts to meet its goal of registering more than 10 million vehicles on its platform around the globe by 2028, first mentioned by Didi CEO Cheng Wei in April last year.

• Didi’s new investor, Japanese auto giant Toyota, is establishing a joint venture with Chinese EV maker BYD next year as part of a plan to sell 5.5 million “electrified vehicles” globally by 2025, five years ahead of schedule.

Toyota and BYD inch toward formalizing electric vehicle JV

A verified driver on ride-hailing platform Didi registered in the southern Chinese city of Nanjing stabbed his passenger in the arm following an argument, media outlet JSTV reported.

Why it matters: Didi’s safety measures attracted public outcry and government censure last year after two separate female passengers using the platform were raped and murdered by drivers registered under its carpooling service Hitch.

• In the aftermath of the two incidents, Didi suspended the Hitch service and introduced stricter background checks for its drivers. The company also introduced a series of features to aimed at increasing passenger safety.

Details: The incident happened at around 3 a.m. on Nov. 9 after the passenger asked the driver to go faster and the driver refused. The driver told the passenger to leave the car, and the two started to argue outside, which soon escalated into a fight, JSTV reported.

• During the fight, the passenger pinned the driver to the ground, and the driver stabbed him in the right arm with a knife, the report cited the passenger as saying.
• Following the incident, the driver was put into criminal detention, while the passenger was sent to the hospital and discharged on Nov. 11.
• A Didi spokesperson confirmed the cause of the incident to TechNode after checking recordings from the order, saying that the passenger was asking the driver to exceed the speed limit.
• According to a screenshot of the order on Didi obtained by JSTV, the driver is a verified driver with a five-star rating. He has completed more than 10,000 orders prior to the incident.
• A Didi representative covered some of the passenger’s medical expenses but also required him to sign an agreement saying he would not disclose the incident to any media organization, the passenger told JSTV. After the passenger refused, the representative said he would no longer cover any related medical expenses.
• A second representative from the platform, however, told JSTV that they were only asking the passenger not to disclose how Didi deals with the matter.

Context: Last week, Didi announced plans to relaunch Hitch later in November, more than a year after suspending the service.

• Didi’s new rules for Hitch initially barred female users from using the service between 8 p.m. and 5 a.m. the next day.
• Following public backlash criticizing the company for sexist policies, Didi said it would standardize operating hours for Hitch to run from 5 a.m. to 8 p.m. for all users.

Ride-hailing giant Didi has backtracked on plans to impose gender-specific operating hours when relaunching its carpooling service Hitch later this month, following public outcry blasting the company for limiting women’s freedoms.

Why it matters: Didi suspended its Hitch service indefinitely last year following two separate incidents in which drivers on the platform raped and murdered their female passengers.

• The murders sparked outrage from the public and prompted regulators to launch an industry-wide crackdown aimed at improving safety in the ride-hailing industry.
• Shortly after the incidents, China’s transport ministry lambasted Didi, saying the company had “lost control” of its drivers and vehicles.
• The company has subsequently launched and upgraded a series of safety features and introduced more stringent background checks for its drivers.

Didi to restart operations of its carpooling service Hitch

Details: Didi on Wednesday announced that it would relaunch Hitch on a trial basis later this month, more than a year after suspending the service.

• However, while men would be able to use the service between 5 a.m. and 11 p.m., women would not be permitted to hail Hitch rides after 8 p.m.
• The move prompted widespread pushback on social media, with female users calling the practice unfair.
• Responding to the criticism, Jean Liu, Didi’s president, said in a post on microblogging platform Weibo on Wednesday that the current rules for Hitch are “not useful to women,” but added that the trial will function as a safety test.
• A day later, Didi said in a statement that it would standardize operating hours from 5 a.m. to 8 p.m. for all users, thanking netizens for their feedback.

Context: Didi has faced scrutiny in the past for allowing sexist practices to creep into its services.

• In an early iteration of its Hitch service, drivers were able to review passengers, a feature that was often abused to include inappropriate comments about a riders’ body and looks.
• Didi has struggled with the fallout of last years’ murders, pivoting from pushing for growth to an increased focus on safety.
• The focus on safety has had a significant effect on the company, resulting in reported losses of nearly RMB 11 billion ($1.6 billion) in 2018.

Ride-hailing giant Didi will resume operations of its carpooling service Hitch on a trial basis this month, the company announced on Wednesday. The relaunch comes a year after Didi suspended the service indefinitely over safety concerns.

Why it matters: Didi halted its Hitch service last year after two separate incidents involving female passengers using the platform who were raped and murdered by their drivers.

• The first incident took place in May 2018 in China’s central Henan Province, with the second taking place three months later in Zhejiang, on the country’s east coast.
• Didi faced public outcry and government censure after the incidents, leading it to halt the carpooling service.
• The murders led China’s transport ministry to say that the ride-hailing giant had “lost control” of its drivers and vehicles.
• Didi subsequently introduced more stringent background checks for its drivers and underwent a round of restructuring to increase its focus on safety.

Details: Operations of the rebooted service will be limited to seven cities, including Beijing, eastern China’s Nantong and Changzhou, and the northern cities of Harbin and Taiyuan, among others.

• Nevertheless, usage of the platform is limited to between 5 a.m. and 11 p.m. for men and 5 a.m. and 8 p.m. for women. It is unclear how this will be enforced.
• Trips are not permitted to exceed 50 kilometers and are restricted to metro areas.
• The company also announced that it would be piloting a “women’s safety program,” which includes using models that identify high-risk scenarios and trip anomalies. Didi plans to roll out the features to its other services in the future.

Context: Didi has removed more than 300,000 unqualified drivers from its platforms following a government crackdown on the industry in the wake of the murders.

• Jean Liu, Didi’s president, said in July that the company planned to spend an additional RMB 2 billion (around $286 million) on safety enhancements in 2019.
• Didi reportedly lost RMB 10.9 billion last year as a result of subsidies and a clampdown on non-compliant drivers.

German auto giant Daimler is launching a ride-hailing service in China in partnership with Zhejiang-based automaker Geely, aiming to join an already crowded market dominated by Didi Chuxing.

Why it matters: Car manufacturers in China hurt by a slowing auto market are looking to shift into the country’s mobility sector to shore up growth.

• Chinese OEMs are piling into the market. T3, a ride-hailing platform co-developed by FAW, Dongfeng Motor, and Chang’an last month announced it had surpassed 50,000 daily average rides in the eastern city of Nanjing.
• SAIC’s ride-hailing platform Xiangdao in late August revealed daily order volume of 30,000 in its home city of Shanghai nine months after launching its service.
• Didi Chuxing remains dominant, offering more than 27 million rides on average each day.

Details: Geely and Daimler will roll out a premium ride-hailing service called Staride starting in Hangzhou, capital of eastern Zhejiang province, by year-end, said Geely chairman Li Shufu, according to the company’s official WeChat account.

• The two automakers in May set up a 50:50 joint venture (JV) with registered capital of RMB 1.7 billion ($242 million) after reaching an agreement to enhance their “strong position in the mobility market” in late 2018.
• Initially, the platform will feature a proprietary fleet with all new Mercedes-Benz E, V, and S Class vehicles, and will later expand to include electric Geely cars, according to a Financial Times report.
• A Staride app is available on Chinese Android app stores, but is currently being tested internally, according to a notification on the app.
• The size of the fleet and its expansion plan is unknown, but a person close to the JV told TechNode that Geely will be responsible for vehicle scheduling and fleet management, and a former Didi executive was recently hired as CEO of the company.
• A Geely spokesman declined to comment when contacted by TechNode on Monday.

Context: Chinese automakers are looking for ways to tap the ride-hailing market, which is seen as an increasingly important business for traditional automakers.

• Geely was an early mover into ride-hailing with the launch of its Caocao Chuxing service in the eastern city of Ningbo in late 2015. The service is available to users from more than 50 Chinese cities, and averages 1.65 million rides each day, Li said.
• Revenue for China’s largest private automaker declined 11% year on year to RMB 47.5 billion in the first half of the year, while its net profits plunged 40% year on year to RMB 4.01 billion.

China has surpassed the United States as the country with the most unicorns, with 206 privately held tech startups each valued at $1 billion or more, the Hurun Research Institute said on Monday.

The report identified 494 unicorns worldwide as of June 30, 2019.

Why it matters: China and the US are locked in a race to lead in key technology sectors such as artificial intelligence (AI) and cloud computing. Ongoing trade tensions between the two countries have led to the crippling of several Chinese tech startups by a ban on the import and sale of American technology.

“China and the USA dominate with over 80% of the world’s known unicorns, despite representing only half of the world’s GDP and a quarter of the world’s population.  The rest of the world needs to wake up to creating an environment that allows unicorns to flourish in.”

—Hurun Report Chairman and Chief Researcher Rupert Hoogewerf

Details: According to the ranking, the world’s top three unicorns by valuation are from China: Alibaba-affiliate Ant Financial valued at $150 billion, TikTok’s parent company Bytedance worth $75 billion, and ride-hailing giant Didi Chuxing at $55 billion.

• The report named American venture capital firm Sequoia as the most successful unicorn investor with 92 unicorns in its portfolio. Other prominent unicorn investors include SoftBank, Tencent, Tiger, IDG, Goldman Sachs, and Alibaba.
• The US trailed China by a small margin, clocking 203 unicorns.
• In China, e-commerce has produced the most unicorns with 33 startups in the sector. Fintech and media and entertainment are also fertile breeding grounds for unicorns.
• The cumulative valuation of China’s fintech unicorns totaled $262 billion, more than four times than that of the US.
• Chinese startups SenseTime, valued at $6 billion, and Megvii, valued at $4 billion, were among the four highest valued AI unicorns worldwide.
• This is the first report on global unicorns released by the Hurun Research Institute.

Context: China is eager to transform itself from the world’s manufacturing center into an innovation hub on par with the most technologically advanced countries, and it is looking to do so by boosting its technology sector.

• In July, China debuted a Nasdaq-style STAR Market technology board on the Shanghai Stock Exchange, which aims to make China a more attractive destination for tech startups looking to float shares.
• The Chinese government is pouring money into fostering tech startups. The Ministry of Science and Technology runs several tech-focused incubation programs and funds.

Chinese ride-hailing giant Didi Chuxing is opening up its significant stores of transit data with the release of two major datasets in order to improve understanding of transport patterns and optimize infrastructure investments.

Why it matters: The move is likely to win the company goodwill from city officials after attracting heightened scrutiny from authorities, especially over the past year. Machine-learning applications, largely driven by data sharing, play a critical role in resource utilization and planning safer, smarter transport networks.

• Didi in late 2017 first launched its GAIA Initiative, a global research platform under which scientists can apply for access to anonymized data to explore traffic solutions.

Detail: Didi will make available two of its anonymized historical TTI (Travel Time Index) datasets which index urban congestion, gathered from vehicles on its platform, Didi CTO Zhang Bo announced Friday at the China National Computer Congress summit in Suzhou.

• The release contains traffic congestion indices, calculated using passenger trip information, as well as the average speed of motor vehicles on Didi’s platform over the past year in six Chinese major cities: Shenzhen, Chengdu, Xi’an, Jinan, Suzhou, and Haikou.
• The other dataset includes detailed historical trip-level data, namely anonymized start and end points and route information from Didi’s Express and Premier service tiers for a two-month period in Chengdu and Xi’an in late 2018.
• The ride-hailing giant said it has partnered with governments from more than 20 Chinese cities to provide innovative solutions for transport and traffic management, such as smart traffic signaling technologies. The company said adjusting the timing of more than 2,000 traffic lights across the country reduced congestion by 10% to 20% on average.
• Didi was not immediately available for comment when contacted by TechNode on Monday.

Ride-hailers may face app store delisting over illegal drivers in Shanghai

Context: Didi is the not the only company seeking to play an important role in a smart transportation system built around connected autonomous vehicles.

• Uber in early 2017 launched an online website called Movement using data and tools which allowed users to measure travel times between points in cities including Washington D.C., Sydney, and Manila. It was updated two years later with a feature allowing users to track vehicle speeds down to the street level in a total of 38 cities.

Autonomous driving startup AutoX announced on Saturday that it will launch a robotaxi pilot in Shanghai, the latest Chinese company to pass this particular milestone in the development of self-driving vehicles and one that comes on the heels of a similar announcement by heavyweight rival, Didi.

Why it’s important: Chinese ride-hailing giant Didi announced Friday that it would launch a robotaxi fleet of 30 driverless vehicles on the outskirts of Shanghai’s Jiading district, the same area that AutoX will be conducting its tests.

• Didi said it will start trial operations with a mix of driverless and human-piloted vehicles to handle complex traffic and road conditions in the city. It was awarded road testing permits by the city government two days before the announcement.
• The ride-hailing giant did not specify a timeline for the launch or disclose where in the district it would be testing cars, but did say that it expects the longest trip to exceed 10 kilometers (around six miles).

Detail: AutoX will deploy 100 autonomous vehicles in a pilot area of 150 square kilometers in Anting Town, which takes up nearly a third of Shanghai’s northwestern Jiading district.

• The pilot area contains residential zones, shopping centers, and office parks. Jiadiing is the city’s automotive center, housing offices and manufacturing plants for major automotive players including China’s largest OEM, SAIC, and its joint venture with Volkswagen.
• AutoX also plans to set up its regional headquarters in Jiading, and expects the driverless taxi service will be available to residents as early as the end of this year.
• The California and Hong Kong-based AV startup has been testing its vehicles in more than 10 locations worldwide, including San Jose in Silicon Valley and the Nanshan district of Shenzhen, located in southern Guangdong Province.
• AutoX’s applications for government permits allowing autonomous vehicle testing in Shanghai are on track, according to an announcement sent to TechNode on Monday.

Context: Chinese AV companies are racing to launch robotaxi services in an effort to lure investors in a shrinking investment market.

• China’s AV frontrunner Pony.ai said earlier this year that it will expand its robotaxi fleet from dozens to 100 vehicles by the end of this year. The company has offered over 12,000 trips with its driverless vehicles in the Nansha district of Guangzhou in Guangdong Province since late 2018, and unveiled a partnership with Toyota on a driverless mobility service last month.
• Baidu has also said it will roll out its robotaxi pilot service, Apollo Go, with 100 FAW-made vehicles in the central city of Changsha by year-end.
• Guangzhou-based WeRide has partnered with the city’s largest cab operator, Baiyun Taxi Group, in an effort to provide intelligent mobility service in the city next year.
• The undisputed leader in autonomous driving, US company Alphabet’s Waymo, began piloting self-piloted ride-hailing services in December.

Ride-hailing giant Didi will launch a pilot robotaxi fleet in Shanghai, allowing passengers to book rides in autonomous vehicles through its app, the company said on Friday.

Why it matters: Didi is the latest tech firm to announce plans to test a fleet of autonomous taxis in China, following similar initiatives by search giant Baidu and self-driving startup Pony.ai.

• Didi this month spun off its self-driving unit. The move is seen as an effort to refine its business structure before a rumored initial public offering.
• Didi CEO Cheng Wei said is an internal meeting in February that the company’s primary focus is ride-hailing, and that non-core businesses would be merged or cut altogether.

“We believe that giving ordinary citizens access to large scale, shared autonomous fleets is key to achieving our shared goal of safety, efficiency, and sustainability for future cities.”

—Didi CEO Cheng Wei in a statement on Friday

Details: The pilot program will feature 30 different models of Level 4 autonomous vehicles—cars that are fully driverless in most scenarios, the company said.

• The vehicles will be available in Shanghai’s northwestern Jiading District, the city’s automotive center.
• The company said the vehicles would be deployed in a mixed dispatching model, in which autonomous vehicles and human-driven cars will pick up passengers depending on road conditions.
• Didi was awarded pilot licenses by the Shanghai government on Wednesday, but did not disclose when the robotaxi pilot would kick off.
• The company says it has the potential to become the first company to scale robotaxi deployment in China.

Context: With around 550 million users, Didi is the largest ride-hailing company in China.

• The company has seen its share of issues. Two female Didi passengers were murdered by their drivers on separate occasions last year. Robotaxis could reduce this risk.

In spite of no clear timetable for profitability, ride-hailing companies could significantly reduce costs from investing in electric vehicles fleets, as growth continues to decelerate in China’s mobility market, according to a recent report by management consultants Bain & Company.

Why it matters: After booming for three years, China’s ride-hailing market has entered a sharp and unexpected downturn amid rider safety concerns and growing regulation from local governments. Bain expects the downward trend would continue over the next two years.

• China’s ride-hailing sector witnessed a substantial decrease in annual growth, from 39% to 25%, with a gross merchandise volume of $40 billion in 2018.
• Bain estimates that year-on-year growth will be further lowered to less than 5% in 2019, and then regain momentum ranging from 10% and 15% in 2021 with the potential return of carpooling services.

Details: Ride-hailing companies could see as much as a 65% reduction in fuel costs by switching to electric vehicles, according to the report.

• The benefit is also expected to more than offset a 15% increase in rental costs, resulting in a $380 increase in monthly income for a driver who travels distance between 200 and 300 kilometers each day.
• The cost reduction would make a direct contribution to profitability, though it depends on how platforms and drivers “divide the cake,” said Helen Liu, principal of Bain & Company.
• China also boasts the world largest charging infrastructure with over 1 million installed EV chargers as of the end of June. Beijing has already set a target of 4.8 million charging piles by 2020.
• As regulations tighten, Bain suggests ride-hailers create standardized operations for improving efficiency and pursue growth in lower-tier cities.

Context: China’s once red-hot mobility industry is shifting to a lower gear. Ride-hailers are struggling to find ways to break as stiff competition and government control restrict market leaders’ flexibility in pricing.

• Ride-hailing giant Didi Chuxing is accelerating its EV push in tie-ups with China’s largest electricity provider State Grid and UK energy giant BP. The company now has more than 600,000 electric cars operating on the platform and Didi CEO Cheng Wei hopes to expand that number to over one million by next year.
• The ride-hailing markets in first-tier cities are highly saturated. Lower-tier cities are the next growing market. That is why Chinese OEMs make a foray into the business in these cities, said Liu, who anticipates a renewal of street fights like the earlier ones seen among Didi, Kuaidi, and Uber.
• China’s mobility market is growing slower than expected, as Bain anticipates a market size of $60 million by 2021, compared with the previous estimate of $72 billion by next year.
• Only the instant delivery sector increased steadily by 40% last year, while the annual growth of bike rentals plummeted from 700% to a merely 12% in terms of GMV.

Meituan Dianping has started hiring for its new mapping and navigation services unit, a move that could help the services giant to increase its presence in ride-hailing and unmanned deliveries.

Why it matters: Mapping has become strategically important for Chinese life service platforms with ambitions of expanding into mobility.

• The move will also help with developing IT infrastructure for existing restaurant reviews and food delivery services, as well as connected driving in the long term.
• Meituan launched its on-demand driverless delivery solution in July last year and runs trial services with delivery bots in selected office complexes and campuses in Beijing, Shanghai, and Shenzhen.
• Caocao, Meituan’s ride-hailing venture with Geely, has amassed around 400,000 trips a day. The platform lags far behind Didi, which books 30 times as many fares daily.
  

Details: Meituan posted a batch of new job openings this week specifically targeting digital mapping expertise. Positions cover web development, software testing, and path algorithms.

• All the jobs are listed under a new service called “Meituan Maps.” A company spokeswoman confirmed that the company has been working on the project recently.
• The move comes just a month after the company hired Zhang Shaowen, a former intelligent navigation general manager and chief web architect at Baidu Maps, to serve as tech leader for Meituan’s location-based services (LBS) team.
• The services giant set up the LBS team late last year following corporate restructuring. The unit includes ride-hailing, and traffic data management.

Context: China’s tech giants are racing to transform into one-stop service aggregation platforms.

• Alibaba’s online mapper AutoNavi, also known as Amap, reportedly booked an average of 700,000 ride-hailing orders per day in July, making it China’s second-largest player in the sector.
• Meituan launched its own branded ride-hailing services in February 2017. The service was combined with its life services app in June this year, months after it began allowing users to access third party services such as Shouqi.

Didi Chuxing has been ordered to pay fines totaling RMB 5.5 million ($780,000) for failing to weed out unqualified drivers on its platform in Shanghai, as authorities in the eastern Chinese city harden their stance on the ride-hailing sector.

Why it matters: Shanghai’s local government has adopted a tougher stance on ride-hailers in recent months after years of relatively uncapped expansion. Regulators warned that more severe punishments could come if they don’t comply, including app removals from online stores and business suspensions.

• Scrutiny of the local sector intensified after pedestrians were injured in June when an unlicensed  Didi driver attempted to flee from police.

Details: Authorities found that as many as eight out of ten locally registered Didi drivers fail to meet regulatory standards in a series of spot checks last month. Around 15% of Meituan’s ride-hailing drivers were also found to be working illegally. Didi will pay RMB 5.5 million in penalties while Meituan has been fined RMB 1.5 million for leaving illegal drivers on its platform.

• Regulators have raided 14 ride-hailing companies over compliance issues, accusing them of turning a blind eye to disqualified drivers and faking operations reports.
• The crackdown has resulted in the number of Didi vehicles in circulation in Shanghai falling by around one-sixth from 120,000 in June to less than 100,000 as of the middle of last month.
• Didi pledged to remove around one-third of its registered drivers in the city to comply fully.

Context: China’s transport ministry rolled out a new policy in January requiring drivers to obtain special permits for ride-hailing, in addition to their driving licenses.

• The municipal governments of Beijing, Shanghai, and Tianjin last year strengthened implementation of regulations stating that only people registered in the respective cities could pick up ride-hailing fares there. The move came after the high-profile murders of two female passengers by Didi drivers in 2018.
• China is home to roughly 31 million cab drivers as of late last year, but only 1% of them, that is about 340,000 drivers, are legally qualified for ride-hailing, reported Chinese media, citing figures from the China Academy of Information and Communication Technology.

