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Didi, the Chinese Ride-Hailing Giant, Shows Resilience by Narrowing Losses in Q1
Updated: Jan 5
Chinese ride-hailing giant, Didi Global, reports a significant reduction in losses during the first quarter, driven by increased demand and despite an 8.026 billion yuan fine for data violations.
Didi's strong performance highlights its continued dominance in China's ride-hailing market, despite regulatory challenges and heightened competition.
Chinese ride-hailing leader Didi Global has made impressive progress in narrowing its losses during the first quarter of the year. Following an 8.026 billion yuan fine imposed by regulators for data violations and in the midst of intensified competition within China, the Beijing-based company reported a net loss of 1.2 billion yuan. This marks a substantial 93% improvement compared to the same period in 2022, when Didi recorded a loss of 16.3 billion yuan.
Boosted by a rapid recovery in daily transactions after a lackluster Lunar New Year holiday in January, Didi's first-quarter revenue reached 42.7 billion yuan. This represents a 19.1% increase from the previous year's 35.8 billion yuan. The company's mainland operations, which form its primary revenue source, grew by 18.7% year on year to 39 billion yuan, while international business experienced a growth of 40.7% to 1.7 billion yuan. Notably, Didi's domestic operations achieved an adjusted EBITDA gain of 1 billion yuan, a stark contrast to the 6.2 billion yuan loss in the first quarter of 2022 when the substantial data violation fine was imposed by the Cyberspace Administration of China (CAC).
Despite facing a year-long cybersecurity investigation and the need to rectify its operations, Didi's strong performance in the first quarter demonstrates its continued dominance in China's ride-hailing market. In July of the previous year, the CAC publicly announced that Didi had committed 16 offences related to the illegal collection of data from drivers and passengers. This quarter's results mark Didi's first earnings report since its return to mainland app stores and the resumption of new user sign-ups.
Didi's ability to resume registrations and make its main app available for download in China only occurred in January of this year, nearly 18 months after being ordered to halt customer enrolment during the CAC's investigation. Previously, Didi had conducted its initial public offering as Didi Global on the New York Stock Exchange on June 30, 2021, but later faced a shareholder vote to delist from the NYSE due to Beijing's displeasure with the public listing that raised US$4.4 billion.
However, Didi's return to local app stores encountered challenges due to weak macroeconomic conditions and intensified competition from various Big Tech companies such as Meituan, Huawei Technologies, Tencent Holdings' WeChat, and ByteDance-owned Douyin. By the end of May 2023, a total of 313 ride-hailing platform companies had obtained licenses to operate, compared to 236 in June 2021 before Didi's cybersecurity investigation, as reported by China's Ministry of Transport.
Several Chinese cities, including Dongguan, Zhuhai, Wenzhou, Jinan, and Sanya, have issued notices stating that their ride-hailing markets are either saturated or soon will be. Sanya's local transport agency, for instance, has stopped issuing permits to new drivers since May 5, citing the nearly saturated capacity due to the rapid increase of ride-hailing platforms and cars in recent years. Furthermore, ride-hailing platforms have faced an influx of new drivers amidst the country's weakened macroeconomic environment.
While the number of registered online taxi drivers in China grew by 76% to 5.1 million at the end of 2022, the number of ride-hailing passengers increased by only 20% to 437 million in the same period, according to the China Internet Network Information Centre.
Zhang, a Didi driver in Beijing who joined the platform in March after losing his previous job, shared his experience of declining daily orders and pay. He stated, "There are just lots of people like me who started driving Didi after losing jobs in the last two years, making it hard for especially new [Didi] drivers to get enough orders,"
As China's jobless rate for individuals aged 16 to 24 reached a record high of 20.8% in May, and with nearly 11.6 million college graduates entering the workforce later this year, the country's overall unemployment rate remains unchanged at 5.2%.
Didi Global narrows losses in Q1, reporting a net loss of 1.2 billion yuan, a 93% improvement from the previous year.
First-quarter revenue reaches 42.7 billion yuan, driven by increased demand after a lackluster Lunar New Year holiday.
Didi's domestic operations show a gain of 1 billion yuan in adjusted EBITDA, compared to a loss of 6.2 billion yuan in Q1 2022.
Source: SCMP