China Targets DiDi in Latest Crackdown on Tech Giants

why-kei-8e2gal_GIE8-unsplash

With the Chinese government banning DiDi from all app stores, what does it mean for the company’s future?

DiDi is one of the world’s largest ride-sharing companies. Presently, it has over 493 million annual active users and is heavily backed by Tencent, Alibaba, Apple, and Uber.

Late last month, DiDi raised $4.4 billion in its initial public offering (IPO), making it the largest IPO of a Chinese company since Alibaba. However, two days after its IPO, China announced a probe into the ride-hailing firm. The announcement on July 2 sent shockwaves across the stock market, with DiDi’s shares dropping as much as 10%. .

Two days after the announcement, China’s Internet watchdog, the Cyberspace Administration of China (CAC) banned DiDi from all app stores in the country, stating that it posed a cybersecurity risk for customers.

The Chinese regulators noted: “Didi Chuxing app is found to have severely violated the laws by illegally collecting and using personal information.” It called DiDi to comply with the laws and to ensure its customers’ safety. However, there is still no clarity on the alleged violations and whether more penalties will follow suit.

DiDi later responded, stating that it was thankful to the ”department for its instruction in troubleshooting Didi’s risks.” It also said that it would “rectify and improve risk avoidance and…provide safe and convenient services to our users.”

Financial analyst Ben Cavender, meanwhile, stated that the move signals China trying to discourage companies from listing overseas. Cavender, the principal at China Market Research Group, noted, “I think there’s potentially some subtext here which is basically saying ‘if you’re going to be a big tech company’ and you want to do an IPO, you’d better be doing it on the mainland.”

Cavender further stated that the regulators wanted “to tighten up access to data that’s being collected while at the same time sort of trying to codify a little bit better what kind of data practices are actually OK in China.”

How big is DiDi?

Founded in 2012, DiDi’s main business is ride-sharing. Its app includes many features such as ride-hailing, taxi-hailing, and other mobility services. But, it gained mainstream popularity in China in 2015 due to the merger of Didi Dache and another leading ride-hailing app Kuaidi Dache, forming Didi Kuaidi.

Since then, DiDi has become the number one ride hailing service in China, accounting for 88% of total trips in Q4 of 2020. DiDi’s dominance had also led to Uber selling its China business to DiDi in exchange for a stake in 2016.

Furthermore, in June of 2021, DiDi reported revenue of about 42.2 billion yuan (US$6.5 billion) in the last quarter. Of the total revenue, 39.2 billion yuan (US$6.05 billion) came from China and 800 million yuan (US$123.57 million) came from its international business.

DiDi presently operates in 16 other countries including Australia, Brazil, Mexico, and Russia. One of its strongest international positions is in Latin America, where it has established itself as the second-largest ride-hailing platform in the region. Overall, DiDi’s international business serves 12 percent of its annual active users worldwide and more than 60 million active users.

The impact of the crackdown on DiDi

The current ban on the app is temporary, and will only affect new user sign-ups. Those who have already downloaded the app can continue using it. DiDi, however, has said that the app’s removal could have an “adverse impact on its revenue in China.” Analysts have also said that ban will “hurt its user growth.”

“…at the same time, the existing users of Didi’s app will also have a certain level of reservation over using the company’s app due to fear of compromising their personal data,” warned Shifara Samsudeen, an analyst at LightStream Research.

After U.S. trade restarted post the July 4 break, DiDi’s shares crashed, going down as low as 25%. In the two trading days alone, DiDi’s co-founders Cheng Wei and Jean Liu lost $1.5 billion in wealth.

China’s crackdown on DiDi is not a standalone incident. Recently China has been doubling down on antitrust regulations and going after many big tech companies. In March, Xi Jinping had stated that regulating companies and businesses was essential.

The country’s current crackdown on tech giants began with Alibaba in April this year. Alibaba was fined a record $2.8 billion for violating anti-monopoly rules. Previously, in November 2020, Jack Ma’s Ant Group was ordered to overhaul its operations and was forced to suspend its IPO.

Following CAC’s crackdown on DiDi, the agency also imposed sanctions on truck-hailing firm Full Truck Alliance and job recruitment site Boss Zhipin. Both the companies are listed in the U.S.

These increased crackdowns by Chinese regulators can discourage other companies from opting for overseas listing. Investors, meanwhile, will have to keep a serious tab on regulations and its possible implications, before investing in tech giants.

Header image by why kei on Unsplash

SHARE THIS STORY

Share on facebook
Share on twitter
Share on linkedin
Share on email

RELATED POSTS

Top Must-Follow Productivity Influencers in 2023

Top Must-Follow Productivity Influencers in 2023

Productivity is a key aspect of success in today’s fast-paced world. Being productive enables individuals to balance their work and personal lives effectively while accomplishing their goals efficiently. To help you stay on track and reach your full potential, we’ve identified top influential productivity experts who provide valuable insights to maximize your efficiency in 2023.

What Can Drones Be Used For, and Do They Have a Future?

What Can Drones Be Used For, and Do They Have a Future?

In January 2023, Australian soldiers used drones to search for a missing woman. The drones helped them reach areas that might have been too challenging for a human to enter. For the past few years, the drone economy has been booming. Global investments in the industry amount to US$1.15 billion, with China leading the market.

2022 FIFA World Cup

The Most Controversial VAR Decisions at the 2022 FIFA World Cup

The footballing world has welcomed many new technological developments in recent times. Its goal is to make decision-making more accurate and provide a better experience for players and fans alike. These technologies include the video assistant referee (VAR), semi-automated offside technology (SAOT) and sensor-equipped footballs, all used extensively during the 2022 FIFA World Cup in Qatar.

Self-funding Your Startup? Follow These Expert Tips from Proven Entrepreneurs

Self-funding Your Startup? Follow These Expert Tips from Proven Entrepreneurs

Starting a new business can be an exciting and challenging endeavor, with securing funding being one of the biggest obstacles. Traditional funding options, such as venture capital and angel investing, can be time-consuming, especially for new and untested businesses. In such cases, self-funding, or “bootstrapping”, might be a viable option.

Navigating Ghost Job Postings: How to Avoid Them

Navigating Ghost Job Postings: How to Avoid Them

Job searching can be a daunting task, especially with the risk of encountering scams or fraudulent job postings. Ghost job postings, which refer to open job positions that are not actively being filled, are a common issue that jobseekers should be aware of. According to a survey by New York-based financial consultancy Clarify Capital.

Can AI Help You Flirt Better

Can AI Help You Flirt Better?

“Excuse me, but I think you dropped something: my jaw.” This is the pick-up line the famous artificial intelligence (AI) chatbot ChatGPT dished out when we asked for some viable options. Not the most original, sure, but not bad for a trained algorithm.