Didi Chuxing had spun off its autonomous driving unit into an independent company, it announced on Monday. The move may be part of efforts to refine its business structure ahead of a much-rumored IPO.

Why it matters: Didi is sharpening its focus on ride-hailing as well as vehicle-related services, while bringing other money-bleeding units under control following a reportedly RMB 11 billion ($1.5 billion) annual loss.

• Didi CEO Cheng Wei said in an internal meeting in February that ride-hailing is the company’s top priority this year and non-core businesses would be slashed or merged, while he set out plans to lay off 15% of staff.
• The company suspended the development of its online travel agency late last year, and the expansion of its food delivery business was paused after running for a mere six months.

Details: Didi CTO Zhang Bo will act as CEO to lead the autonomous driving while Meng Xing, former executive director at investment firm Shunwei Captial, will be COO, according to a company announcement.

• Didi entered the driverless business in 2016 and has over 200 employees working on developing autonomous driving technologies including HD mapping in China and the US.
• Didi’s self-driving push has had less success than its ride-hailing. It received permits for testing vehicles from regulators in both Beijing and California last year, though it only deployed two vehicles covering 78 kilometers on the streets of the Chinese capital last year.
• Uber went public one month after it divested its cash-burning self-driving unit with a $1 billion investment from Toyota Motors this April.
• Didi did not respond to comment when contacted by TechNode on Monday.

“The new company looks forward to further strategic collaborations with automakers and industry partners to promote the application of self-driving technologies in people’s everyday lives.”

—Zhang Bo, CTO of Didi Chuxing

Context: Didi is the latest Chinese company seeking external investors to help share the increasing cost of developing autonomous vehicles.

• Ford and Volkswagen AG announced last month that the two will jointly develop electric and self-driving vehicles. VW will invest $3.1 billion into Ford’s self-driving unit Argo AI and the collaboration is expected to save huge amounts of money for each company.
• Apple June acquired Mountain View-based Drive.ai, one of the promising AV startups was once valued at $200 million in 2017, before it would have shut down the business in late June.

China’s largest search engine Baidu and ride-hailing platform Didi have beefed up their anti-graft campaigns, dismissing more than 40 employees and reporting wrongdoings to the police.

Why it matters: Increasing numbers of Chinese tech firms have launched anti-corruption campaigns as they seek to mimic the Chinese state’s approach to misconduct.

• Since 2013, Chinese president Xi Jinping has led an extensive crackdown on corruption that has targeted everyone from members of the government to corporate figures.
• Apart from Didi, companies including lifestyle services giant Meituan, dronemaker DJI, e-commerce company JD, and used-car trading platform Guazi have sought to weed out graft from within their ranks.

“Any employee who violates the law will not be tolerated. Serious cases will be sent to the public security department.” —Baidu wrote in a leaked email last week. The company confirmed the authenticity of the email to TechNode on Monday.

Details: Baidu dismissed 14 employees that were allegedly involved in 12 cases of internal corruption, the company said in its email. Allegations include bribery and infringing on trade secrets, among others.

• Meanwhile, Didi laid off 30 members of staff for their alleged involvement in bribery and collusion during the first half of 2019, according to a statement on popular messaging app WeChat.
• In one case, a service consultant helped drivers that did not meet the company’s requirements register on the platform.
• Employees from both Didi and Baidu fabricated expenses for reimbursements, the companies said.

Context: To encourage honest work, JD earlier this year went as far as sending employees on a prison tour in Beijing.

• Didi employees were involved in 60 cases of corruption in 2018, the company said in January.
• Drone maker DJI made headlines this year after it announced it was investigating 45 employees for graft. The company said it could lose as much as $150 million from cases of internal fraud.
• Alibaba, Tencent, and Xiaomi have launched similar investigations.
• Chinese telecommunications giant Huawei is also not immune. In 2017, the company’s executive vice president of its consumer business group in Greater China was investigated for accepting bribes.

Didi Chuxing has joined forces with UK energy giant British Petroleum to build electric vehicle charging infrastructure in China, months after a breakdown in cooperation with domestic players.

Why it matters: The partnership marks an acceleration in the Chinese ride-hailer’s efforts to develop services for EV drivers as sales continue to boom.

• The collaboration is the latest in a series of moves by Didi to move aggressively into the market.
• Last month, Didi formed an alliance with two state-owned firms to manage charging infrastructure in the southern island province of Hainan, where there are plans to increase charging piles six-fold to nearly 30,000 next year. 

Details: The two companies will set up a new joint venture in China to offer charging services not only to Didi drivers but to millions of general EV owners as well.

• BP’s first Chinese charging station in Guangzhou has already been connected to Xiaoju Automobile Solutions, Didi’s mobile auto-related services platform for charging, leasing, maintenance, and repair.
• The two parties expect to scale up the network after the JV is formed.

“We look forward to combining our strengths to create a robust EV charging network for China, promote the growth of the new energy automotive industry, and provide a better experience for car owners across the country.”

— Cheng Wei, Didi Chairman and CEO

Context: Didi made a solid entry into the EV charging business by forging alliances with Teld New Energy, Star Charge and iCharge as early as 2016. However, all three companies ended their cooperation in April and left its platform.

• Didi CEO Cheng Wei first disclosed plans for a Didi charging network in late 2017 with the aim of providing support for over one million EVs on its platform by next year.
• The charging service launched in early 2018 and is available in more than 20 cities including Beijing, Shanghai, and Guangzhou.
• Teld New Energy, Star Charge and iCharge operate more than 220,000 public charging piles in total as of May this year, more than half of the total supply nationwide, according to the China Electric Vehicle Charging Infrastructure Promotion Alliance.
• Star Charge last month formed partnerships with major OEMs including Volkswagen, VW’s China partner JAC, and state-owned FAW to install fast-charging facilities at its 30,000 stations.

Ride-hailing firm Didi and social media giant Tencent will set up a cybersecurity lab to deal with online and offline threats that could potentially affect their operations amid intensified government scrutiny.

Why it’s important: China is home to the world’s largest internet population. As the domestic internet has flourished, so too has an illicit market for personal data, which bad actors have used to conduct fraud, identity theft, and blackmail.

• The Chinese government has attempted to deal with cyber threats and data breaches by imposing numerous laws and regulations, but the market for online data continues to thrive.
• Didi has struggled to regain its footing after a spate of safety incidents last year.

Details: Didi and Tencent announced the partnership on Tuesday, which will focus on information security, business security, and protection for emerging technologies including connected and autonomous vehicles.

• The research will include fields such as facial recognition and anti-fraud protection. Didi has already implemented facial recognition checks for drivers on its platform.
• Didi’s and Tencent Security will work together on the research.
• Earlier this year, the company faced incidents of fraud after a syndicate that used data stolen online and fake payment credentials sold rides online without paying Didi for the services.

Context: The Chinese government is intensifying its push to improve data protection in the country, calling for companies to answer for offenses such as overcollection of personal information as well as data breaches.

• Didi faces issues that are at the nexus of the online and offline worlds. The company is required to ensure the safety of its users during rides and also safeguard online data generated by the use of its services.
• Last year, two passengers were murdered b their drivers on separate occasions while using Didi’s carpooling service Hitch. During one of the incidents, Didi’s facial recognition technology used to identify drivers proved to be ineffective.
• The company subsequently suspended its Hitch service but has recently shown it was looking for ways to reintroduce the service.
• Didi said it would invest another RMB 2 billion (around $290 million) on safety this year. The company has set up a safety team of 2,500 people.
• Online and offline protection is of existential importance to Didi, as the government toughens its stance.

Didi Chuxing on Thursday announced that it has closed a $600 million investment deal from Toyota Motor Corporation to jointly offer auto services for ride-hailing drivers on Didi’s platform.

Why it matters: The deal marks a big step forward for Didi, which seeks closer ties with traditional automakers to extend its dominance in the Chinese ride-hailing market. Other players across mobility and internet sectors, from OEMs to bike-rental firms to lifestyle platforms, are taking aim at the ride-hailing market in direct competition with Didi.

• Didi began setting up its mobility-automotive industry alliance in April 2018, and has wooed upwards of 30 OEMs and key suppliers worldwide in an aim to offer shared mobility services with new energy vehicles.
• State-owned automakers FAW, Chinese largest private car company Geely, and German automaker Volkswagen are some of its allies.

Details: Toyota, Didi, and GAC Toyota Motor will establish a joint venture offering car leasing, fleet management, and other vehicle-related services, said a Didi spokesman. Guangzhou-based GAC Toyota itself is a car manufacturing company formed between automakers GAC Group and Toyota in 2004.

• The two companies are also piloting services to drivers including car maintenance and self-driving guidance based on Toyota’s proprietary mobility services platform (TMSP), a form of information infrastructure that supports various mobility services.
• Toyota and Didi first partnered in January 2018, when the Japanese auto giant unveiled “e-Palette,” a driverless all-electric concept vehicle designed for a range of Mobility as a Service (MaaS) businesses. Didi was one of the partners in testing vehicles for a variety of functions, including on-demand delivery and carpooling, apart from Amazon and Pizza Hut.
• Speculation about Toyota’s investment in Didi has been circulating since May this year. Didi is now valued at about $62 billion.

“I am delighted that we are strengthening our collaboration—which utilizes Toyota’s connected technologies and next-generation BEVs—with DiDi … Looking ahead, we will work with DiDi to develop services that are more attractive, safe and secure for our customers in China.”

—Shigeki Tomoyama, Toyota executive vice president

Context: Global automakers and Chinese ride-hailing firms are shifting focus to comply with the central government’s goal of one electric car out of every five vehicles sold in 2025.

• Toyota said in June that it expects to sell 5.5 million electrified vehicles worldwide in 2025, moving up the target date by five years. This was followed by the partnership with China’s largest EV maker BYD earlier this week, with an aim to launch 10 battery electric vehicle models to the Chinese market over the next five years.
• T3 Chuxing, a Chinese ride-hailing company co-established by three state-backed automakers, said Monday that it plans to purchase 300,000 cars over the next three years, and its fleet will consist entirely of electrified cars.
• Beijing municipal government will replace all gas-powered taxis with electric cars over the next two years. More than 20 Chinese municipal governments are following suit, including the southwestern Chinese city of Chengdu and Xi’an, capital of western Shanxi province.

T3 Chuxing, a Chinese ride-hailing platform developed by three state-backed automakers, on Tuesday launched its business in the eastern Chinese city of Nanjing, in what many see as the most significant challenge yet to ride-hailing giant Didi’s near-monopoly over the industry.

Why it matters: T3, comprised of FAW, Dongfeng Motor, and Chang’an, are joining the hordes of Chinese car manufacturers flocking to the ride-hailing market, a component of the growing shared mobility sector, in an open challenge to market leader Didi Chuxing.

• Last month, state-backed GAC Group launched a ride-hailing platform named OnTime in Guangzhou with immediate plans to expand into the Greater Bay Area, following the launch of Xiangdao, Chinese largest automaker SAIC’s mobility service.
• So far at least 20 companies, including Geely, Shouqi, and BMW, are offering ride-hailing in China.

Details: T3 will expand its ride-hailing service to six major Chinese cities including Chongqing and Wuhan by year-end, and further to most provincial capitals by the end of 2020.

• T3 Chuxing is a business-to-consumer model, operating proprietary electric vehicles with high-quality drivers hired and managed by the platform as opposed to rivals which primarily use self-employed drivers, said the company.
• The company said that it will not charge extra fees during peak times, and all the drivers on its platform will be strictly in compliance with government regulations.
• It also plans to initially offer “a fair number of subsidies” for user acquisition, but has said that burning cash will not happen since “that would be stupid behavior,” Caixin cited Cui Dayong, CEO of T3 and a former executive at FAW, as saying.
• Backed by Chinese internet giants including Suning, Alibaba, and Tencent, T3 has said that it will lead the market in smart mobility by 2025, with an offering of more than 1 million cars and related services such as charging, maintenance, insurance, and car rental.

T3 was not immediately available to comment when contacted by TechNode on Tuesday.

Context: The Chinese mobility service market has grown at double-digit rates over the past several years, and is estimated to reach $656 billion by 2030, as is shown in reports from consulting firms McKinsey and PwC.

• Shifting into ride-hailing is how OEMs are responding to mass adoption of driverless mobility; in fact, joining the ride-hailing industry will be critical as the broader mobility industry shifts, according to Cui.

“If automakers just produce vehicles and don’t offer services to consumers by that time, it would be a huge shock to the entire [auto] industry.”

—Cui Dayong, T3 Chuxing CEO

Didi Chuxing said Monday that it will set up a joint venture (JV) in the Middle East in a partnership with local investors, as the company expands its global footprint.

Why it matters: The deal is Didi’s latest push into countries within the Middle East and North Africa two years after it invested in the Dubai-based online taxi service platform Careem.

• The Chinese ride-hailing giant has been actively expanding the overseas market amid tightened regulations and rising costs in its home market. The company said earlier this month that it expects to invest RMB 2 billion ($300 million) to address safety issues on its ride-hailing platform in China this year.

Details: Didi will form a JV headquartered in Abu Dhabi in a partnership with Symphony Investment, an Asia-focused investment firm mainly funded by Mohamed Alabbar, chairman of Dubai real estate giant Emaar Properties.

• At the current stage, the JV will deliver products and services related to the sharing economy with an aim to “contribute to economic collaboration” between China and the region, according to a statement.
• The company said that Abu Dhabi’s state investor Mubadala Investment is also considering joining the partnership. Mubadala had reportedly invested in Didi in late 2017, and was a major sponsor of SoftBank’s $100 billion Vision Fund with a commitment of $15 billion earlier that year.
• It is unknown whether Didi will expand its presence launching ride-hailing or bike-rental services under its own brand in the Middle East. A Didi spokesman declined to comment when contacted by TechNode on Tuesday.
• Didi and Symphony Investment signed the agreement on Monday at the UAE-China Economic Forum in Beijing. Chinese vice minister of commerce Yu Jianhua and Sultan Bin Saeed Al Mansoori, minister of economy of the UAE, attended the meeting.

Context: The Chinese ride hailing giant has invested or partnered with seven overseas rivals, including Uber, Lyft, and India’s Ola, since it embarked on its global business expansion in 2015.

• Didi acquired 99, a ride-sharing company in Brazil in a $1 billion deal in early 2018, and just launched its ride-hailing services in Chile and Colombia last month.

Chinese ride-hailing firm Didi Chuxing is reportedly raising up to $2 billion from investors while bike-rental company Hellobike is seeking a $400 million cash infusion, the latest in a series of moves which signal that the two mobility firms are preparing for escalating competition.

Why it matters: Didi and Hellobike are now the biggest players in China’s ride-hailing and bike-rental markets, respectively, and they are increasingly moving onto each other’s turf.

• One of the world’s biggest startups, Didi formed a new business group including bike-sharing and motor scooter rentals in June in an aim to expand into the two-wheeler market.
• Hellobike launched a ride-hailing service on its app at the beginning of this year, and on May 21 said it had upwards of 2 million registered drivers across 300 Chinese cities in trial operations.

Both Didi and Hellobike declined to comment on funding matters when contacted by TechNode on Thursday.

Details: Didi intends to sell additional shares at the same price as when it raised $500 million from US travel firm Booking Holdings in July 2018, the Wall Street Journal reported citing a person familiar with the matter. Hellobike’s new round of funding totaling $400 million is led by Ant Financial, Chinese media said Wednesday.

• Didi will be valued around $62 billion after the deal, up from $51.6 billion as of December, according to securities filings from Uber earlier this year, making it the third-largest privately owned tech company worldwide after Ant Financial and Bytedance.
• Hellobike will have a paper valuation of $5 billion after the funding round. The company secured five rounds of investment totaling RMB 20 billion in 2018, and is backed by Ant Financial and investment firms Primavera Capital Group and GGV Capital.

Context: Chinese ride-hailing and shared-bike markets are reshuffling as investment capital and regulations tighten. Big industry players are seeking new growth opportunities to increase their presence.

• The next stage of growth for ride-hailing apps may quickly evolve into a battle for traffic. Didi this week launched an open platform allowing users to book rides from rival companies amid driver shortages and increasing costs, following life services super-app Meituan in April and three state-backed automakers.
• Alibaba-backed Amap has offered similar services with an aggregation model since July 2017. It reportedly has 700,000 ride orders a day, around 3% of the number of trips on Didi’s platform every day.
• Hellobike continues to push its shared electric scooter business forward, working with Ant Financial and Chinese battery maker CATL to build battery swapping infrastructure nationwide. It so far already provides battery charging services to 2 million e-bikes.

Ride-hailing platform Didi will allow users to book rides operated by other companies within its app, the company said in a statement on Monday. The move follows Meituan’s recent foray into ride aggregation services.

Why it matters: The new service includes cars from platforms operated by state-backed automakers FAW, GAC, and Dongfeng Motors. Didi says that it currently has around 550 million users in the country.

• Chinese carmakers are increasingly entering the ride-hailing market, as auto sales in the country plummet amid a slowing economy.
• Car sales fell by more than 10% in the first half of 2019 compared with the same period a year earlier.

Details: Didi will help auto manufacturers through its artificial intelligence (AI) capabilities and operational experience to build their capacity operating connected vehicles, the company said in its statement.

• Didi said last month that it was looking to expand its partnership with GAC to include ride-hailing operations and autonomous vehicles.
• The company has also invested in GAC’s ride-hailing platform OnTime.

Context: In May, lifestyle services company Meituan, which runs its own ride-hailing platform, opened its app up to companies including Shouqi Limousine & Chauffeur, Caocao Chuxing, and Shenzhou. Didi was not included in the service.

• Meituan had been running a trial of the operation in Nanjing and Shanghai. The company later expanded the service to cities including Suzhou, Hangzhou, and Ningbo, as well as Xi’an, Chengdu, Wuhan, and Shenzhen.

Shouqi Limousine & Chauffeur, a ride-hailing service backed by state-owned transport company Shouqi Group, expects to make a profit by the end of this year, CEO Wei Dong said on Wednesday.

Why it matters: If Shouqi’s forecast holds true, China’s second largest ride-hailing service may be the first in the industry to break even.

• Global ride-hailing giants, including Didi, Uber, and Lyft, are struggling to turn their popularity into profits. Lyft reported losses amounting to $911 million in 2018, while Didi reportedly suffered a loss of nearly RMB 10.9 billion (around $1.48 billion) during the same period.
• Shouqi secured RMB 600 million in a Series B in late 2017, followed by another RMB 700 million led by Baidu and Nio Capital, an investment firm founded by Chinese EV maker Nio.

Details: Shouqi is already profitable in Shanghai and Shenzhen, and its businesses in cities including Beijing and Guangzhou are nearing a break-even point, Wei said Wednesday in a letter sent to employees.

• The company attributed the achievement to its high-end positioning and quality services. It says it is China’s second-largest player with more than 53 million registered users in upwards of 70 domestic cities. All the drivers on its platform which services cities including Beijing and Nanjing are regulation-compliant, Wei added.
• Shouqi ranked a distant second with 3.3 million monthly active users in the Chinese ride-hailing market, followed by Geely-backed carpooling service Caocao with 2.5 million users, and Uber with around 960,000 as of end-May, recent figures from market research firm Analysys show. Didi dominates the market with 75.2 million active users.

A Didi executive said on Wednesday at that the company has launched virtual banking services to its drivers and passengers in Brazil as the company expands in Latin America.

Why it matters: The Beijing-based ride-hailing giant is expanding its business to international markets such as Southeast Asia, Japan, and Latin America, the major fronts in its competition with Uber.

• Uber CTO Thuan Pham said on Tuesday to an audience at the RISE Conference in Hong Kong that the competition with Didi is healthy and necessary. “If you don’t have competition, then you can become complacent because there’s no competition to challenge,” he said.
• Zheng Bu, chief security officer and vice president of international business technology at Didi, agreed and added that competition spurs the company to seek out different problems that users and drivers are experiencing.

“In some of the countries or regions, our peers are already there. But there are still many user pain points waiting for us to solve. So we go there and address the local people’s pain points.“

— Zheng Bu, Didi’s chief security officer

Details: Didi said that many people in Brazil don’t have a bank account so drivers and passengers cannot make online transactions with the ride-hailing platform. Zheng said the company offers virtual banking services to drivers by providing them with a MasterCard debit card, called the 99 Card.

• Drivers in Brazil get a 99 Card immediately after registering. The bank card allows drivers to receive income from their daily rides, as well as withdraw cash or make payments.
• Didi also introduced Didi Cash, an e-wallet that allows riders to top up their Didi account through a partnership with local convenience stores.

Context: In Brazil, the most populous country in Latin America, around one-third of adults were unbanked as of end-2017, according to a World Bank report.

• “In Brazil, there are many people who can drive, but they are not able to become Didi drivers mainly because they are unbanked. So we went ahead and started to offer banking services to them,” said Zheng.
• Didi acquired control of Brazilian ride-hailing startup, 99, in January 2018, and continues to offer its service in Brazil under the 99 brand, said Zheng.

Didi announced on Monday that it will raise ride fares in the capital city of Beijing beginning July 11 to attract more qualified drivers as shortages become a major concern for ride-hailing services.

Why it matters: Didi’s challenges mount as competition intensifies and regulation remains strict, prompting concerns that it will further cede share to other players.

• The Chinese ride-hailing giant spent nearly a third of its commission revenue on driver subsidies in the fourth quarter of 2018.
• However, around a fifth of total ride demand on its lower-cost Express ride-hailing service goes unmet on weekday mornings in Beijing due to labor shortages, Didi said in an announcement.

