Beijing orders ride-hailing firms to end ‘vicious competition’ as Didi Chuxing’s cybersecurity investigation continues

Chinese regulators told 11 ride-hailing platforms, including Meituan and Didi Chuxing, to stop ‘disorderly expansion’ and using ‘false publicity’ for recruiting
Didi’s rivals have been trying to grab more market share while the industry giant remains preoccupied by Beijing’s cybersecurity probe

Didi Chuxing

Xinmei Shen

Published: 4:00pm, 2 Sep, 2021

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Chinese authorities summoned 11 ride-hailing companies, including T3 Chuxing, Meituan Dache, Caocao Chuxing and Didi Chuxing, to order them to stop their “vicious competition” amid an ongoing cybersecurity investigation into industry leader Didi that has created new opportunities for rivals.

Regulators said that ride-hailing firms must not “use capital to engage in vicious competition and disorderly expansion”, and they especially cannot “induce” drivers to join their platforms through “false publicity”, according to a statement published by China’s Ministry of Transport.

The transport authority was one of the five government bodies that summoned the companies for a meeting on Wednesday. It joined China’s internet watchdog the Cyberspace Administration of China (CAC), which is in charge of the investigation into Didi, the Ministry of Industry and Information Technology (MIIT), the Public Security Bureau and the State Administration for Market Regulation (SAMR).

Didi will survive the storm but profitability may be capped

The agencies said they discovered some ride-hailing platforms had been fighting for market share by recruiting unlicensed drivers and vehicles, allowing them to operate illegally.

The companies were told to purge vehicles and drivers that do not meet standards to ensure safety, improve drivers’ working conditions and protect data security.

In early July, the CAC announced a cybersecurity probe into Didi after the company ‘forced its way’ onto the New York Stock Exchange against the agency’s warnings. Within days, Didi’s apps were removed from Chinese app stores and the ride-hailing giant was ordered to stop registering new users.

Since then, domestic competitors have been ramping up efforts to expand their presence in Chinese cities.

In mid-July, Meituan, China’s on-demand service giant that runs the country’s largest food delivery platform, quietly relaunched its ride hailing app, which was discontinued in 2019 after launching two years prior.

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Why China is tightening control over cybersecurity

T3 Chuxing has also been aggressively promoting its service, according to Chinese media reports. The company is backed by state-owned carmakers FAW Group, Dongfeng Motor corporation and Chang’an Automobile, along with tech giants Tencent Holdings and Alibaba Group Holding, the owner of the South China Morning Post.

Last month, Chinese state-run media outlet Economic Daily published an opinion piece arguing that frenzied attempts by other ride-hailing firms to exploit Didi’s troubles and expand their market footprint would be unhealthy.

“During the days when Didi stepped away from the spotlight, many companies including Meituan Dache, Gaode Dache and T3 Chuxing have been engaged in a high-profile fight over the market, and all kinds of new and old problems have appeared,” the article said.

So far, there is little indication that Didi’s market dominance is threatened, according to analysts and drivers. With 493 million users and 13 million drivers, Didi controls roughly 90 per cent of China’s ride-hailing market. The platform actually expanded in July, according to data from the Ministry of Transport.

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The on-site investigation into Didi’s cybersecurity started at its Beijing headquarters on July 16, and Thursday marked the 45th working day since the investigation was announced on July 2. Cybersecurity reviews typically last up to 45 working days, according to regulations, but that period can be extended.

Regulators have been weighing different potential punishments for Didi, including a record fine, the introduction of a state investor, or even a forced delisting in New York, Bloomberg reported in July. Didi has also been in talks with a state-owned company to handle its data management and monitoring, Reuters reported last month.

Didi has denied reports that it will be taken private, transfer data to a third party or introduce large new shareholders. The company also denied that it is facing a management reshuffle, which the Post reported last month as one possible consequence of the company going public despite the CAC’s warnings.

This article appeared in the South China Morning Post print edition as: China’s ride-hailing firms urged to end ‘vicious’ fight for market share

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