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Didi faces tough battle to retake China’s urban streets

Didi Chuxing may have defeated Uber, but China’s dominant ride-hailing platform is no match for the country’s local governments after being forced to gut its urban fleet to comply with regulations.

Didi’s core business of cheap ride-hailing now faces a tough fight in the big urban markets, which it built after a bruising battle with local and foreign rivals.

Uber ceded the Chinese market — its largest — by selling its China arm to Didi last year. This left Didi with a near-monopoly on ride-hailing, booking 20m daily rides last October before the regulations hit.

Didi is the world’s fourth-biggest private tech group with a $34bn valuation last September. It has raised more than $10bn from investors including Apple, who invested $1bn in the company last year.

Two of China’s biggest cities, Beijing and Shanghai, recently passed “local cars, local drivers” regulations that require Didi to get rid of the migrant workers and non-local cars that make up the majority of its fleet in those cities.

Didi is dead. They have killed it with a piece of paper

After shedding most of its Shanghai fleet, Didi will only let cars with a Beijing licence plate offer rides in Beijing from Saturday. Police have also begun spot checks on drivers and heavily fining those whose ID cards show they are from outside Beijing.

Roughly 40 per cent of Beijing’s and Shanghai’s residents are from outside the city. Migrants make up the vast majority of the low-wage workforce, such as Didi drivers, in China’s major cities since residents have much better options. 

“Didi is dead. They have killed it with a piece of paper,” said one Didi migrant driver in Beijing from Heilongjiang province, who plans to leave the city to find work elsewhere.

“Because our transportation capacity has been reduced recently, there may be some impact . . . on the chances of successfully hailing a ride and on waiting times, which Didi apologises for,” the company wrote on its Weibo social media account on Wednesday.

Shaun Rein of China Market Research Group said: “The new measures have a serious impact on Didi’s business. It threatens their ability to grow because it’s hard to find drivers.”

In February Didi announced it was moving into high-end car-hailing services, a consequence of losing its pricing advantage against taxis.

But that market is still small and users are limited.

“In China it’s all about the ‘People’s Uber’ — the cheap stuff,” said Mr Rein.

Didi does not say what proportion of its business comes from low-end versus high-end rides, but describes its cheapest “fast car” service as its core business. 

Analysts say that the company has no choice but to go upmarket and look for other sources of growth. 

Didi is also trying to diversify geographically and into sectors outside of ride-hailing. In anticipation of the “local cars” regulations in major cities, Didi began to move into smaller cities from the second half of last year, giving its migrant drivers subsidies to entice them back from Beijing and Shanghai. The company is also expanding its services in buses, bike-sharing and smart transport.

Didi’s new direction is also likely to bring it into closer co-operation with the traditional taxi companies it once competed with, and even take it back to its roots as a taxi-hiring platform.

Via FT