“The disparity between supply and demand in Beijing has grown severe despite taking a series of measures to ease the situation.”

— Didi announcement

Details: Base fares for Beijing riders will increase RMB 1 to RMB 14 (around $2) during morning and evening peak times, as well as for late night service.

• Per-kilometer rates will increase to RMB 1.8 from RMB 1.6 during the morning rush hour, and late-night riders will pay a more than 30% premium to RMB 2.15 per kilometer. The base charge during off-peak periods (10 a.m. to 5 p.m.) will remain unchanged.

Context: Chinese ride-hailing companies have shifted focus from competing for users to attracting qualified drivers, a limited resource in many cities, according to a Jiemian report citing Wei Dong, CEO of state-owned ride-hailing service Shouqi.

• Chinese regulators began enforcing rules on legally qualified drivers following two separate murders of female passengers by Didi drivers. The city governments of Beijing, Shanghai, and Tianjin all began requiring that only drivers with identity cards for each city could drive for ride-hailing services beginning in 2016.

Didi Forms Electric Vehicle Joint Venture With Hainan State Firms – Caixin Global

What happened: Ride-hailing giant Didi and two state-owned firms have set up an electric vehicle services joint venture (JV) in the southern island province of Hainan. The new company, which also includes a subsidiary of China Southern Power Grid (CSPG) and an investment branch of the Hainan government as partners, will lease and sell electric vehicles (EV), and manage charging infrastructure.

Why it’s important: Hainan hopes to become a trailblazer in EV sales and production, even going as far as planning a province-wide ban on fossil fuel-driven vehicles by 2030. Meanwhile, Didi has been forging partnerships to give its drivers access to more charging facilities. CSPG has invested more than RMB 3 billion (around $436 million) to set up 23,000 charging outlets in the region. Another 12,000 are expected to go online by the end of 2019. China leads the world in terms of access to EV charging facilities, according to consultancy firm Alix Partners. The country was home to seven vehicles per charger in 2018, compared with the nearly 20 cars for every pile in the US.

Didi will spend another RMB 2 billion ($300 million) on safety improvements this year including driver management and customer service, as it continues to go “all-in” on keeping users safe.

The company “works day and night” to be an open and transparent platform and welcomes public scrutiny, President Jean Liu said at Didi’s first media day since the murders of two users of its carpooling service Hitch last year.

The ride-hailing giant has removed more than 306,000 unqualified and fraudulent drivers from its platform since the incidents and set up a special safety team of more than 2,500 workers. It has also brought in 9,000 customer service staff to handle 300,000 daily calls on average.

In addition, 99% of cars are now equipped with audio recording capabilities and one out of five are monitored with onboard cameras following a trial project. The company plans to increase the coverage to over half by the year-end, and will pay the majority of costs incurred, according to Vice-president Lai Chunbo. The encrypted recordings, only accessible to Didi’s safety team and law enforcement, are deleted with seven days of each fare.

Didi invested heavily following the incidents amid public outcry and intense government scrutiny, making a monumental shift in focus from growth to compliance. The company reportedly suffered a loss of RMB 10.9 billion for last year, amid continued driver subsidies and a clampdown on non-compliant drivers.

China’s ride-hailing landscape has changed greatly over the past year, with dozens of new players, including tech companies and automakers, piling in to get a piece of the potentially lucrative market. Life service platform Meituan began offering ride-hailing in late 2017, followed by Ant Financial-backed Hellobike a year later. Tencent partnered with GAC Group to launch Ontime in late June.

Didi has moved quickly to compete with rivals and introduced third-party ride-sharing services in May. Senior vice-president Fu Qiang said talks with local regulators have also taken place as part of efforts to tackle a driver shortage, as industry regulations are “fairly diverse” across different areas.

Fu admitted that investment in safety will affect business performance in the short-term, but maintained that the drive benefits the company’s long-term development. “More secure services are now being offered and therefore passengers are more content with their trips,” (our translation) he added.

Jean Liu would not reveal a timeframe with regards to when suspended carpooling service Hitch would come back online, but confirmed that it would take onboard public opinion to help revamp the product.

This article was corrected to reflect that Didi will invest RMB 2 billion in safety this year, not next year.

Didi Chuxing in Talks With SoftBank to Raise Money for Autonomous Driving Unit – The Information

What happened: Didi is reportedly in talks with key shareholder Softbank along with other potential investors to secure financing for its loss-making autonomous driving unit. Discussions are still underway and may not result in a deal, The Information cited anonymous sources as saying. Didi is yet to comment on the matter. Chinese media reports that the mobility giant’s valuation has halved to between $30 billion and $40 billion in the private equity market since hitting a high of $80 billion late last year.

Why it’s important: Self-driving technology firms have focused in raising money from potential investors and forming alliances to stay afloat. Uber completed a $1 billion funding round in April for its self-driving unit from Softbank’s Vision Fund, Toyota, and Japanese auto parts supplier Denso. The company has spent $1.1 billion, or around 30% of its overall R&D budget on the unit, according to its IPO filing. This also followed an earlier partnership between Alphabet’s self-driving unit Waymo, along with Nissan and Renault to bring driverless cars to Japan and France. Ford and Volkswagen also inked an alliance to share driverless fleet costs. A number of global automakers, including Ford, Audi, and Volvo have scaled back ambitious driverless vehicle deployment plans due to the technical limits.

Nissan, Dongfeng in talks to form fleet-management venture with Didi – sources-Reuters

What happened: Chinese ride-hailing giant Didi is in talks with carmaker Nissan and its Chinese partner Dongfeng to form a joint venture for managing ride-hailing and car-sharing, Reuters cited people familiar with the matter as saying. The companies are reportedly exploring joint design and manufacture of specially tailored vehicles, both gas and electric, for Didi’s ride-hailing business. Nissan‘s China unit would help Didi manage its fleets across multiple cities, while Dongfeng Group would supply vehicles.

Why it’s important: The lines between mobility tech giants and automakers are blurring. The growing popularity of ride-hailing in China is showing the early signs of reducing private car ownership. To tap the trend, the Beijing-based firm could expand to auto design and manufacturing through joining hands with carmakers. Tailored models would likely feature smaller engines and wheels given their typically lower average speeds. Didi has formed broad alliances with 31 automakers and parts suppliers last year. Auto players are also tapping ride-hailing as part of rebranding efforts. Geely, SAIC, Dongfeng, Chang’an, FAW, Volkswagen China, and Mercedez Benz have made forays into car-sharing or ride-hailing so far.

Tencent has aligned with state-backed GAC Group to launch a ride-hailing platform named OnTime in the southern Chinese city of Guangzhou this week. Chinese tech companies and automakers are battling to secure a piece of the ride-hailing industry in order to gain a stake in the mobility market of the future.

OnTime on Wednesday announced in a WeChat post that it began a two-day trial in four urban districts in the city, offering rides costing RMB 0.01. The Tencent-backed startup plans to officially launch the service in Guangzhou later this month, expand into the Greater Bay Area region, and then the rest of the country. The company’s namesake app has been available for download starting from Wednesday.

Earlier this year, GAC unveiled its investment plan to set up a RMB 1 billion ($150 million) mobility firm with a list of investors including Tencent and Guangzhou Public Transport Group. GAC and Tencent are the two largest shareholders, owning a respective 35% and 25% of the joint venture. The two companies first partnered in November 2017 when they inked a strategic partnership to explore cloud-based, intelligent, and connected vehicle solutions.

China has become the world’s largest ride-hailing market, and it is expected to double in volume to $70 billion over the next three years, research figures from Bain & Company show. Following entries by Meituan and Hellobike into the market, state-owned SAIC also launched a high-end ride-hailing service Xiangdao in December. The company says it is available in more than 154 domestic cities with upwards of 1.3 million users and 1,000 business clients. Global auto brands are also offering ride-hailing in China, including BMW, Ford, and Daimler.

However, ride-hailing giants worldwide are struggling to keep their cash-bleeding businesses afloat, prompting concerns about their sustainability. Tencent-invested Didi laid off 2,000 employees to refocus on its core business earlier this year, after reportedly losing nearly RMB 11 billion in 2018. Both Uber and Lyft recorded around $1 billion losses in the first quarter of this year and expect the heavy losses to continue in 2019.

滴滴发内部员工信：宣布整合升级成立两轮车事业部 – Tencent News

What happened: Didi has formed a two-wheeler business group according to an internal letter released late Monday, a person close to the company confirmed with TechNode on Tuesday. The company is ramping up efforts to compete for China’s 300 million motorists with the new group which combines its bike-rental business unit and another team running a platform named Jietu for motor scooter rentals.

Why it’s important: Chinese mobility giants are expanding their businesses from offering ride-hailing services to serving users with two-wheelers for short rides, hoping to diversify revenues. Ant Financial-backed Hellobike, also known as Hello TransTech, is setting up a nationwide battery exchange and charging network for electric bikes and scooters in a RMB 1 billion ($145 million) partnership with the world largest battery maker, CATL. On average, there are 700 million e-bike rides each day in China, triple that of shared bikes, Yang Lei, CEO of Hellobike said at a public event last week. China had more than 250 million electric motor scooters on the streets as of late 2018, and that number is expected to increase to 400 million by 2050, reported China News citing figures from an industry association.

Chinese ride-hailing giant Didi is facing increased scrutiny from authorities and the public alike following an incident in Shanghai on Thursday involving a Didi driver fleeing to avoid the police, injuring three pedestrians and a police officer.

Shanghai police determined that the driver surnamed Hao was not eligible to work for the ride-hailing service in Shanghai, which requires a Shanghai identification card. Didi will be fined RMB 100,000 (around $14,400) for slack management, according to an announcement released Friday by Shanghai Municipal Transportation Commission.

Shanghai regulators ordered Didi to remove all ineligible drivers by the end of June. The Shanghai authorities also warned of legal action should more unqualified drivers be caught.

Didi later responded in a Weibo announcement that it was “actively” assisting the police investigation of the driver.

The ride-hailing giant reversed an initial refusal to allow authorities complete access to its data including drivers and rides in late 2018, following the high-profile murders of two female passengers by Didi drivers. Wang Fumin, an official with the Transport Department in southern Guangdong province, said publicly in late August that a crackdown on unqualified drivers was hindered by withheld access to data.

Chinese media reported in August that more than 5,000 non-compliant drivers were actively accepting rides on Didi’s ride-hailing platform in the southern Chinese city of Shenzhen, and 10,000 were found in neighboring city Dongguan. The company later pledged to ensure compliance on its platform, saying it removed 140,000 fraudulent driver accounts from its platform last year.

Didi has also faced ride shortages following tightened driver requirements. It posted huge losses as competition increased with lifestyle mega-app Meituan, which began offering ride-hailing service in late 2017, and Ant Financial-backed Hellobike, which launched a year later.

Hellobike has expanded into 81 cities and Meituan into 39. Both players adopted an aggregate model, offering third-party ride-sharing services on their apps.

Didi ultimately decided to follow a similar path, introducing a ride-sharing service Miaozou owned by online travel agency Tongcheng to users beginning in May in the southwestern city of Chengdu. The move is expected to supplement the number of rides available on the platform while offering passengers affordable and reliable rides, Didi said in an announcement sent to TechNode on Monday.

快看｜支付宝上线境外打车小程序，首批覆盖10个国家33座城市 – Jiemian News

What happened: Mobile payment platform Alipay on Monday launched a ride-hailing mini program, allowing users to book rides in around 33 cities in 10 countries worldwide, including the US, the UK, Australia, and the United Arab Emirates (UAE). The mini program can be accessed inside the Alipay app and connects to ride-hailing platforms such as Grab in Thailand, Gett in the UK, and Careem in the UAE. The newly launched system allows users to interact with maps and text drivers in Chinese, call local police, and pay in Chinese yuan. According to Jiemian, the service will launch in more than 100 popular destinations across more than 20 countries this year.

Why important: The mini program is an attempt by Alipay to address issues Chinese tourists face when booking rides outside of China, including communicating with drivers and understanding non-Chinese maps. Mobility giant Uber’s Chinese business was bought by Didi Chuxing in 2016 after a fierce competition for market share. Since then, Didi has taken the top spot in China’s ride-hailing market (in Chinese). Alibaba does not compete directly, but, through cooperation with Hellobike, AutoNavi, Didi, and Fliggy, Alipay’s transportation services cover all aspects of Chinese people’s lives including road, rail, and air travel.

Toyota mulls $548m investment in Chinese ride-hailer Didi Chuxing – Nikkei Asian Review

What happened: Toyota Motor Corp is planning to invest about 60 billion yen (around $548 million) in Chinese ride-hailing giant Didi, hoping to gain a foothold in the world’s largest auto market. It is also reportedly considering setting up a new joint company with Didi offering mobility services in China. A Toyota spokesman told Reuters that the company continues to evaluate its global business strategies in sharing mobility, electric vehicles, and connected driverless technologies, but has “nothing to announce at this time.”

Why is important: Toyota has made large deals with some other ride-hailing firms in hopes of becoming a “mobility company” rather than just a traditional auto manufacturer. The Japanese automaker struck a $500 million investment deal with Uber in August to work jointly on autonomous vehicles, which will be deployed in the US company’s ride-hailing network. It also invested $1 billion in Grab, the largest ride-hailing service in Southeast Asia last year, in an attempt to co-expand the range of services from ride-hailing to new areas such as food delivery and mobile payment. Didi has worked with Toyota as one of its partners to test e-Palette, a self-driving concept vehicle for on-demand delivery since January last year , alongside Uber, Amazon, and Pizza Hut.

Chinese bike-rental companies are taking an indirect path to revive their businesses — replacing old bikes with new ones. Didi this week replaced 10,000 used bikes in Beijing with 3,000 new ones in an effort to refresh its brand image while complying with the government’s restrictions. However, it was immediately reprimanded by the municipal government for violating rules.

According to a report by Beijing Youth Daily, 3,000 new Qingju bikes were introduced to Xierqi, an area in Beijing home to the headquarters of Chinese internet giants such as Baidu and Didi.

Didi, which owns bike-rental services Qingju and Bluegogo, said it had removed 10,000 old Bluegogo bikes from the area a month earlier after being granted permission from the Zhongguancun administrative committee to better meet demand and help relieve traffic in the area. Xierqi belongs to Zhongguancun Technology Park.

However, Didi did not obtain approval from the Beijing Transport Bureau, which banned in August new shared bikes. The government body castigated the company in a Weibo announcement released Thursday afternoon for introducing new bikes without permission and promised punishment for violating relevant rules and “disturbing the normal order of the market.”

A Didi spokesman explained in a statement sent Thursday that there is not much service life left in the old bikes and that it is in a negotiation with the local government to offer more choices to local commuters.

The company launched its own bike-rental brand Qingju last January, around the same time it acquired Bluegogo, once the third-largest of its kind, in late 2017.

The move marks the debut of Didi’s own brand in the city’s bike sharing market, a major step following the company’s high-stake investment into Ofo in late 2016. Chinese media reported that Didi was Ofo’s largest institutional investor following several rounds of funding totaling $370 million in early 2017.

Didi’s acquisition of Ofo reportedly did not go smoothly. Ofo management was seen as resistant to the takeover; three Didi executives reportedly stepped down from their posts in November 2017, fewer than five months after being assigned to roles at the startup. Ofo faced reports of mounting debt, office closures, and massive layoffs over the past few months.

Facing friction at Ofo, Didi planned to expand and influence the market using its own brand. It will deliver 2 million new Qingju bikes to major cities in a bid to take on Meituan, which acquired Mobike in April 2018, reported 36Kr. However, it has made little progress due to bans in Beijing, Shanghai, and Guangzhou on bike-rental firms from introducing new bicycles beginning August 2017, as the major cities were choking on the millions of bicycles left over from the bike-rental boom.

Didi is not the first company struggling to retain the market amid tight regulatory control. Hello Transtech replaced some of its bicycles in January 2018 after obtaining transport bureau permission, looking to maintain a presence in Beijing, a vital market where rivals Mobike and Ofo continue to grapple.

Ride-hailing giant Didi has launched an open platform for smart transportation, giving enterprises and developers access to its artificial intelligence (AI) capabilities.

“Open cooperation will promote faster and better development of intelligent travel,” Didi CTO Bob Zhang said in a statement on Didi’s official WeChat account on Thursday.

Didi will provide access to its machine learning services and AI platform, which will include voice, image, and natural language processing. Other applications include scene perception, mapping, and travel safety. Didi launched the platform at the Global AI Product Application Expo in the eastern Chinese city of Suzhou on Thursday.

The company said the services could be used in sectors including urban transportation, logistics, and finance, among others.

The system is aimed at providing Didi’s smart transportation services to urban transport managers, enterprises, upstream and downstream partners in the automotive industry, and developers.

Zhang has said that Didi has the “best transportation data in the world.” The company has previously provided anonymized trip data and computing resources to researchers through its Gaia Initiative. Didi’s academic collaboration expanded recently through a partnership with US-based Berkeley DeepDrive (BDD) Industry Consortium.

Didi has launched several new products to secure its place in the market as the company seeks to mitigate risks to its ride-hailing service. Didi has faced scrutiny and regulatory censure following the high-profile murders of two passengers by their drivers using the platform last year.

These challenges have hurt Didi’s bottom line, as the company reportedly lost nearly RMB 11 billion (around $1.6 billion) in 2018. Didi also revealed recently that nearly one-third of its commission revenue was spent on driver subsidies in the last quarter of 2018.

In April, Didi launched an online financial management system for auto leasing and fleet companies in China. Didi said that it expected the system to serve around 1,500 leasing partners in its network by the end of 2019. The platform allows Didi’s auto partners to manage leasing accounts and financial plans, and gives them access to risk analysis and data analytics tools.

In January, the company also began providing financial services to its passengers within its app in China, which includes access to funds for critical illness protection, wealth management, personal credit, and lending services. Didi also expanded its automobile financing solutions to users, having previously only been available to drivers and car owners on the platform.

Editor’s note: A version of this post was previously published by ValueChampion, a research firm that aims to help consumers make smarter decisions with their money.

Since Lyft’s IPO and the precipitous drop in its stock price, many investors have been quite concerned about Uber’s upcoming IPO. To be fair, Uber has made a number of maneuvers to improve its profitability, and its newly lowered valuation could help appease some of these concerns.

In particular, Uber has famously exited its business in China, Southeast Asia and Russia in order to cut its losses; in return for selling its local businesses, it received equity stakes in its competitors, forming something of an alliance with Didi Chuxing in China, Grab in SE Asia and Yandex.Taxi in Russia. However, recent data suggests that these “alliances” actually may be less friendly than expected. In fact, each of these players are making solid progress expanding their footprints into Uber’s markets. If this trend continues, it may re-heat competition as regional whales encroach into one another’s territory, making profitability even more difficult to achieve than expected as they continue spending on subsidies and promotions to gain market share.

Didi, Yandex and Grab are encroaching on Uber’s territory

While Uber sold its China business to Didi Chuxing, the leading ride hailing app in China, Didi began competing aggressively against Uber in Mexico, where the latter has been dominant for a long time. In fact, Didi outranked Uber in the app store in November and December. Though Uber took back the top spot since January, Didi has been hot on its tail in Mexico just as Lyft has been in the US.

Yandex.Taxi’s launch into Israel has also been more successful than Uber’s own efforts in the country. While Uber has struggled to grow in this market (only ranked at around 4-8 place in the travel category of Apple App Store in the country), Yandex.Taxi’s Yango has outranked even local leader Gett in downloads since it launched late 2018.

Lastly, when Uber sold most of its SE Asia business to Grab, Uber actually retained its business in few markets where it remained dominant. Hong Kong was one of those markets, where Uber has consistently ranked as the top transportation app in the Apple App Store and Grab does not offer rides. However, Grab strangely began to outrank Uber for the first time ever starting in April despite users being unable to request rides with it, perhaps explained by vacation season as Hong Kong residents prepare for regional travel. The trend that has been continuing in May thus far amidst Uber’s various troubles. Could it possibly signal a new wave of expansion for Grab into regions like Hong Kong, Australia and Taiwan? At the very least, this type of download ranking suggests that Grab has a very legitimate chance of success should it enter the Hong Kong market.

High valuations create an imperative to expand

What’s more troubling is that these companies are very big businesses in their own right. Didi and Grab both raised billions of dollars with sky high valuations. Not only that, they also have been facing tough competition from local players like Dida Chuxing and Go Jek. A combination of high valuation, a lot of capital and difficult competition in local markets creates an imperative for these companies to expand into other markets in order to justify their valuations with better growth prospects.

[infogram id=”uber-frenemies-1-valuations-1hnp270j9dkp6gq?live”]

While Uber exited China, Southeast Asia and Russia to cut its losses in those markets and profit from the growth of its “investees,” it’s now apparent that these deals didn’t categorically prevent them from expanding into Uber’s existing markets. That they are beginning to do so successfully is a very worrisome sign for Uber and the ride-hailing industry in general. These mergers and acquisitions were supposed to have rationalized competition by carving out regions for each company. What happens if these multi-billion dollar companies begin to compete in Uber’s markets?

How this may complicate Uber’s stance in India

This dynamic further complicates the math for Uber’s investors. Before, it might have been easier for Uber and/or its investors to imagine a scenario where Uber simply exits India by selling its local business to Ola, its primary competitor in the country. However, now they have to wonder if allowing someone else to consolidate India creates just another $60bn competitor that will eventually expand into other parts of the world, just as Didi and Grab might be doing. After all, Ola is already in Australia, UK and New Zealand and rising through the app store rankings quite quickly.

