Didi Chuxing loses Rmb4bn in first half of year
China ride-hailing company is paying out billions of dollars annually in subsidies
Chinese ride-hailing giant Didi Chuxing made a net loss of more than Rmb4bn ($580m) in the first half of the year, and is still paying out billions of dollars annually in subsidies two years after winning an expensive battle with Uber.
The figures were disclosed in a letter last week to employees by chief executive Cheng Wei, which was leaked to domestic media. A person familiar with its contents confirmed the authenticity of the letter, which gives a glimpse into the financial state of the company after its purchase of Uber’s China operations in 2016.
Mr Cheng wrote the letter as the company faces fierce criticism following two murders this year of female passengers by Didi drivers.
“We are definitely not an evil company, and definitely not one focused on profits above all else,” he said, arguing that this was because six-year-old Didi has not turned a profit since it was founded and instead gave out Rmb11.7bn in subsidies to drivers and passengers in the first half of this year.
“We will invest our revenues in safety and the [user] experience,” Mr Cheng wrote.
Defending the online ride-hailing sector, he added: “We can see that the rate of incidents is far lower than that for the traditional taxi industry.”
Didi has promised to focus on safety rather than unbridled growth after a 20-year-old woman was raped and killed by a driver for Hitch, the company’s carpooling platform, in the coastal city of Wenzhou three weeks ago. Her death followed the murder in May of another woman using the service.
Didi faces a driver shortage in China’s major cities, where migrant workers — the bulk of its workforce — are prohibited from driving for the platform. The company told the Financial Times this year that it was making “very low” profits, and had no immediate plans to raise them.
The company, which claims 550m registered users — more than half of China’s mobile-internet users — and 30m drivers, was valued at $56bn last year.
In his letter, Mr Cheng said Didi takes an average of only 16 per cent from each order placed on its platform, which falls to 1.6 per cent after deducting the cost of subsidies.
In March, Didi had roughly $12bn cash on hand. It is drawing on that reserve not only to subsidise rides in China but also to compete internationally with Uber by expanding in Mexico and Brazil.
Didi has raised more than $17bn in the past two years from investors including major backer SoftBank, the Japanese technology conglomerate that is also the biggest investor in Uber.
The Beijing based company has a near monopoly on ride-hailing services in China. For the past year, the biggest threat to its dominance was the food delivery giant Meituan Dianping, which has started ride-hailing services in the cities of Shanghai and Nanjing.
But Meituan, which is pursuing an initial public offering in Hong Kong looking to raise as much as $4.4bn, said last week in its updated prospectus that “based on current market dynamics” — likely a reference to heightened government scrutiny of the sector following the Didi murders — it would not expand the service further.