DiDi Chuxing Already Had Huge Accumulated Losses Before COVID-19

DiDi Chuxing Already Had Huge Accumulated Losses Before COVID-19

DiDi is the dominant ridesharing company in China controlling close to 90% of the market. The number of daily active users is more than 4-5 times larger than Uber in the US but during the current COVID-19 crisis, their active users fell by more than half on average across the country.

Major cities saw a 70-85% drop in rides on many days within a month of their government acknowledging that there is a coronvavirus outbreak. At the peak drivers said they had to spend over two hours waiting for a passenger to hail a cab. DiDi will seemingly survive the crisis because it has received close to $11B in funding from SoftBank. WeWork's collapse had impacted its valuations but has continued on its growth-first strategy of expansion.

There were close to 11 million drivers on the platform in 2018 but only 2 million were issued a license at the end of 2019. This is due to stricter government regulations on which has lead to only those with a local household registration can legally drive in the city. The tighter government regulations were being blamed for all the changes that the company has to undergo before the virus but now a real outbreak has pushed immigant drivers back to their villages for the shutdown and forced riders to stay in. In February, at the peak of the crisis, 50 cities has suspended the ride-hailing service to prevent spread of virus during transportation.

“I don’t think they can be profitable in the near term,” said Mr Shawn Yang of Blue Lotus Capital Advisors in the Financial Times. He noted that DiDi's commissions from Drivers and additional fees on top of the ride fare were already high enough and the organization has very little room left to raise prices even after the pandemic. There can be another ride-sharing company which can launch and offer cheaper prices and users will easily flock to the new app. “If you charge too much from customers, then they will take [other] taxis.”

The industry will benefit from people starting to go back to work even if they don't travel for leisure or entertainment but numerous tech companies around the world are now pushing to make work from home mainstream which means that the total market size of daily corporate rides in the New Normal will also be affected severely.

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