[infogram id=”copy-uber-frenemies-1-valuations-1hmr6gm35xy96nl?live”]

What does that do to Uber’s motivations & plans to compete in India? Will Uber be willing to suffer bigger losses in this market than investors are willing to endure? These are just some of the questions that make it even more difficult for investors to assess Uber’s investment prospects. Interestingly and perhaps coincidentally, we also observed Uber’s download rank in India inching up slightly against Ola’s starting in February of 2019, which isn’t something we observed previously since we started collecting the data in November 2018.

Race to acquire local players?

This dynamic also adds an interesting take on Uber’s recent acquisition of Middle Eastern ride hailing app Careem. As we highlighted previously, Careem had been competing very successfully against Uber in the Middle East. What’s notable about this deal was that Didi actually was already an investor in Careem. Given that Didi and Grab are now showing clear intent to and signs of success in encroaching into Uber’s markets, it creates an incentive for each of them to acquire as many of the “local leaders” as possible: Uber wants to make it as difficult as possible for others to expand into new markets, lest it face more Lyfts—large and well funded competitors—around the world), while acquiring a local leader might be the easiest way for those those competitors to find new growth engines, especially in relatively young markets like Latin America and Africa.

Chinese ride-hailing giant Didi is “hot on the tail” of US rival Uber in Mexico, according to a new report, as competition in the sector heats up amid aggressive expansions into new markets.

In November and December Didi was the most popular travel app in Mexico’s Apple App Store, with Uber coming in second. Since then, the Chinese company has ranked second according to an analysis by research company ValueChampion. “Didi has been hot on [Uber’s] tail in Mexico just as Lyft has been in the US,” Duckju Kang, ValueChampion CEO said in the report. Didi launched its services in Mexico in April 2018.

Uber drew attention to the competition with Didi in its IPO prospectus, which it filed on April 11, saying that the Chinese company had “made significant investments to gain or maintain category position in certain markets in Latin America.”

Didi has faced scrutiny in China after two passengers were killed by their drivers on separate occasions last year. The incidents took place on the company’s carpooling service Hitch, which has subsequently been suspended indefinitely. Regulators have since tightened their grip on the ride-hailing sector by imposing stricter rules. Didi has responded by implementing more stringent driver background checks, while various cities require drivers and cars to be registered in the city in which they operate. The result is a decrease in the pool of available drivers.

Didi reportedly lost RMB 11 billion (around $1.5 billion) in 2018, almost five times higher than its 2017 losses of $400 million. The company recently revealed that nearly one-third of its commission revenue was spent on driver subsidies in the fourth quarter of 2018.

To make up for losses at home the company has been expanding aggressively around the world. Didi’s Japanese joint venture with Softbank will expand to 13 cities in the country following its launch in Osaka last year. The company has sought to take on Uber globally, but most notably in Latin America. Along with operations in Mexico, both companies are competing in Brazil. Didi is also seeking drivers in Colombia and has advertised for jobs in Chile and Peru.

“A combination of high valuation, a lot of capital and difficult competition in local markets creates an imperative for these companies to expand into other markets in order to justify their valuations with better growth prospects,” Kang said in the report.

Aside from being Didi’s competitor, Uber is also a shareholder. The US company sold its operations in China to Didi in 2016 in exchange for an approximately 18% stake in the company. According to its IPO prospectus, Uber estimates its holdings in Didi amounted to around 15% as of September 2018.

The conflict between Didi and Uber has not only manifested itself in a battle for market share, but also in investments. In March, Uber acquired Careem, a ride-hailing service that operates across the Middle East. Didi had invested in the service prior to Uber’s acquisition. The move highlights Uber’s intent in making it as difficult as possible for competitors to expand into new markets, according to ValueChampion, thereby cutting off possible new revenue streams.

Ride-hailing giant Didi will set up a team of 2,000 service staff to increase its focus on offline driver management and support, the latest in a series of attempts to improve safety for both drivers and passengers on the company’s platform.

Fu Qiang, CEO of Didi’s Ride-hailing Business Group, said in an open memo to its drivers that the company aims to “help drivers solve the problems they encounter in their work,” while soliciting their feedback.

“We firmly believe that only by serving the driver well can the driver serve the passenger well,” Fu said.

The company said it would continue providing its drivers with safety training, which Didi hopes will enable them to protect themselves while “providing passengers with safer and better service,” according to Fu. In March, a Didi driver was murdered by a passenger in the central Chinese city of Changde, calling into question the safety of drivers as well as passengers. The incident followed two others in which drivers were targeted in 2017 and 2018.

Didi’s safety work has so far mainly focused on passengers, following the high profile murders of two Didi users on separate occasions in 2018. The company’s safety features include a driver-passenger blacklist function, emergency contacts, an in-trip panic button, and facial recognition systems that link a driver with a vehicle, among others. The company also pledged to spend $20 million on customer service in the wake of last year’s murders.

Didi CEO Cheng Wei said in an internal meeting in February that the company planned to lay off 2,000 employees, or 15% of its workforce, following a restructuring that aimed to improve safety and compliance. Sources told TechNode at the time that Didi planned to hire an additional 2,500 employees following the layoffs, which included headcount for offline driver management.

As Didi faces tougher regulations governing its drivers at home following the murders, the company has sought to expand its footprint abroad. Latin America has become a key battleground for Didi as it seeks to take on international rival Uber. The company has launched operations in Mexico and Brazil, with plans to expand to Peru, Chile, and Colombia.

滴滴与全球顶级自动驾驶研究联盟BDD达成战略合作 – TechNode

What happened: At a conference on Thursday, car-hailing titan Didi announced that it had formed a strategic partnership with Berkeley DeepDrive (BDD) Industry Consortium, an initiative hosted at the University of California, Berkeley. Through industry-academic linkups, BDD conducts research in the fields of computer vision and machine learning. According to Didi, the partnership will involve research and applications in the field of smart vehicles, training, and academic exchange. BDD has already partnered with Tencent, Huawei, Baidu, and Meituan-Dianping in addition to international auto brands.

Why it’s important: According to its official website, much of BDD’s research is linked to autonomous driving, suggesting that the partnership will support Didi’s ongoing efforts in applying the technology to its business. As of last February, the ride-sharing company was designing its own software and conducting small-scale tests on city roads in China. In July, company CTO and co-founder Bob Zhang also spoke of a mixed model that would allow the company to dispatch self- or human-driven cars as needed. Didi’s ambitions may be held back by its business model, however; in addition to a difficult 2018 following the murders of two passengers, it recently revealed that its spending on driver subsidies may not be sustainable.

Didi-SoftBank taxi-hailing JV expands to 13 cities across Japan – Reuters

What happened: Didi-Softbank joint venture Didi Mobility Japan has launched its taxi-hailing services in Tokyo and Kyoto and will expand to 13 cities across Japan. The service initially landed in Osaka last year, targeting Chinese tourists and residents alike. The company joined forces with taxi firms as it sought to take on rivals backed by Sony and Toyota.

Why it’s important: Didi has been pushing to increase its presence internationally as it faces regulatory difficulties and driver shortages at home. The company this year plans to focus on internationalization and aims to take on rivals like Uber in international markets. Didi this week began recruiting drivers in Colombia as it pushes ahead with its Latin American expansion plans. However, the situation is different in Japan, where the company cannot offer ride-hailing services, as they are effectively banned. Instead, Didi has partnered with taxi operators.

Ride-hailing giant Didi revealed a glimpse at its commission rates and cost structure on Monday in a question-and-answer post published on its platform to address criticism for its cash-burning business model.

Nearly one-third of its commission revenue was spent on driver subsidies over the fourth quarter of 2018. Operating costs were roughly equivalent to 21% of total fare revenue from its private car hailing business during this time, Chen Xi, executive president of Didi’s Ride-sharing Business Group, said on Monday. Meanwhile, fourth quarter average commission rate was 19% of fare revenue, and the 2% difference was recorded as operating losses.

Chen stressed the continued losses could not last long, promising more efforts on cost reduction in order to “run businesses in a sustainable way.”

Additionally, driver subsidies accounted for 7% of total fare revenue during the same period, the company said, explaining that driver incentives were a critical tool to meet market demand during the peak times.

This was the first glimpse of Didi’s internal finances as questions mount about its fiscal viability as well as safety on its platform. According to an internal file obtained by Chinese media, the Chinese ride-hailing firm recorded a loss of RMB 10.9 billion (roughly $1.48 billion) in 2018, nearly five times the reported $400 million in losses booked in 2017.

Didi had expected 2018 to be a profitable year, according to Chinese media reports in March 2018 citing industry sources. But by October, following the murders of two female passengers in May and August, its priorities shifted to security, according to a corporate executive cited by the Wall Street Journal.

Global ride-hailing giants share a common problem of huge losses despite robust commission revenues, as competition in the worldwide ride-hailing market remains intense. Uber reported $3.03 billion in operating losses in 2018, and has run at a loss for three consecutive years beginning in 2016, according to its SEC filing from earlier this month. Its core ride-hailing business had a 22% commission rate over the past year, and the US ride giant continues to offer subsidies to drivers to gain market share around the world.

China’s Didi recruits Colombian drivers ahead of Bogota launch-Reuters

What happened: Ride-hailing giant Didi is recruiting drivers in Bogota, the capital of Colombia, as it prepares to launch its services in the country. Didi said in a statement that it hopes it can “meet the market’s expectations” as it recruits drivers with “an attractive offer.” The company did not give any indication as to when it would launch its services.

Why it’s important: Didi has identified Latin America as a critical battleground in its attempts to take on international rival Uber. The two companies are already going head-to-head in Mexico and Brazil, where Didi has attracted drivers with higher pay and bonuses. The move also highlights Didi’s efforts to offset issues its faces in China, including stricter policing of its platform. The company has already moved some of its senior executives to Latin America to lead its expansion in countries including Brazil, Colombia, and Peru. Uber is popular in Colombia, but illegal, with drivers risking a 25-year license suspension if they are caught working for the platform.

Ride-hailing operator Didi Chuxing has launched an online financial management system for auto leasing and fleet companies in China, the company announced on Thursday.

“Quanju” allows Didi’s auto partners to manage leasing accounts and financial plans, as well as access risk control and data analytics tools. The ability to monitor a vehicle’s operation, performance, and maintenance in real-time means that risks can be identified and improvements implemented more efficiently, said Liu Xiaoyu, head of Didi financial services operations in China.

Facilitating the operation of leasing and fleet companies will help Didi better manage its overall costs. “Mobility services providers like Didi need to manage the costs for operating the vehicle fleets… to deliver profitability for them and the drivers,” said Bill Russo, founder and CEO of advisory firm Automobility told TechNode.

“If drivers bear the burden of the car payments, insurance, and maintenance as individuals, they will not be able to get as good a price as Didi who can leverage their size to create economies of scale,” Russo added.

Didi expects the new system to serve 1,500 leasing partners in its network by the end of 2019. The ride-hailing operator has been focusing on auto services for the past few years, having set up Xiaoju Automobile Solutions in 2015. It stated in August that it planned on injecting $1 billion into the auto services division. Xiaoju, which provides services including auto leasing, car maintenance, and gas station services, has a gross merchandise value exceeding RMB 60 billion (around $8.79 billion).

However, Didi’s move into ride-hailing finance is relatively new. In January, the company began offering financial services including insurance, automobile financing solutions, and payment services to riders, drivers, and car owners on its platform. Didi has around 550 million users and 31 million drivers on its ride-hailing app, according to the statement.

A move into financial services isn’t uncommon among tech titans in China. BAT (Baidu, Alibaba, and Tencent) and JD.com all have been cultivating their own fintech businesses.

Didi’s new found interest in finance may also help to expand its revenue stream, which is especially critical at a time when its main ride-hailing business is facing increasing public and government scrutiny following passenger murders last year.

A Didi driver has allegedly been murdered by a passenger in the central Chinese city of Changde, once again drawing attention to safety standards on the ride-hailing platform.

The incident occurred early Sunday morning when a 19-year-old suspect stabbed the driver, surnamed Chen, before disembarking, according to law enforcement in the city.

Police said that the suspect turned himself in shortly after committing the crime.

“We have formed an emergency response team to fully cooperate with police while sending representatives to visit the family of the vicitim,” Didi said in a Weibo announcement (in Chinese). A Didi spokesperson told TechNode that the driver worked for the company’s Express service.

The incident follows Didi’s increased focus on safety after it experienced public outcry and government censure after two passengers were killed by their drivers on separate occasions last year. Those occurrences took place on Didi’s carpooling platform Hitch, which has subsequently been halted indefinitely.

This is not the first time a Didi driver has been killed by a passenger. In 2017, a driver surnamed Ao was killed by 22-year-old passenger Li Qingbing in Foshan, a city in the southern province of Guangdong. Li later appeared in court and pleaded guilty to the crime. A year later, another driver was killed in Guizhou province after being robbed of more than RMB 2,000 (around $300). His body was later found under a bridge.

Didi has implemented a number of safety upgrades, including a panic button for passengers and a driver-passenger blacklisting function. According to an announcement last week, nearly 140 million people have added an emergency contact to their Didi app. However, most of the focus has fallen on passenger safety.

Additional reporting by Jill Shen. 

More than 500 individuals have been arrested for using Didi’s ride-hailing platform for fraudulent activity using stolen personal data.

In a work report released Thursday on WeChat (in Chinese), Didi confirmed Chinese police apprehended suspects in 25 cases during 2018, the latest in a series of measures to ensure compliance on its platform. “Security, rather than growth, has been the most crucial target for Didi,” the company said in the report.

The perpetrators allegedly took advantage of a system that Didi uses to pay its drivers prior to receiving payment from customers. The suspects registered for Didi user accounts with stolen personal information, including mobile phone numbers that weren’t tied to an ID and fake payment credentials. They then posted ads online offering Didi trips at reduced prices. Internet users respond to their postings and paid the fraudsters for the trip, though no money ever reached Didi.

The arrests follow Didi’s claims that it removed nearly 140,000 fraudulent driver accounts from its platform in 2018. The ride-hailing giant said the unqualified drivers had posed “severe threats to users’ safety.” Previously, Chinese media reported that individuals with criminal records could register to be drivers on the platform using fake driver’s licenses and IDs, which could be bought for RMB 1,000 (around $150).

The cleanup forms part of a larger move as Didi seeks to go “all-in”  on security. The company has revamped its platform following the murder of two passengers using its carpooling service Hitch last year. Since the incidents, Didi has faced mounting public pressure and government scrutiny and halted its Hitch service indefinitely.

In response to the concerns, Didi launched or upgraded a host of security features, including a panic button and driver-passenger blacklisting function. Didi’s mobile application has been updated 15 times since September. By March, more 138 million people had added an emergency contact to their app, Didi said.

Correction: This article has been corrected to reflect that the suspects used stolen personal data to register for Didi accounts. They did not sell Didi user data as was previously reported. 

滴滴发布违规使用单车惩罚措施，相关账号将被冻结5-90天 — Jiemian

What happened: Mobility company Didi is taking more severe punitive measures against misbehaving rental bike riders. Rule-breaking such as locking and/or hiding bikes for private use, damaging bike parts, and pasting will be targeted. Offenders will be forbidden from using the service for a maximum of 90 days. The company warned that repeat offense of certain actions such as theft would be reported to the police. The measures went into effect on Wednesday on Didi’s bike-rental platforms Qingju and Bluegogo.

Why it’s important: User misconduct has been one of the big costs for struggling Chinese bike-rental firms. Hong Kong-listed Meituan recorded an RMB 11 billion ($1.6 billion) operating loss in 2018, nearly triple the previous year. That company partly blamed its poor performance on depreciation of plant and equipment from Mobike, which it fully acquired in April 2018. In August, a Chinese media report citing an Ofo spokesperson said that around 1,500 Ofo bicycles were found broken on average each day in the eastern Chinese city of Hangzhou. Didi, which made a $370 million investment in Ofo, appears to want to strengthen management and increase efficiency on its self-owned bike-rental platforms.

Japanese conglomerate Softbank will invest an additional $1.6 billion in Didi, according to the company’s CEO. The move comes amid reports of the ride-hailing giant’s record losses in 2018.

“We’re investing $1.6 billion … as the additional investment to our earlier rounds,” Softbank CEO and founder Masayoshi Son said of Didi during an interview with CNBC on March 8. He did not specify whether the investment would come from Softbank or its venture capital arm Vision Fund.

Son said that companies in the ride-hailing industry are “growing so quickly,” while acknowledging that they had not yet made a profit.

A Didi spokesperson declined to comment on the latest investment pledge by Softbank when contacted by TechNode.

Softbank previously took part in a $4.5 billion funding round in Didi in 2016. It was also involved in a $5.5 billion round in the ride-hailing firm in 2017, alongside China Merchants Bank and the Bank of Communications, according to data from Crunchbase.

The Softbank announcement comes amid mounting financial and regulatory challenges for Didi. The company reportedly made a loss of nearly RMB 11 billion (around $1.6 billion) in 2018 as it shifted its focus from revenue to compliance following the murder of two passengers using its carpooling service.

Didi this year plans to lay off 2,000 of its employees, amounting to 15% of its workforce. During an internal meeting in February, Didi CEO Cheng Wei said some non-core businesses would be re-evaluated and cut back if necessary. The company plans to make additional hires to focus on compliance, driver management, and internationalization.

In September, Cheng said in an internal letter that the company had “never achieved profitability” since its founding.

Didi has faced public outcry and government scrutiny following the murders on its Hitch carpooling service, which has been suspended indefinitely. The company has been working to remove non-compliant cars and drivers from its network. As a result, Didi has had to commit additional capital to recruit qualified drivers and devote more resources to safety, both of which have had an impact on its finances.

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Ride hailing platforms under spotlight as China’s transport watchdog slams ‘one sided’ pursuit of traffic, subsidies to achieve growth – South China Morning Post

What happened: Chinese vice minister of transport Liu Xiaoming criticized ride-hailing companies’ “one-sided pursuit” of platform growth and investor funding at a briefing on Thursday. He pledged industry overhauls and the promotion of “healthier development” to better protect the interests of passengers and drivers. Liu also denounced prioritizing rapid growth over sustainable business models. In response to a question about industry leader Didi, he said authorities have “taken note” of the company’s workforce reorganization, as well as its attempts to improve both user safety and service.

Why it’s important: After two Didi carpool passengers were murdered last year, China’s transportation ministry undertook industry-wide inspections. Didi took action as well, implementing a slew of safety measures and suspending its popular carpool service indefinitely. These setbacks no doubt contributed to the major losses Didi suffered last year. CEO Cheng Wei has acknowledged (in Chinese) the company’s inability to achieve profitability, and the company is planning a large-scale reorganization. While Liu appeared to approve of Didi’s latest efforts, his comments also indicate his caution towards the industry in general. For the near future at least, official scrutiny and regulation of China’s ride-hailing industry will continue.

Ride-hailing platform Didi is cutting employee perks as it seeks to limit internal spending, a move that comes shortly after the company’s CEO announced plans to lay off around 2,000 employees.

Didi is slashing meal subsidies at its cafeterias, while increasing the prices of some goods. In addition, gym benefits and late-night snacks have been canceled, and funding for staff clubs is being cut. Workspaces at the company are also being made smaller. The policy came into effect on Monday.

News of the cuts began circulating on Chinese media over the weekend, detailing the extent of the reductions in a screenshot of a document that was sent to employees. In the internal memo, the company said the new policy is being implemented to “better save on internal expenses.”

A Didi spokesperson confirmed that the company had recently “made adjustments” to its employee perks, adding that it has “no plans to make any major cuts.”

The cutbacks come shortly after Didi CEO Cheng Wei told employees in an internal meeting that the company this year intends to lay off 15% of its workforce, amounting to around 2,000 people. Cheng said that the layoffs were a result of a reorganization plan announced in December and a performance review. He also said that Didi intends to an additional 2,500 employees in 2019 to focus on safety, compliance, offline driver management, and internationalization.

The news followed rumors that Didi lost nearly RMB 11 billion in 2018. In September, Cheng said that the company had “never achieved profitability.” Three months later, the company slashed its employees’ year-end bonuses in half, citing the firm’s poor performance in 2018.

According to Chinese media, Didi is offering generous severance packages, amounting to an employee’s annual income divided by 12 plus two months’ salary. Anonymous Didi employees posted on Chinese professional networking platform Maimai that “everyone wants to be fired after they became aware of the scheme.” The posts were widely shared on microblogging platform Weibo.

Didi has faced increased scrutiny following incidents in which two female passengers were murdered by their drivers while using the company’s carpooling platform Hitch. One of the two drivers was sentenced to death in early February, while the body of the other alleged murderer was found in a river following the incident.

An investigation by Chinese authorities at the company’s headquarters found that Didi’s Hitch service had “serious safety hazards.” The service has been suspended indefinitely.

Editor’s note: A version of this post was previously published by ValueChampion, a research firm that aims to help consumers make smarter decisions with their money.

Ridesharing companies are starting to come to the public market in 2019. With Lyft planning an IPO in March, and Uber and Didi also preparing for an IPO this year, it’s important for interested investors to understand the competitive dynamics in this industry around the world.

A number of major players around the world have raised billions of dollars to compete fiercely in their respective regions, a dynamic that has resulted in heavy losses for every company involved. For example, Uber reportedly lost $1.8 billion in 2018, while Didi also lost about $1.6 billion in China largely due to rider and driver subsidies, drawing concern about whether these businesses will ever generate enough profit to justify their high valuation.

We believe there are two main factors (outside of self-driving cars) that will determine the profitability of ride-sharing apps around the world. First, the competitiveness of each company’s market will heavily impact their profit levels. If markets are maturing and a clear leader emerges, profitability will gradually improve as smaller players find it more difficult to compete on subsidies alone due to scale differences.

