Experience-hailing large Didi needs to be extra than simply the Uber of China

A user opens the Didi Chuxing Ride-Hailing smartphone app in Shanghai, China on September 18, 2020.

Qilai Shen | Bloomberg | Getty Images

BEIJING – China’s version of Uber, Didi Chuxing, seeks to use driving a car as an opportunity for various aspects of daily life, from grocery shopping to financing.

Didi submitted the listing in New York on Thursday for what is likely to be the world’s largest IPO this year. The company, founded in 2012, is one of the five largest private start-ups worldwide and has SoftBank, Uber and Tencent among its major investors.

Smartphone-based ride-hailing in China remains Didi’s main business, generating $ 20.4 billion in revenue last year with a total net loss of $ 1.62 billion, according to the prospectus. But when Didi made a profit in the first quarter of this year, the revenue share of “other initiatives” rose from 4% for the whole of 2020 to 5%. That’s an increase of 1.2% in 2018.

A quick look at Didi’s smartphone app reveals a range of other products for everything to do with bike sharing, movers, personal finances and petrol stations. The row of icons is similar to that of the Alibaba group Alipay, whose app is not just a mobile payment platform, but enables users to book flight tickets and pay for utilities. Similarly, the ride-hailing app Grab, which is prevalent in Southeast Asia, delivers groceries and aims to become a regional leader in mobile payment.

Eight types of auto services

Didi is the primary ride-hailing app in China, with several other players added, including those focused on high-end (Shouqi) or new-energy vehicles (Cao Cao).

Didi users can choose from eight options, ranging from car pooling to luxury car service. Didi also lets users call taxis through his app and runs a chauffeur-driven business that assigns drivers to car owners who may have had too much alcohol or may not be able to drive their own vehicle for other reasons. These temporary riders can travel on collapsible bikes between assignments.

The company said it had 377 million active users and 13 million active drivers per year in China for the twelve months ended March 31. Didi said it earned 133.64 billion yuan ($ 20.88 billion) in the “Mobility in China” category last year.

Including Didi’s other services such as e-bikes and freight, customer costs for different types of products can range from 15 cents to more than $ 100, the prospectus says.

Development of a finance department

Didi said in his prospectus that bicycle and e-bike sharing was the largest contributor to his total revenue of 5.76 billion yuan from “other initiatives” last year. Other companies in this category include inner-city freight, car leasing, joint buying, and financial services.

The company announced in August that its unmentioned financial technology arm, Didi Finance, had announced a partnership with the Bank of Shanghai for consumer financial services and other digital financial products.

Didi has also partnered with China Merchants Bank to support credit card applications through the ride-hailing app and offer car hire purchase plans. A subsidiary of Didi works with Ping An Insurance to sell finance and leasing products as well as insurance.

The start-up rents vehicles to drivers at prices reportedly around 20% lower than outside Didi’s platform. While more than 600,000 vehicles are available for lease, about half of them are owned by roughly 3,000 vehicle leasing partners, reducing the amount of assets Didi is responsible for, the prospectus says.

Anecdotally, Didi recently introduced some users in Beijing to its own mobile payment system by setting it as the default payment option – at a discount. Users had to manually select other options like WeChat payment after which the discount was removed.

Didi’s ride-hailing app also works with international credit cards. The company operates in 15 countries including Brazil, Mexico and Japan.

Bet on electric

Many analysts assume that self-driving, shared vehicles will become an important means of transport in the future and not individual car ownership.

Didi has invested in its own autonomous driving unit, which in June 2020 introduced “Robotaxis” in part of Shanghai. The ride-hailing company announced in November that it had partnered with BYD to develop an electric car called the D1 that would hit major Chinese cities in the following months.

In May, the autonomous driving unit and state-sponsored GAC Aion New Energy Automobile agreed to work towards mass production of fully self-driving New Energy cars.

Didi claims it has the largest electric vehicle charging network in China based on self-commissioned research.

Privacy and other risks

Didi plans to go public in New York as tensions have built up between the US and China in recent years. The ride-hailing giant spent nearly three pages of its prospectus discussing the risks of delisting arising from non-compliance with U.S. government audit requirements.

The Chinese government’s increased control of technology companies over monopoly practices and general government control over data protection are also risks that Didi mentions in his prospectus.

In 2018, Didi came under fire from Chinese social media users demanding the app’s deletion after a woman was allegedly raped and killed by a driver. As a result, Didi announced that it would record audio while driving, which would be erased after seven days.

Didi did not explicitly mention this feature in its prospectus.

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