Secondly, the funding environment will also determine how aggressively these companies can spend to compete. If funding is readily available, companies will not shy away from spending to grow and capture market share; if funding becomes scarce, they will conversely have to be more conservative about the way they subsidize rides.

To help interested investors to assess where each of the major players lie regarding these two factors, we surveyed each app’s popularity in 28 different markets to assess whether the extremely competitive ride hailing industry has begun to mature.

After a series of deals between Uber and its Asian counterparts, the ridesharing industry has become more mature in developed markets, with one player emerging as the clear winner in each region. For example, Uber has consistently ranked as the top travel app in the US and Canada, while Lyft has not been able to contest the number one spot. Similarly, Uber has solidified its leading position in most of Europe, Australia, Hong Hong, and Taiwan, with very distant number twos like mytaxi, BlaBlaCar, and Cabify in each region. This bodes especially well for Uber, as it is becoming the de facto leader in most of its major markets.

In many parts of Asia, we saw a similar trend. Ola comfortably maintained its top position in the App Store’s travel category, ahead of Uber for the past four months (though it is struggling to gain traction elsewhere), while Uber continues to lead markets like Taiwan and Hong Kong. In South Korea, Japan, and Russia, markets that have been extremely difficult for foreign companies, local apps like KakaoTaxi, JapanTaxi, and Yandex.Taxi have consistently reigned as ridesharing champions.

In many emerging markets, the picture isn’t as clear yet. For example, although Grab acquired Uber’s Southeast Asia business in eight countries and has been maintaining dominance in markets like Philippines, Vietnam, and Thailand, it is now facing stiff competition from Go-Jek, an Indonesian company backed by Tencent. In fact, their download rankings in each other’s home markets (Indonesia and Singapore) are neck and neck already, suggesting vicious competition between the two firms.

Also, Didi Chuxing in China has been facing difficulty in fending off competition from Dida Chuxing. In fact, Dida’s download ranking in the Apple App Store has surpassed Didi’s for most of the past few months. This is rather surprising, given that Didi has already consolidated the market significantly after merging with Kuaidi and acquiring Uber’s China business.

This seems to be largely driven by Didi’s series of PR disasters related to murders of its customers by drivers, a problem similar to the one that Uber experienced when its PR problems resulted in tougher competition from Lyft few years back. While Didi should be able to maintain its dominance if it solves this quickly, Dida could be a thorn in its side if it is able to exploit this opportunity to raise a large amount of capital.

In other regions around the world, Uber is still facing stiff competition from companies like inDriver (Colombia), Beat (Peru), Didi (Mexico), Taxify (South Africa and Nigeria), and Careem (Saudi Arabia and Pakistan), though it has been able to dominate some of big emerging markets, such as Brazil and Argentina.

Meanwhile, the VC market has shown an increasing appetite for mega deals. For instance, both total VC funding and average deal size nearly tripled from fourth quarter 2016 to fourth quarter 2018, according to Pitchbook, driven by massive financing rounds ranging in the hundreds of millions. Essentially, while availability of funding still seems ample overall, we’re seeing the rich get richer among successful startups. In other words, investors show clear signs of preferring leading companies over their competitors.

For ridesharing companies, this means that the winners will find it easier to raise money than their smaller competitors. With a bigger war chest, leaders can more easily tolerate losses while waiting for their smaller competitors run out of money, and could even consider acquiring them.

What to expect

For Uber, our findings are quite positive. It doesn’t have a real challenger in most of its major markets, and the dynamics of VC market is also favorable to the biggest player in the world. In such circumstances, it could potentially start reducing subsidies to increase its profitability; if it does, its smaller competitors (i.e. Lyft) have incentives to follow the leader, especially if they are concerned about their own finances. After all, even the US is now essentially a two-player market where one is significantly larger than the other.

This also helps to explain why Lyft is in a hurry to complete its IPO before Uber. Investors prefer the biggest player in an industry, so Lyft’s best bet might be to be the only publicly available stock in the space before Uber also becomes public. One possible implication of this rationale is that Lyft’s goal may not be to spend its newly raised capital aggressively to compete.

For other ride sharing companies, the future is still somewhat unclear. Grab and Go-Jek seem to be having a knife fight, funded by immense pockets (Tencent invested in Go-Jek, while Softbank invested in Grab). In India, Uber is still a close number two to Ola, creating uncertainty for the leader due to Uber’s stronger finances. However, the rumor that Uber is in talks to sell its UberEats business in India suggests it may pull out of the country as it has previously in China and SE Asia, leaving the market to Ola. Even in China, where Didi still has the biggest market share and war chest, Dida’s sudden rise suggests it may be able to capitalize on Didi’s 2018 PR disasters.

Last year was a rough one for the rental economy and mobility industries in China. With long lines of disgruntled customers outside Ofo’s Beijing office looking for refunds, sexual and physical assaults inside Didi’s cars, and the veil pulled away from Mobike’s numbers, 2018 saw the rubber hit the proverbial road.

No longer could marketers, PR armies, and executives continue to paint rosy pictures about the future of private transportation in China’s cities. For anyone on the ground, many of the claims had already inspired a mix of awe, confusion, and incredulity. If 2018 marked a breakdown in the industry, then 2019 is the year in which we’ll see if their attempts at repair will actually work.

A short ride down memory lane

Both Ofo and Mobike have been around for some time, but it wasn’t until the ride-hailing war was resolved that the industry was able to pick up speed.

Before 2012—when Didi and Kuaidi were both founded—getting around in a Chinese city was not easy. The intrepid intracity traveler had various options: bus, subway, cab, or unlicensed and illegal private cars (heiche, literally “black cars”). None were convenient.

Back then, the subway was less developed and stations were sparse. Deciphering bus maps required intimate knowledge of the city and its neighborhoods. Hailing a cab required a certain finesse as well as an utter lack of regard for other commuters as everyone jockeyed for position on the road; cab drivers, for their part, cared little for fairness, only concerning themselves with the direction and duration of the ride. Black cabs were even worse: overpriced and potentially dangerous. The demand for transport was exponentially higher than the supply and the suppliers knew it.

One night, as my wife and I were leaving a bar at Chaoyang Park’s west gate—a formerly hip and happening place—we discovered it had snowed quite heavily while we were inside. The subway was too far away by foot and most buses had already stopped service. Cab drivers in Beijing are notorious for abandoning the roads during inclement weather. We were stuck. It wasn’t until a good Samaritan gave us a ride to a busier road that we were able to find a cab home.

With the increasingly ubiquitous mobile internet—Xiaomi had launched their first smartphone in 2011, one of the first affordable ones in the country—the mobility industry was ripe for disruption. Unlike Uber, however, both Didi and Kuaidi started not as disruptors of regulation. In countries like the UK and France, Uber’s biggest challenge lay in regulatory frameworks that protected cab drivers but disadvantaged passengers. The American company became notorious for flouting their disregard for regulators and developed a reputation for being hard to deal with. In China, however, Didi and Kuaidi disrupted the cab market by working with cab drivers directly, then signing agreements with cab companies—some of which were state-owned—and then only later launching their private car-hire services.

Fast-forward to 2015: Didi and Kuaidi together controlled much of the market, but after a protracted subsidy war—offering discounts for riders and extra cash for drivers—the companies combined forces in order to face off against the foreign invader, Uber, who had entered China in 2014. After yet another subsidy war, subsequent fraud by drivers, new laws requiring government access to data, increasing compliance costs, and the rising barrier of regulatory approval, Uber raised the white flag in 2016 and sold their China operations to Didi.

Bike rental’s flight of fancy

Founded in 2014, Ofo launched in 2015 as a bike-sharing company on Beijing’s Peking University campus. China’s universities tend to be quite large and inconvenient to travel through. Ofo created a platform where students could share their idle bikes—for a fee—with classmates who needed to get across campus.

Mobike, on the other hand, launched in Shanghai in 2015 as a one-sided rental platform. Unlike Ofo, which had been co-founded by students, Mobike was established by seasoned professionals, including a former executive at Uber China.

After the ride-hailing war had been decided, investors and tech giants alike were looking for the next mobility play, with media dubbing both Ofo and Mobike as the “Uber of bikes.” The money poured in and, just as with any boom cycle in China, both companies competed fiercely for users, suppliers, and mindshare. Unlike in previous booms, however, these products were all offline and required significant investment to manufacture, deploy, and maintain. This didn’t stop both companies from claiming stellar numbers for both user numbers and rides. They remained coy, however, about the number of bikes on China’s streets, in order to conceal the true cost of their operations and to avoid potential dust-ups with municipal regulators over the externalized management costs.

We now know that these numbers were actually quite far from the truth. In 2018, Meituan Dianping went public in Hong Kong. As they had just purchased Mobike in April of the same year, we got a glimpse of the real story: Mobike’s previous claims were 70-75% higher than what was reported in Meituan Dianping’s IPO prospectus. We don’t have that kind of visibility into Ofo’s operations because they are not a public company and have chosen to remain opaque, but we can assume that they are much worse.

Didi in danger

The year 2018 was also a rude awakening for Didi. Established players from other industries began encroaching on the market. Local governments began making noise about the company’s effective monopoly. Worst of all, the public lost most of its trust in the company. The first murder of a Didi passenger was a tragedy but widely seen as a fluke for a company with few previous problems. The second was a wake-up call.

The mask was pulled off to reveal a company completely unequipped to deal with safety issues, especially for female passengers. Not only did they outsource all customer service—with the safety-reporting mechanism between the call center and Didi operations a complete failure—but the service where both murders occurred had been advertised as a place for male drivers to pick up female passengers, literally and figuratively. The former head of Didi Hitch, the carpooling service which saw the most problems, even went on record as calling it a “sexy application scenario.” On top of that, investigations revealed that assaults by drivers on Didi’s platform were much worse than previously thought.

Chinese companies, in a regulatory environment where many rules go unenforced, do not have a good track record of protecting their customers. In order to eke out margin, stay competitive and grow, companies in both tech and traditional sectors have skimmed and cut as much as possible. For a company like Didi, this degree of negligence has pushed them to the brink. As of now, the company is rumored to face losses of RMB 11 billion (around $1.6 billion) for 2018 and looks to be laying off up to 2,000 people. However, unlike Ofo, they actually have a chance to pull out of their current nosedive.

Didi claims to be implementing strategies that will allow it to do a U-turn and get out of the dead-end in which it finds itself. The company has announced that not only will they hire an additional 2,500 people for core business units, but that they will also increase their efforts in South America and bolster their efforts to improve rider safety. They’ve even gone so far as to call it an “existential” moment for them, one that could make or break the entire industry— referring to themselves, one would assume, since they make up most of the ride-hailing industry in China.

Being on top definitely does have its perks: better access to talent, funding, and regulators. However, it also means bearing the brunt of criticism, scrutiny, and the cost of reform. Didi, like other “sharing economy” startups, did not take safety seriously until it was too late, and even then the problem proved to be much deeper than we thought. Didi’s leadership, a pedigreed bunch of Alibaba, Goldman Sachs, and Uber alumni, have shown they know how to weather serious storms. We’ll just have to wait and see whether they make it through this one while also protecting the public at the same time.

Following the reports of lay-offs and heavy losses, ride-hailing company Didi is rumored to be offering downsized employees large paychecks, sparking a scramble to be fired.

Tencent Tech (in Chinese) cited anonymous employees as saying the package is N+2, which equals to the amount of an employee’s annual income divided by 12 plus two monthly salaries. The actual reward was said to be “far more than three monthly salaries,” as not only basic salary but annual bonus was also included in the calculation of annual income.

Update: A Didi spokesperson told TechNode that the company rigorously follows regulations governing employment practices.

Rumors about Didi’s compensation schemes first came out of Chinese professional networking platform Maimai on Thursday and immediately spread through microblogging platform Weibo (in Chinese), with anonymous employees commenting that: “everyone wants to be fired after they became aware of the scheme.”

“Didi is the most genuine and generous employer I have ever been [employed by],” said an unnamed leaker, posting to Maimai as “a Didi Chuxing employee.” He added downsized employees were even allowed to remain in the company to the end of March to allow them time to look for new jobs.

In a nationwide public outcry and government scrutiny, Didi has faced mounting pressure to improve the safety of both drivers and passengers on its platform since the second half of 2018. This contributed to record-breaking losses of over RMB 10 billion (roughly $1.48 billion) in 2018, as the company invested more money to promote compliance by recruiting qualified drivers with subsidies to offset labor shortage.

Didi took a further step recently to lay off 15% of its employees this year, amounting to around 2,000 people, as the company announced non-core businesses would be re-evaluated and curtailed if necessary.

Meanwhile, Didi rival Hello Transtech announced on Weibo (in Chinese) on Friday that it had launched its carpooling service in over 300 cities across the country. The Shanghai-based mobility firm has been backed by e-commerce titan Alibaba since late 2017. It received nearly RMB 4 billion in the latest funding round led by Primavera Capital Group and Ant Financial in September.

Didi’s carpooling service Hitch has been suspended since September following the murder of two female passengers by drivers last year.

Update: This article has been updated after a Didi spokesperson provided comment on Feb. 26. 

Beijing’s municipal government announced today nine measures to support the development of the delivery industry, including designated courier accommodations, state-owned media Beijing Youth Daily reported today (in Chinese). The set of policies aims to enhance the working conditions for deliverymen, while also encouraging the development of the industry.

Local authorities unveiled the measures to regulate the country’s booming express delivery industry in a government meeting, presided over by Beijing’s deputy mayor Wang Hong. Beijing’s e-commerce industry has grown from an annual turnover of RMB 12 billion (around $1.78 billion) in 2010 to RMB 263 billion (around $39 billion), based on data from the Beijing Municipal Commerce Bureau. It now accounts for 22.4% of total retail sales in the city.

This astounding growth was predicated on a flexible labor market, which left many workers exposed. Delivery drivers—usually men—are generally hired on a temporary basis by logistics and lifestyle companies without legal safeguards. The government has decided to promote employer compliance to protect the low-income workers, in accordance with wider labour regulations.

Firms are urged to outline their obligations to employees in formal contracts, offering on-the-job injury compensation and medical insurance to ensure their rights and benefits. These will also enhance the courier fleet’s job security.

A total of 2,400 dorm rooms will be offered for rent by the government to address the housing shortage for local couriers. The dorms will be treated as part of the public infrastructure, only available for lease and not for sale. The local government also plans to accelerate the construction of more housing.

Earlier this month, the Ministry of Human Resources and Social Security censured local companies, including popular ride-hailing firm Didi, for not providing insurance for its drivers, reported Nanfang Metropolis Daily (in Chinese). It added legislative amendments will be introduced “in due course so as to provide legal protection to the ‘new economy’ workers.”

Chinese online retail, along with logistics and food delivery, has become a key industry in China. Statistics from the State Post Bureau show that over 50 billion goods were delivered over the past year, a 26.6% year-on-year increase. China counts more than 70 million gig-economy workers, including express couriers, according to central government figures.

As I wrote previously, China’s digital economy has reached a turning point.

Before, new user growth could offset digital businesses’ strategic and commercial missteps. Double-digit or triple-digit MAU growth could mute criticism of flimsy unit economics, absent strategy, dodgy investments, or lackluster monetization efforts.

Now, internet user saturation within China’s consumer class makes it harder to avoid scrutiny with eye-popping user growth. Companies like Meitu, JD, and Zhihu are facing tough questions: shareholders and investors want to whether these platforms can turn their impressive scale into profits.

Weaker players might have a hard time meeting impatient investors’ demands for return on investment, but China’s digital giants are adapting. They are repositioning themselves to adjust to new market dynamics, developing strategies to take advantage of enduring opportunities as mature businesses.

Previously, China’s internet companies grew by latching onto investment frenzies in a particular product or industry vertical, known as fengkou (literally “a gap where a strong wind blows”) in Chinese startup lingo. These rapid influxes of capital and speculative behavior are so notorious that leading Chinese executives have joked that investors could pump in enough money to make pigs fly.

Investment frenzies have reshaped markets, delivered exponential growth, and minted some of China’s internet success stories. Meituan, Didi, and VIPKID were built off all the back of them. These companies identified white space, shaped user behavior, and benefited from oodles of capital to achieve scale and outlast a slew of competitors to win winner-take-all or winner-take-most positions. However, as the mobile internet’s white space shrinks, these investment frenzies are more volatile and less conducive to value-creation.

The recent struggles of live-streaming, bike sharing, and automated convenience stores illustrate the danger of relying on speculative investment flows. My own analysis estimates 80% of live-streaming players with Series-A funding didn’t last two years. ofo, a bike-sharing firm, has gone from a $2 billion valuation to the verge of bankruptcy. There are now serious doubts that Bingo Box, the automated convenience store darling backed by GGV Capital, can survive long enough (Chinese link) to make a meaningful dent in China’s retail landscape.

Six durable white spaces

China’s digital giants—Baidu, Alibaba, Tencent, Bytedance, Meituan, Didi, Pinduoduo, and JD—are looking for something more durable than spaghetti-against-the-wall investment flows.

When they first burst onto the scene, today’s digital giants were a thin, interfacing layer between consumers, products, services, and attention. Now, being a thin, interfacing layer isn’t enough. The giants are making themselves thicker in a way that adds new users, gives depth to existing offerings, deepens competitive advantage, and creates new revenue streams.

The giants are pursuing six avenues to growth:

New Tech R&D: China’s digital giants can develop or apply technology to existing or new operations. Leading players, such as Baidu, Tencent and Alibaba are developing leading capabilities in artificial intelligence, big data, and cloud computing.

Industry digital transformation: They can also offer new products and services to industry. Having shaped consumers’ digital behavior, China’s digital giants are lining up to lead the digital transformation of traditional industries such as retail, hospitality, tourism, and agriculture, packaging software and platforms as services.

Overseas expansion: They can seek growth overseas. China’s digital giants consider themselves well-placed to service mobile-first emerging markets, such as India and South-East Asia. These markets also have the growth prospects associated with relatively low existing internet user penetration.

Lower-tier cities: They can develop products, services and experiences for consumers in lower-tier cities. The stunning rise of Pinduoduo, Qutoutiao, and Kuaishou have shown that existing e-commerce, news, and entertainment apps don’t always meet the needs of users in China’s populous third, fourth, and fifth-tier cities.

Local services: They can further penetrate and digitize food, accommodation, shopping, and transportation markets. The size of the local services market and its potential for further digitalisation means the competition between “super-apps” like Meituan, Ele.me, Didi, and Alipay is just getting started.

New mediums: They can also explore new ways to search, connect, shop, and get informed. Innovations in newsfeeds, multimedia messaging, gamified reading and social commerce present opportunities to unseat incumbents in search, social media, and e-commerce.

Who’s playing where

Each of China’s digital giants has restructured in the last two years. That’s no coincidence. China’s digital giants are re-orienting themselves for future growth. If you cross-reference each restructure’s relationship to the above growth directions, you get a pretty good sense of who’s playing where for future growth.

Alibaba and Tencent’s investments, products and proxies will fight for market share across all six growth avenues.

Baidu continues its push to be relevant beyond search through artificial intelligence investments and applications.

Bytedance plans to take its content creation and recommendation products into lower-tier and overseas markets. At the same time, its recent tinkering with e-commerce integration and social messaging shows that it’s thinking about next-generation video commerce and social media.

Meituan hasn’t abandoned its ambition to be a super-app but has doubled down on services to restaurants and retailers on its platforms, with new features like order-management systems.

JD will strengthen its core business through investments in smart logistics, expand its offline retail partnerships and open up its logistics network to third parties.

Didi’s quest to become the world’s largest transport platform in 10 years continues unabated with overseas expansion, investments in developing markets’ ride-hailing services and autonomous driving tests.

Pinduoduo, China’s newest force in e-commerce, will improve merchant quality and test the upper limits of user growth.

As China’s digital economy has reached a turning point, China’s digital giants haven’t stood still. They’re seeking out durable sources of future growth. In so doing, they’ve set the stage for a new wave of intense competition.

Exclusive: China ride-hailing giant Didi plans Chile, Peru launches to take on Uber – Reuters

What happened: Chinese ride-hailing giant Didi intends to launch its services in Peru, Chile, and Colombia, according to job listings and a company official. The company has already moved senior executives to South America to lead its expansion in the region. Didi has begun looking to fill positions relating to advertising, crisis management, marketing, and business development.

Why it’s important: The move escalates the competition between Didi and its international rival Uber. The two companies are already battling for market share in Brazil and Mexico. Didi CEO Cheng Wei said at an internal meeting last week that the company will focus on internationalization in 2019. At the same meeting, Cheng announced plans to lay off staff in China, as the company deals with increasingly strict regulation following the murder of two female passengers using its platform last year. It also reportedly faced record losses in 2018, amounting to nearly RMB 11 billion (around $1.6 billion).

Chinese ride-hailing giant Didi will this year lay off 15% of its employees, amounting to around 2,000 people, a move that follows rumors the company made record-breaking losses in 2018.

Sources close to the company told TechNode that Didi CEO Cheng Wei made the announcement at an internal meeting on Friday, saying that the ride-hailing giant would cut headcount and that some non-core businesses would be re-evaluated and cut back if necessary.

Didi declined to comment when contacted by TechNode.

The move comes shortly after Didi was rumored to have made a loss of nearly RMB 11 billion (around $1.6 billion) in 2018. In December, Didi slashed its employees’ year-end bonuses in half, while executives received nothing, due to the company’s poor performance last year. Cheng said in an internal memo in September that Didi had “never achieved profitability” since its establishment.

Also in December, Didi announced a reorganization plan to improve passenger safety, while appointing two new executives to oversee emergency management. It also merged its car-hailing services into a single business to promote compliance.

At the meeting on Friday, Cheng said the layoffs are a result of the reorganization and a performance review

Sources said that the company plans to hire an additional 2,500 employees to focus on safety, compliance, offline driver management, and internationalization, among others. Didi is expected to end 2019 with around 13,000 employees in China, roughly the same as at the end of 2018.

The company has seen increased government and public scrutiny in the aftermath of two high profile safety incidents on its platform last year, in which two female passengers were murdered by their drivers while using Didi’s services. One of the drivers was sentenced to death earlier this month, while the body of the other alleged murderer was found in a river shortly after the incident.

A national-level investigation at the company’s headquarters following the incidents found that there were “serious safety hazards” in its carpooling service Hitch—the platform the drivers used to target their victims. The service has since been suspended indefinitely.

At the meeting, Cheng said that the entire ride-hailing industry had a long way to go before it achieved its security goals.

Chinese ride-hailing firm Didi is rumored to have lost of billions of yuan in 2018, as the company shifted focus from revenue growth to legal compliance, reports 36Kr (in Chinese).

According to an internal file obtained by 36Kr, the Chinese mobility giant recorded an annual loss of RMB 10.9 billion (roughly $1.48 billion) in 2018. It had also reportedly given to drivers subsidies totaling RMB 11.3 billion for the whole year.

Didi was not immediately available for comment when contacted by TechNode.

Previously, Chinese media reported in September that Didi founder and CEO Cheng Wei acknowledged its poor finance in an internal letter, saying Didi “never achieved profitability” since its founding 6 years ago.

Following the murders of two female passengers and a number of other safety incidents last year, China’s largest ride-hailing operator has been the subject of public outcry and government scrutiny. It has since removed non-compliant cars and drivers while also investing more money to recruit qualified drivers to offset the labor shortage.

Didi was once thought to be pursuing “a multibillion-dollar IPO” in the first half of 2018, Wall Street Journal reported April last year, citing an anonymous person close to the company. A company executive told Chinese media in October that “Didi now cares about nothing except security problems.”

Chinese ride-hailing giant Didi is rolling out a feature on its bike-rental platform allowing its users to report each other for “uncivilized” behavior.

The feature enables users to blow the whistle on others who have damaged or vandalized bikes, used a bike for a prolonged period, or parked improperly. Didi told TechNode that it started rolling out the reporting function gradually in early December.

Once reported, the severity of punishments depends on factors including the seriousness of the damage to the bike and the willingness of the offender to cooperate after being caught. The company said it sends out text messages and in-app notifications to alert users before issuing punishments. In more severe cases, offenders would be handed over to the police.

So far, more than 1,000 user accounts have been frozen for periods ranging from five to 90 days, according to Chinese media reports.  Since Jan. 1, the platform has received more than 30,000 complaints from users. The company did not elaborate to TechNode on further punishments.

Didi first introduced its bike rental platform to major Chinese cities including Beijing and Shenzhen in January 2018. The platform is integrated into its main ride-hailing app and features the company’s bike rental brand Didi Bike, as well as others including Ofo.

Chinese bike rental operators such as Ofo and Mobike have also introduced measures to discourage the misuse of their bikes to shake their reputation for crowding city streets following the bike-rental boom in 2017.

Mobike implemented a credit scoring system last February, in which users can earn and lose points for good and bad behavior. Negative behavior includes “riding bikes in an unsafe manner and ignoring traffic rules.” In June, the company started requiring riders to park in designated zones. Recently, Ofo said it was considering a similar measure on its platform.

The Chinese government has imposed stricter regulations on the country’s bike-rental companies. Last year, authorities banned operators from deploying more bikes in major cities like Beijing by capping the total number of bikes permitted on the streets.

Didi Chuxing Mulls Layoffs – The Information (paywalled)

What happened: Chinese ride-hailing company Didi is reportedly mulling layoffs. While the move has not been finalized and figures may change, the company is looking to cut headcounts in some departments by as much as 20%. Staff from support departments including human resources and marketing will be the worst affected. The company currently has more than 10,000 employees around the globe.

Why it’s important: Didi, along with other ride-hailing and ride-sharing services in China, has had to deal with increased regulation following two high-profile murders of passengers that were using its platform. The company has since imposed and enhanced a number of safety features, but the incidents caused government and public backlash. As a result of tightening regulation, the pool from which the company can select drivers has shrunk. Didi has also fallen victim to China’s slowing economy. In December, the company cut its employees bonuses by 50% following its poor performance.

Jinri Toutiao parent company Bytedance has slashed its employees’ Chinese New Year bonuses, as it faces challenges including increased competition and an economic downturn.

Apart from awarding annual bonuses in April, Bytedance typically distributes special “red packets,” also known as hongbao, before Spring Festival as an additional benefit to its employees. Red packets are cash gifts given out around the holiday season in China as a gesture of good fortune.

Employees who have worked at the company for more than three years were this year given RMB 3,600 (around $540) red packets, down from last year’s RMB 16,000, according to Chinese media. Staff members who had worked at Bytedance for between one and three years were last year given RMB 6,000, while they receive RMB 2,600 this year.

A Bytedance spokesperson confirmed the cuts to TechNode.

Bytedance founder and CEO Zhang Yiming sent an internal memo on Tuesday, the same day the red packets were distributed, calling for staff to not be disappointed by the cuts. He said the company had seen success as well as “fair losses,” referring to the economic slowdown, competition from rivals, and mistakes the company made.

He also said that the company would adjust its appraisal system after the Chinese New Year to include more incentives for “employees who work hard and innovate.”

Chinese tech giants have been reported to cut annual bonuses and lay off staff as China’s economy cools. Ride-hailing firm Didi in December slashed its employees’ year-end bonuses by 50% due to less-than-satisfactory performance over the course of 2018. Its executives received nothing.

China’s Didi, BAIC set up joint venture to work on NEV projects – Reuters

What happened: Chinese ride-hailing giant Didi has set up a joint venture (JV) with a unit of state-owned BAIC to work on new energy vehicles (NEV) and artificial intelligence. The JV aims to develop the next generation of connected car systems amid a shift by BAIC to move away from gas-driven cars by 2025.

Why it’s important: The market for NEVs in China is growing rapidly while the wider auto market cools. Sales of fully or partially electric vehicles jumped by nearly 62% to 1.3 million units in 2018. That number is expected to reach 1.6 million units in 2019, according to China’s Association of Automobile Manufacturers. Didi said there are already 400,000 NEVs operating on its platform through partnerships with auto manufacturers including BYD. NEVs and autonomous vehicles also form a central part of China’s Made in China 2025 initiative, in which Beijing seeks to move to a more high-value economy.

Chinese ride-hailing giant Didi will impose higher fares over the Spring Festival, as passengers will be required to tip drivers amid a nationwide driver shortage exacerbated by the national holiday.

In an open letter to its passengers, Didi has asked users to pay a “special Chinese New Year fee” to drivers when they book their trips between Jan. 28 and Feb. 10. The holiday tips range from RMB 1 ($0.15) to RMB 9, varying depending on location and date, and will be given in full to the platform’s drivers.

Didi is already short of drivers in major cities amid increasingly stringent regulations. However, it anticipates a further shortage driven by the Chinese New Year, when most drivers will take a holiday break amid increased demand.

The tip system will be applied to its major ride-hailing services—Express, Premier, and Didi-owned Uber China—in nearly 268 cities across the country.

Users in Beijing will pay the highest premiums, which will reach up to RMB 9 per trip from Feb.4 to Feb. 6. Shenzhen and Shanghai follow with highs of RMB 8 and RMB 5 respectively. Didi expects that the longest queues will occur between Chinese New Year’s Eve and first two days of China’s first lunar month (Feb. 4 to Feb. 6). The company said drivers will also be given additional subsidies, from RMB 2.8 to RMB 100 per trip, as a reward for working during the Spring Festival.

“We expect the request response rate [from drivers] to drop by 20% across mainland China as the nation goes into festival mode,” the company said in the letter. It added that users will be able to check average response rates from the previous day and peak hours for specific areas from Jan. 28.

In spite of the mounting pressure from authorities and the public following the murder of two female passengers by its drivers last year, the Chinese ride-hailing remains a dominant figure in China’s mobility sector.

Still, Alibaba-backed Hello Transtech is taking on them, planning to provide carpooling services in 10 cities by the end of January.

Ride-hailing giant Didi has hinted at the next possible upgrade to the company’s security features: requiring passengers to register their real names in order to use the platform.

“At-risk users cannot be identified and targeted immediately without a real-name system,” the company wrote on its WeChat account on Tuesday. Didi also said that without such a system there is little recourse for drivers if a passenger refuses to pay for their trip.

In a WeChat poll, the company invited netizens to share their views about whether real-name verification should be applied to passengers. As of 4 p.m. on Wednesday, nearly 90% of the 160,000 respondents indicated that they believe the feature should be extended to include the platform’s passengers.

The poll, which opened on Tuesday and will close early next week, also has more than 600 comments and thousands of public “likes.”

Didi has enforced real-name verification for its drivers since 2016, but this is the first time it has hinted at extending the measure to its passengers. Drivers are required to upload their driver license and vehicle registration when applying to use the platform. Nonetheless, unqualified drivers still spring up on the platform with the help of counterfeit licenses and fake IDs, according to Chinese media.

The company insists that drivers and passengers are strictly forbidden to access one another’s personal information. Still, some voters voiced concerns over privacy, worrying that their identities could be leaked or misused by drivers.

Didi created its online discussion platform in November 2018 as part of an initiative allowing the public to provide input on various topics. Past polls have included whether drivers should be able to refuse drunk passengers and if the owners of lost goods should pay fees to reclaim their items.

Following a poll, the company began testing a feature in the southern Chinese city of Shenzhen allowing drivers to cancel the trips of drunk passengers should they threaten the safety of the drivers or themselves.

“Users will receive messages which remind them to check if the drivers they meet are consistent with the license information,” a Didi spokesperson told TechNode. All drivers on its platform are required to pass a facial recognition each day before they start picking up passengers.

The company implemented the measure to enhance safety following the murder of 21-year-old flight attendant Li Mingzhu by a Didi driver in May 2018. The incident was followed by another murder in the eastern Chinese coastal city of Wenzhou in August.

Didi Employees Involved in Over 60 Internal Corruption Cases Last Year – Caixin Global

What happened: Ride-hailing giant Didi said it dismissed more than 80 employees last year after its compliance staff found in excess of 60 cases of internal corruption. The employees were laid off for alleged “severe violations” of the firm’s rules, which involved cases of fraud, bribes, or information security breaches. The company handed over the former employees to police for suspected illegal behavior.

Why it’s important: Chinese tech companies have stepped up internal investigations in an attempt to stamp out corruption within their ranks. Tencent, Baidu, Xiaomi, and JD have all launched similar initiatives. Recently, super lifestyle app Meituan sent 90 of its and its partner companies’ employees to the police for suspected wrongdoing. Last year was a difficult one for Didi. The company faced increased public and government scrutiny following the murders of two female passengers who booked rides on its carpooling service Hitch. The company restructured and updated its safety systems in response.

Zhong Yuan, a 28-year-old driver for Chinese ride-hailing giant Didi, has pleaded guilty to the murder and rape of a female passenger in August last year, according to Beijing Youth Daily (in Chinese).

Zhong appeared in court in the eastern Chinese city of Wenzhou on Jan. 4. The trial was not open to the public and the court has yet to say when its decision will be made public.

The victim, a 20-year-old woman surnamed Zhao, went missing in Wenzhou’s Yueqing County in late August 2018, after hailing a ride on Didi’s Hitch. A friend reported to local authorities that she sent her a message pleading for help. Zhao’s body was found in a mountainous area nearby, and Zhong was arrested by police, later admitting his involvement in the crime.

When contacted by TechNode, a representative from Didi refused to comment on the case.

Last year, two high-profile murders by Didi drivers caused a nationwide outcry. Government officials also launched a series of investigations into the company’s safety mechanisms. The firm was found to have “serious safety hazards” in its carpooling business Hitch—the platform that the drivers allegedly used to target their victims.

In a separate case, a 21-year-old flight attendant Li Mingzhu was raped and killed in May 2018 after she booked a ride through Didi’s Hitch service. Li booked the trip at Zhengzhou Airport in China’s central Henan province. After the crime, the suspect, Liu Zhenhua, abandoned his vehicle and drowned himself in a river, according to police.

The company has since started to remove non-compliant drivers and vehicles from its platform and restructured to focus on improving passenger safety and promoting compliance.

According to court documents, Zhong was charged with rape and homicide. Prosecutors said he robbed Zhao to pay back gambling debts he had accumulated after lending money from online peer-to-peer loan platforms. Zhong also pleaded guilty to threatening another female passenger during an earlier ride. The passenger had filed a complaint with Didi.

Chinese ride-hailing firm Didi has launched a series of financial service products, highlighting its efforts to diversify its business lines amid increased government scrutiny.

The in-app features, which include access to funds for critical illness protection, are now available to all users across China. Users who join the program can access as much as RMB 500,000 (around $70,000) in protection from life-threatening conditions, including cancer, leukemia, and paralysis, Didi claims. Other services include wealth management, personal credit, and lending.

This is the first time Didi has showcased its financial services business to everyone on its platform. It previously announced the fintech business group at the beginning of 2018 after it was granted a payment license by fully acquiring a Beijing-based online payment enterprise back in December 2017 (in Chinese).

A Didi spokesperson told TechNode the products are set up to focus primarily on “gig economy workers” and their families. App users can pay around RMB 20 each month for medical insurance, which is provided by ZhongAn, a Hong Kong-listed Chinese online-only insurance company.

The company now also offers automobile financing solutions, including purchasing, leasing, trading, and financing services for new energy vehicles. Didi said the beta versions of these services were previously only available to Didi drivers and car owners.

Following the murders of two female passengers and a number of other safety incidents last year, China’s largest ride-hailing operator has been the subject of continued public and government scrutiny. Stricter regulations have forced Didi to remove from its platform both cars and drivers that don’t meet the required approval criteria. It recently announced that it would slowly decrease the number of orders served to non-compliant drivers.

In December, the company slashed its employees’ year-end bonuses by 50% due to less-than-satisfactory performance over the course of 2018, while executives received nothing. The company also restructured to focus on improving passenger safety and indefinitely suspended its carpooling service, Hitch.

滴滴收购ofo文件曝光？滴滴李敏：10月9日就辟过谣了 – Sina Tech

What happened: Didi Vice President Li Min has denied rumors that the company planned to invest $500 million in bike-rental firm Ofo’s Series F in August, calling the comments “foolish.” Min made the remarks on popular messaging app WeChat after the claims began circulating on various Chinese media websites, citing anonymous sources and publishing alleged financing documentation.

Why it’s important: The Chinese bike-sharing firm has been teetering on the edge of bankruptcy following retreats from international markets and rumors of layoffs. As Ofo’s story has gone viral on Chinese social media, the public is looking for answers relating to what killed the failing unicorn. Pony Ma, CEO of Tencent, commented on one of his employee’s WeChat posts, indicating that one significant reason for the company’s failure was veto rights. Ofo’s investors, mainly Alibaba and Didi, have subsequently been suspected by netizens of standing as barriers to the management of the company by using their veto rights.

Meituan Dianping Gets Green Light for Ride-Hailing Service in Beijing – Caixin Global

What happened: Meituan Dianping, a Chinese group-buying website for consumer products and retail services, received a permit to provide ride-hailing services in Beijing. Licenses were also given to two other businesses, namely Sogood and SH-ABC. This will add to the eight already operating ride-hailing platforms in the city. Meituan launched its mobility service in Nanjing late last year and later expanded to Shanghai.

Why it is important: Dominated by Didi, the ride-hailing industry has become increasingly saturated. Yet, Meituan’s expansion could mark a change in the power dynamic of the industry. As the company ventures to take on Didi in Beijing, there may be a renewed subsidy war between the established firms and the incoming company, resulting in a potential shift in users, whether it be temporary or permanent. Beijing’s attitude is welcoming of a competitive market, particularly given the Chinese government’s investigation into Didi over alleged monopoly allegations.

Chinese ride-hailing firm Didi will over time remove drivers and vehicles that do not meet the company’s safety requirements, the latest in a series of safety measures following an investigation by China’s transportation authority.

The company made the announcement last night as part of a new round of plans to increase safety on its platform. Didi said it would gradually reduce orders dispatched to non-compliant drivers until they no longer received any passengers.

The safety upgrades follow a high-profile investigation by China’s Ministry of Transport, which claimed that the company had “lost control” of its drivers and vehicles after a series of safety issues. It said Didi’s carpool service Hitch lacked adequate safety measures, which could result in significant hazards. The ministry vowed to fine Didi executives.

Last week, a former Didi driver was sentenced to death for the 2016 murder of a passenger in Shenzhen.

The company plans to report its progress in removing drivers and vehicles in the future as it is setting targets to meet compliance standards, which vary between regions and cities.

Didi said that it would also increase the amount of data shared between it and the government. Regulations stipulate that data including driver information, car locations, and routes should be shared. The country’s police database is already used for driver’s background checks.

The new mechanism will also involve the police for handling emergency issues, with a 24-hour hotline for law enforcement to gain access to information from Didi should a safety issue arise. Data mining and machine learning will be used to identify abnormal behavior, such as route deviations, order canceling, and cars pulling over.

The company has faced increased scrutiny this year following the alleged murder of two female passengers by Didi drivers. The incidents caused public outcry, forcing the company to overhaul its services, implement new safety measures including stricter background checks, and appoint a team in charge of emergency management.

It has also previously implemented a blacklist feature, enabling passengers and drivers to block each other, and piloted a function to cut down on bad behavior by drunk passengers.

Employees of Chinese ride-hailing firm Didi will receive only half of their year-end bonuses, while executives receive nothing, the company’s CEO Cheng Wei announced at an internal meeting on Saturday, The Paper reports.

The bonus cuts come as a result of the company’s less-than-satisfactory performance over the course of the year, The Paper cites Cheng as saying, adding that most of the blame is held by its executives. The company’s annual bonuses can vary between two and six months salary, depending on an employees performance.

A Didi representative refused to comment on the matter when contacted by TechNode.

“Everybody is frustrated,” a company employee told The Paper. “We used to work overtime for a bonus. After the decision was made, we just didn’t care about [appraisals anymore].”

Didi has faced government and public scrutiny following high profile safety incidents on its platform.

Last week, a former Didi driver was sentenced to death for murdering a passenger in Shenzhen in 2016. The company refused to comment on the ruling.

Earlier this year, two female passengers in their 20s were allegedly raped and killed by Didi drivers while using the platform’s carpooling service, Hitch. The murders occurred in the capital of China’s central Henan province, Zhengzhou, and Wenzhou, a coastal city in the southeastern province of Zhejiang.

The murders led to users boycotting the service while the company temporarily shut down seven late night services for a week while it implemented new safety measures. The company’s app fell 53 places in the Chinese Apple App Store in the course of a week.

In September an inspection team consisting of 10 national ministries and commissions began an investigation at the company’s headquarters. The investigation found that there were “serious safety hazards” in its Hitch business. The service was suspended indefinitely.

Earlier this month, the company announced a reorganization plan for improving passenger safety on its platform. The company merged its car-hailing services into a single business unit to promote compliance, while appointing two new executives, including a chief safety officer and chief security officer, to oversee its emergency management.

A court in the southern Chinese city of Shenzhen has sentenced a former Didi driver to death. Pan Tujin was found guilty of robbing and murdering a passenger in the city on the night of May 2, 2016. His female victim, identified only by the surname of Zhong, was reportedly a teacher.

According to the official court notice, in April 2016 Pan set out to find victims to rob via Didi’s ride-hailing services. He bought “tools“ including stickers to disguise his license plate number, a knife, a mask, and sedatives.

A Didi representative told TechNode that the company has no comment on the ruling, adding that to date, police had cracked 100% of major criminal cases perpetrated via Didi’s platform.

The company also cited a report by China’s Supreme People Court that the crime rate of taxi drivers (including assault, smuggling, and driving dangerously) in 2017 was over 10 times that of ride-hailing drivers.

In early May, he picked up Zhong in Shenzhen’s Nanshan District. According to the court, Pan saw his opportunity in the lone female passenger apparently living in a high-end residential area. Local media reports he pulled over and forced Zhong to transfer him RMB 7,000 (around $1,000) via WeChat and Alipay. When Zhong struggled, Pan killed her and stole her belongings.

He was reportedly caught only 12 hours later by police and brought to trial in March 2017. Due to the defendant’s nervous breakdown, the hearing was adjourned to a later date.

Pan’s crime took place well before two high-profile murders of female passengers this year by male Didi drivers. Those incidents caused a national uproar and forced Didi to overhaul its services, implement a series of new safety features including more stringent background checks for its drivers, and undergo a corporate restructuring.

Days after a driver was robbed and murdered by his passenger, Didi also rolled out safety upgrades for drivers. China’s ride-hailing giant is being watched closely by both government as well as the public, and its actions may set a precedent for the rest of the industry.

China’s transport ministry said last month that the ride-hailing giant had “lost control” of its drivers and vehicles. It added that the company’s carpool service Hitch lacked adequate safety measures, which could result in significant hazards. It vowed to fine Didi executives after an investigation.

Chinese ride-hailing giant Didi has rolled out a series of features aimed at curbing bad behavior among drunk passengers, marking the latest security enhancement aimed at both users and drivers.

Drivers are permitted to report drunk passengers and cancel their trips should they threaten the safety of themselves or the driver. However, they must complete the journey if a drunk passenger’s behavior isn’t perceived as being dangerous.

The company implemented the policy in the southern Chinese city of Shenzhen’s non-premium services as a pilot project yesterday (Dec. 10). It will be soliciting feedback from drivers and passengers at the same time.

The company is also encouraging sober passengers to accompany drunk friends to reduce risks. A user’s emergency contact uploaded to their Didi profile will be contacted if needed. Drivers can also apply to have a passenger pay a cleaning fee should they throw up in the car.

Didi said the driver complaints and service charge applications would be stored for reference in future disputes.

The implementation of the new policy comes after a conference the company organized last month to discuss safety protocols, which included the opinions and proposals of 269,000 netizens. Before the rollout of the policy, Didi’s internal management team received around 30,000 drunk passenger complaints and reports from drivers nationwide daily, the company told TechNode.

The Chinese government and public lambasted Didi in the aftermath of the murder of two passengers. The company then scrambled to implement a number of updated safety features, including a voice recording function to keep in-car communication on record for dispute resolution, a blacklist function allowing passengers and drivers to block each other for 12 months, and an in-app panic button.

The company has also been increasing the stringency of its background checks for drivers. In Beijing, rules require that drivers and cars be registered in the city. Compliance with the policy has reduced Didi’s available workforce and led to some driver shortages.

China’s Didi restructures key units to improve safety following passenger deaths – TechCrunch

What happened: Chinese ride-hailing giant Didi announced on Dec. 5 a series of structural reorganizations to improve safety following the murder of two users. The company will merge Didi Express, Premier and Luxe, its car-hailing offerings into a single business unit. Its bike rental, designated driver, and public transport units are moved to a single entity. Two senior positions, a chief safety officer and a chief security officer, will be added to oversee its emergency management.

Why it’s important: The murder of two passengers in May and September has exposed Didi and China’s ride-hailing industry to increased scrutiny, both from regulatory authorities and the public. Didi Hitch, the carpool service the victims used will “remain suspended indefinitely” as the company revamps security measures. The reshuffle also allows the company to explore retail opportunities including car sales, maintenance, and loans to provide its drivers with extra services and support.

The Ministry of Transportation announced on Tuesday the result of the investigation into Didi Chuxing, which was launched just days after the second killing of a female passenger by her driver.

Authorities said Didi’s carpool service Hitch lacks adequate safety measures which could lead to major safety hazards, according to Xinhua (in Chinese). Authorities also slammed Didi for “failing to conduct driver qualification and background checks.” The ministry said that there are still a large number of illegal cars and unqualified drivers on Didi’s platform, adding that many of the safety personnel are also unlicensed.

The ministry said Didi Hitch should not only be suspended before meeting necessary regulatory requirements, but it should also clean up the illegal activities plaguing its platform. Furthermore, authorities also said executives and legal representatives should be fined and penalized for their negligence but did not specify the amount the fines should be.

Although the investigation was targeted at Didi Chuxing, it was actually an industry-wide crackdown that hit 7 other ride-hailing platforms including Shouqi, Shenzhou, CaoCao, Yidao Yongche, Meituan, DiDa, and Autonavi. The ministry said it will also take necessary steps against anti-competitive behavior in the ride-hailing industry.

In response to the conclusion of the investigation, founder and CEO of Didi Chuxing Cheng Wei said in a press release today that Didi’s will continue its safety rectification program for the next 6 months, and the Hitch service “will remain suspended indefinitely.”

The company said it will comply with regulatory requirements proposed by the Ministry and will “strengthen safety audits, organize offline inspections and driver interviews.” Moreover, the company will take an active role in organizing training sessions for drivers as well as helping drivers to acquire the necessary licenses, said Cheng.

Didi will also ramp up investment in safety products and improve existing safety measures such as audio and video recording during rides and one-tap panic button.

“As a young company, Didi still needs to work on many shortcomings and imperfections that have brought the public great concern,” Cheng admittedly said.

Beijing is investigating the merger between Didi Chuxing and Uber China regarding potential monopoly charges. This is likely to allow new comers to join the game, and foster legislation progress in the industry.

“We are now carefully looking into the case according to related law and regulation… Ride hailing is a new industry…which shows complicated and fast-changing competition,” Wu Zhenguo, head of China’s Anti-monopoly Bureau said during the State Council Information Office’s meeting with media (in Chinese) on November 16.

Wu added that China’s Anti-monopoly Law, which has been implemented for ten years, treats all parties equally regardless of nationalities and market status.

Criticism on the merger deal’s being monopoly has long been haunting the ride-hailing market in China, but there has been little substantial investigation.

On August 1, 2016, Didi formally announced their acquisition of Uber China. The deal lifted Didi’s total value to around $36 billion, but soon got the company into legal trouble for having “failed to declare the transaction.” Beijing then announced that this would activate anti-monopoly investigation.

After two years, in September, 2018, as no legal progress has been made, the Ministry of Transportation openly pointed out that the merger could be a monopoly. According to data cited by Yicai (in Chinese) in September, Didi Chuxing, after the merger, was dominating the ride-hailing market with more than 90% market share. As a result, Didi responded that the company welcomes more players to join the competition, as Didi alone cannot satisfactorily serve the huge market.

A possible reason for a delayed investigation, said lawyers close to the Anti-monopoly Bureau (in Chinese), could be the absence of proper legal definition of ride-hailing in China, which could help clarify nature of the services, and then accurately allow existing legal frameworks to come up with fair and lawful judgement.

Didi has not given any immediate response to TechNode’s inquiry by the publication of the article.

Image credit: Tencent Video

According to Chinese media, Nanjing is home to a “car graveyard” of close to 1,000 vehicles. The brand-new cars are being stored in an industrial park as companies wait for the lifting of a local ban on certification for new rental and ride-hailing vehicles. Although not all the cars belong to ride-hailing platforms, photos and videos show that some sport the logos of Didi and Meituan.

Nanjing’s government first announced a temporary ban on new rental car licenses on April 19, but news of the restriction leaked two days beforehand, AI Finance & Economics reports. That led to a rush to buy and register vehicles, as Nanjing mandates that all additional ride-hailing cars must be new.

However, in August of this year, Nanjing leveled an additional restriction on the industry, stalling the processing of rental car certification for three months. Until that regulation ends on November 16, close to 1,000 new cars have been left idle in the Nanjing industrial parking lot.

Image credit: Tencent Video

Nanjing has been the site of fierce ride-hailing competition, boasting an unusually high ratio of some 20,000 cars for a population of around 8.3 million residents. Meituan launched a pilot “ride-share” program there this past February, heightening the competition among the seven platforms that once occupied the city.

The secretary of Nanjing’s local taxi association, Ling Qiang, told AI Finance & Economics that ride-hailing platforms’ tactic of offering discounts drove down demand for taxis significantly.

Meituan has since slowed its ride-hailing ambitions, and Nanjing government regulations have temporarily ceased the entry of new cars into the rental ecosystem. But the fight may not be over just yet. This past May, Didi’s number one competitor Dida Chuxing entered a strategic partnership with Nanjing’s taxi association. All of the city’s taxis can now be booked via Dida’s platform, with modest RMB 1-2 discounts available for online users. Dida doesn’t operate any non-taxi ride-hailing services there, however.

Although not a true “graveyard,” the Nanjing lot of unused cars brings to mind images of the sites around China where thousands of rental bikes have gone to die. The boom of the bike rental market has led to oversupply in many cities, as well as vandalism. Ride-hailing has yet to go the same way, although Nanjing’s limits on the number of rental cars may be a harbinger of things to come.

Dida Chuxing Turns Into China’s Second-Largest Web Driver as Cabs Come Back —Yicai Global

What happened: Ride-hailing platform Dida Chuxing has recorded a jump to 10 million daily active users (DAU) making it the second most popular service following market leader Didi Chuxing. Dida operates taxi hailing and carpooling services. After Didi’s safety scandals including two murders and a number of assaults on female passengers, Chinese are again turning towards taxis.

Why it’s important: Although the number of Dida users is still low compared to the 550 million users that Didi claims to serve, the rise of Dida shows that users have genuine fears over ride-hailing. Last month, China’s Ministry of Transport has discovered a string of safety issues with multiple ride-hailing platforms including weak emergency mechanisms. Didi has also found itself under scrutiny for its monopoly. On the other hand, Dida’s reach is rising. The company recently reached a partnership with Hello TransTech (ex-Hello Bike) allowing its users to hail taxis in 81 cities countrywide.

哈啰出行打车业务81城同步上线 接入嘀嗒打造多元出行平台-Sina Tech

What happened: Hello TransTech, formerly known as Hello Bike, has entered partnership with Dida Chuxing, an up-and-coming competitor of Didi Chuxing, to speed up its foray into the ride-hailing industry. The tie-up would allow Hello TransTech users to hail taxis in 81 cities countrywide, including Shanghai, Nanjing and Chengdu, the three cities where the company start piloting taxi-hailing service on October 11.

Why it’s important: China’s transportation industry is experiencing a swift change of power in both two-wheeled and four-wheeled mobility services. As Mobike being acquired by Meituan and ofo stuck in cash strains, Alibaba-backed Hello TransTech rise quickly to gain market shares through deposit-free services and integration with Alibaba’s online food delivery service Ele.me. The bike rental startup now tries to pivot into four-wheeled mobility through a partnership with Dida Chuxing. As the second-largest ride-hailing company in China, Dida’s daily active users ballooned to 10.2 million while Didi is suffering from scandals about rider safety and industry monopoly.

According to a Weibo announcement on October 10, Didi will test out a new blacklist feature on its ride-hailing app today (October 18). It’s part of an update that also includes improvements to existing options like the “one-click” panic button, emergency contacts, and warning against underage passengers. But unlike previous safety upgrades, which have mainly focused on passenger safety, the blacklist feature can also be accessed by drivers.

The option will be accessible from multiple pages within the app, from trip cancellation to complaint submission to reviews. After a passenger or driver adds someone to the blacklist, Didi will prevent them from being paired up again for 12 months.

As a staff member of Didi’s public safety department told China National Radio, being added to a blacklist can also affect other aspects of one’s in-app experience. Drivers who are featured on multiple passenger blacklists and are also the subject of complaints, for example, may be punished by the company. Meanwhile, passengers who are added to more than one list will have access to fewer drivers’ services in the future.

In its current stage of development, a blacklist status cannot be reversed.

As of writing time, a Didi PR representative had not yet responded to TechNode’s request for further information. The concept of a blacklist and its negative aftereffects, however, may sound similar to social credit systems that have sprung up across China in recent years.

In fact, the vice-director of the Research Center on Communications Law at China University of Politics and Law, Zhu Wei, told CNR that the “blacklist feature is an important component of creating a credit system” (our translation) among drivers and passengers. According to Zhu, both parties will be incentivized to avoid negative behaviors.

Fudan University’s Professor Zheng Lei, on the other hand, said that the measure has limits. While it punishes wrongdoers, the blacklist may fail to prevent crimes before they happen.

The feature is only the latest addition in a long line of safety features churned out by Didi after the murders of two passengers earlier this year. Past updates have included more rigorous background checks and a mandatory daily safety knowledge test for drivers, as well as an audio recording option for Express and Premier trips.

More recently, on October 16 Didi announced that it was recruiting 1,000 Party members to join the ranks of its customer service team. According to the company, it’s part of an effort to reduce response time for emergency situations, as well as improve the reporting of complaints to police.

Didi Chuxing has announced new plans to grow the size of its in-house customer service team, adding 3000 new positions into the existing team of 5000. On top of the expansion, the company also proposed to give a thousand of those new vacancies to Chinese Communist Party members.

“Under the guidance of the higher Party organization, Didi plans to recruit a thousand Party member customer service representatives, who will be given the priority to be in the Safety and Emergency Customer Service Team to bring their exemplary role into full play,” the ride-hailing firm said in the WeChat post.

Didi Chuxing has been rolling out and trialing a number of new features aiming to enhance passenger safety after two murders in three months. After widespread public outrage, Didi temporarily suspended several night services as it rushed to implement a host of new safety features, including audio recording on Express and Premier trips, a mandatory daily safety test for drivers, and an improved panic button to contact police.

As part of the safety revamp efforts, the company said it has increased the number of representatives in the safety and emergency team by threefold.

Currently, the company has a team of 15,000 customer service representatives—including 5000 in-house and 10,000 outsourced representatives.

According to the company, from January to September, the customer service department had assisted over 1.1 million passengers to retrieve lost items and handled on average over 2 million calls per day. However, there is still the need for expansion.

“Didi will continue to invest the best resources into customer service and increase its internal customer service team to 8000.”

Didi to trial passenger and driver blacklisting feature

Didi Chuxing is facing increasing pressure from not only the public but also authorities to improve its safety measures. The Party has been making moves to strengthen its role within the ride-hailing firm and other Chinese tech companies.

Reports suggest that Didi Chuxing’s party branch was established in 2013, which later formed into a party committee in 2016. The number of Party members under Didi grew significantly from 3 to 3750 in five years. Currently, there are 24 branches under the firm’s party committee which are located all over in Beijing, Shanghai, Zhejiang, the Huanan region and the Southwest of China.

滴滴美团称在南京已清退近20万辆违规网约车 – Xinhua

What happened: According to figures provided to the Nanjing authorities, Didi Chuxing and Meituan Dianping reportedly have removed 161,151 and 38,000 vehicles, respectively, from their fleets. The two ride-hailing platforms combined have removed nearly 200,000 vehicles that fail to meet standards.

The Nanjing authorities have increased supervision of 7 ride-hailing firms operating in the city earlier this month. Both companies have agreed to remove all non-compliant vehicles in Nanjing before October 18.

Why it’s important: China’s ride-hailing industry has been under great pressure to revamp its operations after the deaths of two Didi Hitch passengers. In an effort to ensure safety, the transport ministry announced early September that it would conduct checks on ride-hailing companies and work with the police to remove vehicles and drivers that fail to meet standards by the end of the year. Meituan Dianping started piloting its ride-hailing service in Nanjing earlier this year but announced last month that it would halt its expansion into ride-hailing due to the ongoing passenger safety crisis.

哈啰出行回应上线打车业务：正与合作伙伴试点 – Tencent

What happened: Hello TransTech (Hello Chuxing in Chinese), formerly known as Hello Bike, has started piloting taxi-hailing service in China working with partners in Shanghai, Nanjing, and Chengdu. The company did not reveal when and where it will officially launch the new taxi-hailing service.

Why it’s important: Chinese bike sharing company, HelloBike, rebranded itself as “Hello TransTech” in September in a bid to expand its operations to other mobility services. The Ant Financial-backed company is not the only one trying to take a piece of China’s lucrative ride-hailing market. Earlier this year, Chinese on-demand food delivery service operator Meituan Dianping started piloting ride-hailing service in Shanghai and Nanjing but announced last month that it would suspend its expansion into ride-hailing amid passenger safety crisis at Didi Chuxing.

Chinese ride-hailing giant Didi Chuxing will begin trialing a feature on October 18 that will allow passengers and drivers to blacklist each other, marking the latest in a series of upgrades to its security features.

The blacklisting function (in Chinese) will be accessible when canceling an order, as well as through the driver evaluation and complaints pages. Should one party decide to block the other, the driver and passenger will not be matched for 12 months.

Didi says that once an individual has been put onto a blacklist during the trial period, they cannot be removed.

The company has faced increased scrutiny following the murders of two women using the company’s Hitch service this year, as well as a string of sexual assaults. The latest incident, which occurred in August, was met with outrage online. Didi users began posting photos of themselves deleting the company’s smartphone app. It also resulted in increased downloads of apps that facilitate video calls to police.

China’s Ministry of Transportation published a commentary censuring Didi for its failure to offer effective preventive measures as well as urgent help during the incident, saying the company only tried to solve the problem with pricy settlements. The company was also summoned by authorities in ten cities around the country, which required it to implement or improve safety features.

Didi originally included an emergency button, itinerary sharing, and trip recording feature in July 2016. Since then, the company has enhanced its emergency button by making it more accessible and allowing users to instantly call the police. The company also added mandatory safety knowledge tests for drivers and more stringent facial recognition tests.

However, Didi was criticized by state media in September for advertising its in-app panic button as being “one click to call the police,” when the feature requires at least two taps. At the time, the company responded to TechNode, saying: “We are exploring ways to tackle external constraints and have the trip information sent to police automatically through partnerships with law enforcement agencies.”

滴滴出行举行乘客意见征求会 顺风车仍持续无限期下线 – Tencent Tech

What happened: On the afternoon on October 6, Didi invited driver and customer representatives to an internal discussion on ride-hailing safety, service, and driver management. The company decided to continue the suspension of their carpooling function. The discussion centered around safety issues on the drivers’ side – allowing only cars with video recording equipment to pick-up drunk passengers and setting up special report mechanisms were two possible solutions discussed. Didi’s CEO Cheng Wei, President Liu Qing, CTO Zhang Bo, and other high-level officers attended the discussion.

Why it’s important: Public safety pressure and carpooling service suspension will reduce Didi’s passenger absorption capability, and add an extra burden to any profitability plans. Meanwhile, the situation could force Didi to give up sizeable market share and allow competitors to fill the service vacuum, considering the large ride-hailing market. However, criticism concerning safety has raised the market-entry threshold.

Uber Is Back in China: But for Making Bikes, Not Ride-Hailing —Bloomberg

What happened: After selling its ride-hailing operations to Didi in 2016, Uber is coming back to China but not to compete for the market again. The company is ordering bikes and scooters for its bike-rental business back in the US. Uber has no plans to bring the scheme to China but it is considering other Asian countries.

Why it’s important: After a period in which ride-hailing companies were investing in bike-rental (Didi into ofo, Grab into Singapore’s failed platform oBike), integrating mobility services is all the rage. Didi kicked off the trend by taking over troubled bike-rental platform Bluegogo in January. Uber bought electric bike-rental platform Jump in April, around the same time that Didi bought its second service Mobike. Indian Ola started its own bike-rental service back in December 2017. Looking forward, we are likely to see more mobility services added to one single platform.

自己无法满足数亿民众出行需求 欢迎更多企业投入 – Tencent Tech

What happened: Ride hailing giant Didi published a public announcement last night, admitting that the company itself cannot satisfy the whole Chinese ride hailing market’s demands. The company also stressed that it would strictly follow related regulations, and continue strengthening safety management. Didi also said that it has increased the number of safety supervision staff by 300%.

Why it’s important: The announcement signals Didi’s tacit gesture to admit a dominant (even a monopoly) position in China’s ride hailing market. Welcoming new players show Didi’s open attitude to comply with the government and Chinese market’s demands of a healthier and more balanced market, despite that the company’s user base and market influence are still dominantly powerful in the country. The announcement may also be interpreted as a confident reply which suggests Didi’s irreplaceable leading role in the industry.

China’s ride-hailing giant is revving up to service Japan, starting with its second biggest city – Osaka. A press release states that Didi launches taxi-hailing service today in Osaka and the Senshu area, including Kansai International Airport.

Didi Japan, a joint venture with Japanese conglomerate SoftBank, seeks to cater to the country’s taxi market, the third biggest in the world with 1.6 billion annual passengers. Osaka alone has 8.8 million residents and will be the biggest international city Didi has tackled so far.

The launch comes just ahead of China’s fall Golden Week holiday, which begins on National Day (October 1) and ends October 7. According to the press release, Didi Japan’s taxi-hailing service will accommodate travelers from mainland China, Hong Kong, and Taiwan, who can hail taxis in Osaka, access Chinese-Japanese text translation, and get “bilingual customer support” via their apps.

Didi’s entry into the local taxi market will mean increases in efficiency as well as income for Japanese drivers, according to its statement. Japan is one of the ride-hailing giant’s “core overseas markets,” in addition to Australia and Mexico.

The launch seems especially timely in light of recent news: Ctrip.com reported that for the first time, Japan is the number one choice for Chinese travelers over the upcoming Golden Week holiday, despite a recent earthquake and typhoon. A total of 7 million travelers from the mainland are expected to go abroad this year.

After Osaka, Didi Japan plans to enter Kyoto, Fukuoka, Tokyo, and other cities in the “near future,” Didi’s press release states. It also quoted company president Jean Liu’s commitment in July, when Didi Japan first launched, to “[develop] extensive collaboration with all industry players to assist in smart city programs across Japan and Asia.”

The recent announcement is a bright spot amid news coverage of Didi over the last couple months. Almost two weeks ago, the company finished adding significant safety upgrades to its Chinese ride-hailing services following public outrage over the murders of two carpool passengers.

Starting September 8, Didi suspended seven late-night services for a week as it rushed to implement a host of new safety features, including audio recording on Express and Premier trips, a mandatory daily safety test for drivers, and an improved panic button to contact police. The upgrades followed widespread public outrage over two high-profile murders of Didi passengers in recent months.

Despite the improvements, China National Radio called out the ride-hailing company for potentially misleading users about its emergency button. Although the feature is branded as “一键报警,” usually interpreted as “one click to call the police,” it actually prompts passengers to tap at least twice to contact authorities.

According to the Didi app, clicking the button brings passengers to a page with information about their car, driver, and location. From there, users must tap again to text or call the police, with either action automatically sending their trip information to all emergency contacts via text. At the same time, users will receive an identical message on their own phones.

When asked whether the apparent misnomer could pose a safety risk for passengers in emergency situations, a Didi representative referred TechNode to materials stating that the vast majority of users “test” the function by tapping once but don’t follow up by initiating an emergency call or text. According to the statement, Didi also has more improvements planned for the button.

“We are exploring ways to tackle external constraints and have the trip information sent to police automatically through partnerships with law enforcement agencies.”

Another document shared with TechNode compared safety features of multiple ride-hailing services. It showed that Didi’s new daily facial recognition checks and plans to cooperate further with Chinese police now set it apart from its competitors.

Bike rental, ride-hailing, and logistics services in China’s Guangdong province were suspended as Typhoon Mangkhut made landfall over the weekend, according to local media.

Chinese mobility services including those offered by ride-hailing giant Didi and Meituan-owned bike rental firm Mobike were temporarily stopped.

The typhoon, which is one of the region’s most powerful in decades, also caused the suspension of transportation services in Guangdong and Hong Kong, where train services were halted and flights were canceled.

Didi suspended numerous offerings—including taxi hailing, Express, and bike-rental,  in seven cities including Zhuhai from 4 am to 5 pm yesterday. However, in Shenzhen, the company’s Premier service was exempt from interruptions. It’s designated driver service, which allows drunk drivers to be transported home in their own cars, will be suspended until the morning of September 18.

Mobike’s service suspension lasted from the early hours of September 16 until this morning (September 17).

Courier services were also affected by the typhoon. SF Express suspended services in Guangdong, Hainan, and Hong Kong in order to protect employees and goods. The company said it would resume operations as soon as it could.

Take out services were also interrupted. Alibaba-owned Ele.me said that users in Guangdong would not be able to make use of its delivery service. The company said the timeframe of its closure would be dependent on weather conditions.

Mangkhut is not traveling inland and is expected to hit Guizhou, Chongqing, and Yunnan later today. It remains to be seen whether similar suspensions will be imposed there. Over 2.5 million people were evacuated from southern China. Before battering Hong Kong and Guangdong, the typhoon made landfall in the Phillippines, killing at least 33. Mangkhut is expected to be downgraded to a tropical depression as it moves toward the interior of the country.

Rumors started Tuesday morning that China’s tech giant Alibaba has lent bike sharing company ofo RMB 60 million to help them pull through a cash crunch. Later at noon, local media reported both Alibaba and ofo denied the rumor.

On September 5, local media reported an unconfirmed “millions of dollars” worth of fundraising for the yellow bike-rental company led by Ant Financial and followed by Didi Chuxing. Didi and Ant Financial declined to comment while ofo said it was unclear on the issue.

The rumors show further speculations of the company’s operations and reveal continued doubt about how the company would fulfill its ambition to stand alone.

As bike rentals cool, ofo chooses to stand alone

Word has been circulating for a while that ofo was to be acquired by Didi, with decreasing valuation each time. However, Yu Xin, co-founder, has denied the rumors several times. Amid acquisition rumors, the bike-rental company based in Beijing has withdrawn from several overseas markets, including South Korea and Australia.

Ofo’s most recent confirmed financing happened on March 13 when they raised $866 million from Alibaba, Haofeng Group, Tianhe Capital, Ant Financial, and Junli Capital. In February, data from the National Enterprise Credit Information System showed that they pledged more than four million bikes in exchange of two loans totaled RMB 1.77 billion from Alibaba affiliates.

Earlier this year, the company was said to be delaying payments to bike manufacturers and logistics companies. The total payments were worth more than hundreds of millions of RMB. Shanghai Phoenix, a domestic bike manufacturer, has sued Dongxia Datong, a child company in charge of operating the bikes, for delaying payments.

Ofo’s overseas operations show signs of cash crunch

The bike-rental company has been trying to explore methods of commercialization and improve efficiency this year, including increasing ads on bikes and inserting advertisements when a user unlocks a bike. However, these methods haven’t seemed to relieve ofo from its stressed financial situation.

滴滴消失的第一夜：出租车漫天要价，强行拼车拒载，黑车暴增–AI财经社

What happened: Starting from September 8th, China’s most popular ride-hailing app suspended seven late-night services for a week as it implements new passenger safety measures. Not surprisingly, the temporary suspension led to a surge in taxis and illicit “black cabs” trying to make up the difference. This past weekend in Beijing’s busy Sanlitun neighborhood, taxis were hard to come by and other ride-hailing apps faltered under the large volume of passengers. Social media users in other cities also complained of price-jacking, sometimes to three or four times the normal fare.

Why it’s important: Despite public backlash over the deaths of two passengers this year, Didi remains the country’s biggest ride-hailing company. Its popularity has also helped to supplant or counter phenomena like black cabs and unscrupulous taxi drivers, making life easier for city dwellers. Much as non-Chinese consumers were unsure if they could drop Facebook following the data breach scandal, PRC residents may now be wondering if they’re ready to live in a world without Didi, or another ride-hailing equivalent.

程维内部信确认滴滴巨亏：永远不会为利润放弃安全 —QQ Tech

What happened: Cheng Wei, founder and CEO of China’s biggest ride-hailing platform Didi, sent an email to employees, responding to the murder of a female passenger on August 24. The letter was released to the press on Friday. According to the letter, Cheng said the company would never trade passengers’ safety for profit. In the letter, Cheng Wei revealed that Didi has not profited for the past six years. In the first half of 2018, Didi’s net loss reached RMB 4 billion.

Why it’s important: The reveal of loss of revenue comes amid the accusations that Didi has prioritized profit over safety issues. According to the letter, the costs of promotional campaigns, drivers’ subsidization, and other operations alike were more than RMB 1.2 billion.

Shaanxi police have introduced a new in-app safety feature on WeChat. According to local media reports (in Chinese), the new feature, accessed via the Shaanxi police official WeChat account, allows people to not only report incidents of crime and emergency to the police but also upload images, audio and video recordings which could be useful evidence later on.

If the phone’s location service is turned on, people can share their whereabouts directly with the police. The feature also offers a way to get help when the person seeking help for some reason cannot speak or is at a location with no stable service but has access to Wi-Fi.

The murders of two young women and the numerous reports of sexual assault that followed have sparked heated discussions across the country. In China, the number of downloads of emergency-reporting apps has surged. The public is not only demanding Didi to take passenger safety issues more seriously but also calling Chinese authorities for greater oversight of ride-hailing operators.

Since the incident, Didi has announced new safety measures, including a panic button that allows users to contact and share passenger information with the police. Didi will also experiment with audio recordings of shared-rides.

Didi upgrades panic button and adds audio recording after riders killed–CNN

What happened: Starting this Saturday, Didi will suspend seven late-night services for a week as it implements additional safety measures. Upgrades include an improved emergency button that allows users to instantly call the police, a new function that will record audio on Express and Premier trips, more background checks, and a mandatory daily “safety knowledge test” for drivers. The measures follow widespread public anger over two passenger murders in the last four months and arrive just in time as Chinese authorities begin their inspections of ride-sharing companies today.

Why it’s important: Didi has been on the scramble to make up for a significant drop in public trust following the two high-profile murders, as well as a string of sexual assaults that have taken place in recent years. Following a public apology from company founders last week, this appears to be the ride-hailing giant’s latest attempt to appease angry users.

Correction, Sept 1: This post originally stated that Didi suspended services beginning last Saturday.

Tencent-Backed Tesla Rival Forms NEV Ride-Hailing Firm– Yicai Global

What happened: Chinese electric vehicle manufacturer Nio has set up a new car-rental and ride-hailing subsidiary in the country’s southern island province of Hainan. The report points out that the new firm could be related to the company’s partnership with China Automobile Technology and Research Center and several other companies inked on August 21.

Why it’s important: Nio’s newly founded subsidiary is obviously part of China’s ride-hailing resurgence. Apart from Nio, the burgeoning sector witnessed the entrance of several big name players over the past year, including Meituan, state-owned SAIC Motor, mapping company AutoNavi, and more. New players in the field could pose a series threat to Didi Chuxing’s current dominance, especially at a time when the ride-sharing giant is under public backlash due to passenger murder scandals. NIO has filed to list on the New York Stock Exchange this August.

The death of a 20-year-old woman who was raped and murdered while using ride-hailing firm Didi’s carpooling service last week has triggered renewed outrage. The company suspended its Hitch service on Monday following the death of a second female passenger within the past four months, saying it would only resume operation after all safety issues were addressed.  

On August 24, the passenger surnamed Zhao was on her way to a birthday party in southern Zhejiang province. During the trip, her Didi driver navigated to a secluded mountainous area, coerced her into transferring around RMB 9,000 to him, and then forced himself on her before taking her life.

While safety issues are a sector-wide problem, the murders have drawn the ire of government officials and the public alike for creating an environment in which harassment and killing are possible.  Most notably, the company’s customer service staff have faced scrutiny for their poor handling of this case and others.  

After realizing something was amiss, Zhao contacted her friends, pleading for help. They, in turn, notified Didi’s customer service team, repeatedly asking for information about the driver. Their requests were met with assurances that the case had been flagged, but nothing more. After the police got involved, they too were made to wait. It took them over two hours to get information about the driver.

A day before Zhao’s death, another passenger, surnamed Lin, allegedly almost suffered a similar fate at the hand of the same driver. However, she grew suspicious and got out of the car, eventually threatening to call the police. Lin took a photo of the car and submitted a complaint to Didi’s customer service department. Staff promised to get back to her but never did.

The failures of the customer service team have garnered increasing amounts of attention. But it is also Didi’s lack of contingency plans if one party cancels a trip that is worrying.

Common cancelations

In both cases, the trip was canceled shortly before or after it started, a common practice that allows drivers to pick up more passengers en route. In Zhao’s case, police reported that she had, for unknown reasons, canceled the journey in the app one hour after the trip began. Didi initially claimed she was never in the car and refused to give any further information. Similarly, Lin canceled her journey at the driver’s request after he said he would be late. Lin agreed because she thought this was common practice among Hitch drivers.

The company launched safety functions like Emergency Help Button with real-time sound recording feature and Itinerary Sharing in July 2016, and the Emergency Help functions were updated in June 2018. However, these features are not available unless a trip is active.

Apart from technical and other shortcomings, the problems are also institutional. The platform has repeatedly been criticized for breeding a culture of sexual harassment. Hitch, which was previously likened to a social network, allowed drivers to view the age, gender, and occupation of the passenger. More worryingly, it also permitted reviews of the passengers which often made lewd references to female passengers’ looks and body types, which had been taken down after the murder of the flight attendant. The objectification also extended to its advertising campaigns, in which the company made use of innuendo to attract drivers at the expense of female passengers.   

Macro factors

But general macroeconomic factors also need to be considered. China’s slowdown is also affecting jobs and increasing the difficulty of finding employment with adequate income. This is especially true among the younger generation. Despite a record number of graduates leaving university, China’s economic growth fell to 6.7% in 2017, with unemployment in this bracket reaching as high as 30%.

When an air hostess who was also using the company’s Hitch service was murdered in May, Didi’s facial recognition system failed to alert the company that the driver was unauthorized to use the platform. Didi’s vetting practice for drivers is again being called into question. The company claims it collects vehicle and identity information from drivers, and information relating to criminal records every three months from the police. It says those with severe violations of “public safety, public security or traffic safety, or a history of mental illness,” will not be allowed to use the platform.

For Didi, the murders mark a severe breach of trust, exemplified by the increased downloads of apps that facilitate video calls to police. Following the latest apology by the company, in which it promised to devote more time and resources to customer services and develop better contingency plans, internet users questioned whether it was another perfunctory public relations stunt.  

Users also began documenting their departure from using the platform on social media, prompting the use of the hashtag #BoycottDidi. As a result, the company’s app fell from 9th to 61st place in the Chinese Apple App Store. It is unclear whether the incidents will cause the company to delay its $80 billion IPO, which is rumored to take place this year.

Government’s concern

But Didi is not just going to have to answer to its customers. China’s National Development and Reform Commission has announced plans to extend the country’s nascent social credit system to the transport industry following the latest murder. This is bound to have far-reaching effects on companies in the sector, which could face extensive cross-departmental punishments for infractions. Officials have called for greater general oversight of the ride-hailing sector, which has had a turbulent few years, with accusations of sexual harassment as well as price wars between major players.

The Ministry of Transport has also weighed in with a list of demands. “These two vicious incidents that have violated the life and safety of passengers has exposed the gaping operational loopholes of the Didi Chuxing platform,” it said in a statement and ordered the company to improve its driver vetting process, among other demands.

The murders are affecting the industry as a whole. Most notably, mapping company AutoNavi suspended its carpooling service shortly after news of the killing went public. Didi rival Dida also made changes to its service after the last Didi passenger was murdered in May by removing a social networking component from its app.

There is likely to be pushback from local governments around the country. Didi has already been summoned by authorities in ten cities around the country, which require them to address its security loopholes, integrate vehicle and driver data into a government-supervised system, and implement an “emergency SOS” button its app.

However, it is clear that local governments expect compliance by the industry as a whole, and they are seeking greater supervision of ride-hailing platforms. Didi is not the only company that has been summoned after the latest murder. Up to eight other firms are being caught in the net of government supervision.

With additional reporting from Chris Udemans

The speed at which Chinese tech companies are burning cash is disturbing. In order to maintain its dominating position, China’s massive service platform Meituan has spent over $4 billion in the past seven years. But O2O is not the only field that witnessed a fierce land-grabbing battle. Similar subsidy-fueled wars are going on in virtually every emerging market from ride-hailing to bike rental.

The prevailing model for a startup to prosper in the Middle Kingdom is to snap up market shares as fast as possible, often luring customer by providing massive subsidies and extensive marketing campaigns. Once they build their brand and clear up major competitors, they will have a final say in monetizing its users.

Before reaching a critical mass, in Didi’s case over 95% of China’s ride-hailing market, these companies are largely funded by venture capital and private equity firms, along with larger internet companies like Tencent and Alibaba. The rise of a raft of emerging tech verticals draw capital in and billion dollars investments are constantly hitting the headlines of local media.

Spoiled by abundant capital, the entire marketing strategies of some companies are formed around losing money. “2VC model” was jokingly coined in the craziest days of China’s fundraising extravaganza. Like customer-targeted business is shorted as 2C or ToC business, 2VC is  a term created for cash-burning startups that survive only by raise funding from venture capitalists instead of a sustainable profitability model.

However, two recent scandals surround China’s tech tycoons show that “VC welfare” is coming to an end in some of the more mature fields. Ultimately, users are going to pay for the tech unicorn’s sprawling growth.

Renting a home in China’s megacities like Beijing and Shanghai are becoming increasingly costly. The possible roles Chinese online real estate brokerage platforms have played in driving up the skyrocketing home prices sparked national outrage recently.

A Beijing landlord surnamed Cheng recounted his experience on a Chinese bulletin board about how Ziroom and Danke, another operator, had engaged in a bidding war for leasing out his apartment in the Beijing suburbs. While Chen had planned to rent out a 120-square-meter apartment for RMB 7,500 ($1,098) per month, the price was eventually raised to RMB 10,800 after the competitive bidding.

As one of the proptech unicorns in China, Ziroom takes out long-term leases of existing homes from individual landlords. The houses are then sublet to tenants, coupled with weekly cleaning, wifi, and other services. The company raised a whopping RMB 4 billion ($622 million) in January at an RMB 20 billion valuation. Its parent Lianjia, a residential brokerage, reportedly received RMB 2.6 billion in January 2017.

With abundant capital, Ziroom easily got a larger budget in striking deals with landowners in a bid to gain a larger market share. As the company gradually gain supremacy in the sector, however, they are under increasing pressure to show its profitability capacity. That means raising rents, but this will put the costs on the shoulders of their users.

Hu Jinghui, the former vice chief executive officer of another real estate agency Woaiwojia criticized competitors like Ziroom for acquiring apartments at above-market-value prices and then renting them out at even higher prices, Sixth Tone reported.

Ziroom denied its role in rising home prices in Beijing, claiming that the rental apartments only account for less than 5% of the rental market. It promised to put an additional 120,000 apartments on the market in an effort to stabilize prices.

In more extreme cases, the VC-backed fast growth and hasty monetization approach not only cost money but also lives. China’s ride-hailing giant Didi comes under fire recently after a second female user was being raped and murdered within four months. To worsen the case, a local report shows that there are at least 50 sexual harassment and assault incidents by Didi drivers over the past four years. The public backlash against Didi peaks when angry users called for the mass to delete Didi’s app.

“We raced non-stop, riding on the force of breathless expansion and capital through these few years, but this has no meaning in such a tragic loss of life. Throughout the company, we start to question if we are doing the right thing; or even whether we have the right values. There is an enormous amount of self-doubt, guilt, and soul-searching,” said Didi CEO and founder Cheng Wei and president Liu Qing in an apology released four days after the incident, admitting the company’s misstep in pursuing fast expansion and return while partially sacrificing user benefits.

Controversies about Didi’s measures to achieve profitability are nothing new. Earlier this year, the company was accused of charging higher prices to customers who it thinks will be willing to pay more, a kind of personalized pricing, or price discrimination, targeting at premium members.

But the company refutes price discrimination claim, saying that “Didi has never used its big data capabilities to disadvantage or bully regular passengers and will never allow price discrimination.”

While lots of China’s emerging markets are quickly maturing and vertical dominators are reaching the critical point to monetize. The experiences of Ziroom and Didi serve as cautionary tales for why we need to balance profitability and public goodwill.

滴滴出行 App Store 下载排名从第 9 滑落至第 61 名 – 动点科技

What happened: Didi Chuxing’s app downloads have taken a nosedive following the second passenger murder that sparked nationwide outrage. According to data from mobile insights and analytics firm App Annie, the ride-hailing app was ranked the 9th on Apple’s iOS app store in China on Aug 20th, but slipped to 61st in just 9 days.

Why it’s important: Didi Chuxing, China largest ride-hailing company, is now facing intense pressure from both the public and authorities to improve passenger safety. The company has since suspended its Hitch carpooling service as it examines its practices. In May, a young flight attendant was found murdered by her Hitch driver, which prompted Didi to suspend the carpool service for six weeks as it adds new features to improve the safety of passengers.

Another incident is shaking up China’s ride-hailing industry after multiple ride-sharing drivers were caught live-streaming themselves and even harassing their female passengers. Since the discovery, several live streaming platforms have announced tightening streaming rules.

News of drivers live-streaming passengers on popular Chinese streaming site Huya without their knowledge broke out on August 29. The news came only several days after China was shaken by a rape and murder of a young woman by a driver who picked her up through ride-hailing platform Didi Chuxing’s carpooling service. The murder, which was the second one on Didi’s platform in only three months brought China’s ride-sharing and ride-hailing industry under close attention by the authorities.

The drivers—suspected of belonging to the carpooling service of a smaller-scale Didi competitor Dida Chuxing—exhibited disturbing behavior such as allowing audiences to choose their next fare based on user profile photos and directly harassing women with vulgar language in order to boost their popularity

Audience members were reported to post crude comments during the live streaming sessions. According to a Beijing Youth Daily report, once a female passenger boarded the car, the audience could soar up to 34,000. One drive reportedly made RMB 700 in a single day by streaming female passengers.

Live streaming platforms including Kuaishou, Huya, YY, and widely popular ByteDance’s short video site Douyin promised to tighten rules and supervision in order to ensure privacy according to The Paper.

Huya, who hosted the reported broadcast, said that the live-streaming was against regulations and that it will carry out special rectification against the violations. The live streaming site banned broadcasting from any type of ride-hailing or ride-sharing vehicle and suspended the two accounts that were reported to be live-streaming passengers on August 29.

The live streaming incident is just another part of China’s ride-hailing crisis, the brunt of which is carried by Didi—the country’s largest platform. According to reports, over the past four years, media and relevant authorities reported at least 50 sexual harassment and assault incidents by Didi drivers. Didi was summoned by authorities in 10 Chinese cities while the Ministry of Transport said the incidents exposed gaping operational loopholes of the Didi Chuxing platform.

The company has issued an apology after the murder that took place August 24 and once again suspended its carpooling service, a move which was soon followed by Alibaba-backed AutoNavi which also operates a carpooling service.

Chinese ride-hailing pioneer returns with blockchain app to boost safety, income as Didi mired in crisis – SCMP

What happened: Kuaidi Dache founder Chen Weixing has launched a new blockchain-powered ride-hailing platform, VV Go, which claims to improve passenger safety and increase the income of drivers. The app enables information about drivers and rides to be shared among all users on the platform in real-time. For example, the passenger can inform all drivers and even the police across the shared network to shorten the response time in case of an emergency.

Why it’s important: Didi Chuxing, which acquired Kuaidi Dache in a merger in 2015, has been under fire for failing to address passenger safety issues after the killing of two young women. VV Share, the non-profit organization behind VV Go, is not first to use blockchain technology to improve passenger safety–Singapore-based MVL Foundation also launched a similar app last month, which managed to garner more than 9,500 drivers in three weeks. Chen hopes VV Go can eventually compete with industry giant Didi and Uber.

顺风车司机直播女乘客牟利–Beijing Youth Daily

What happened: Multiple drivers were caught live-streaming passengers, apparently without their knowledge, on live streaming platform Huya. The drivers are suspected of belonging to the carpooling service of Dida Chuxing, a smaller-scale Didi competitor. Drivers exhibited disturbing behavior such as verbally harassing female passengers, or allowing audiences to choose their next fare based on user profile photos. Audience members were reported to post crude comments during the live streaming session. One driver claimed he had made RMB 700 in a single day by streaming female passengers. A Huya representative said the platform is currently investigating the accounts under suspicion.

Why it’s important: In the wake of an alleged murder of a Didi Chuxing passenger, safety and privacy violations are surfacing with a vengeance and multiple companies are under scrutiny. Going forward, the demand for corporate accountability will likely continue to grow.

Chinese downloads of police apps surge after latest Didi ride-hitching death – SCMP

What happened: Downloads of mobile apps which allow users to contact police in a video call have surged following the alleged murder and rape of a 20-year-old female Didi passenger last week. Gong’an 110, or Police 110 translated into English, was one of the most downloaded free iOS apps on Monday (August 27), despite the app being plagued by complaints of bugs and registration errors.

Why it’s important: The increased usage of these apps draw attention to the insecurity that is appearing in the wake of public outrage over the weekend. The rush has also come amid calls by authorities for greater oversight of the ride-hailing sector. The National Development and Reform Commission (NDRC) has already weighed in on the issue, saying that it will coordinate the regulation and expand the use of the social credit system across the transport industry.