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Beijing has been tightening the government's grip on sensitive online data. Photo: Bloomberg

Didi challengers rush to get ahead in ride-hailing market as industry leader remains snarled in regulatory traffic

  • Beijing’s decision to punish Didi by kicking its app from stores and a ban on new clients has opened a window of opportunity for others
  • Disruptive tech such as autonomous driving could also offer opportunities for existing players and new entrants to forge ahead in the ride-hailing market
Didi Chuxing

A number of ride-hailing challengers are redoubling their efforts to grab market share from Didi Chuxing, the undisputed market leader currently under a Beijing-directed cybersecurity investigation, in a sign that Didi’s troubles may not end with the results of the regulatory review.

While few players can mount a serious challenge to Didi, which controls about 90 per cent of the market in China, Beijing’s decision to punish Didi by kicking its app from app stores and banning it from accepting new clients in the last two months, has opened a window of opportunity for some operators to catch up, analysts say.

“The Didi probe has offered rivals an opening to snap up new users,” said Jiang Xinwei, research director at consultancy Analysys. “Some small ones, with 3 or 4 million users, may see their user base increase by 10 per cent during this time, an unprecedented opportunity.”

However, Jiang added that Didi’s leadership likely remains unbreakable “because it’s staying ahead in terms of technology, the number of cars and its presence in Chinese cities”.

Cao Cao Mobility, backed by carmaker Geely, has secured billions of yuan in new funding as competition in the Chinese ride-hailing market heats up.

Cao Cao said on Tuesday it has raised 3.8 billion yuan (US$586.2 million) in its latest round of financing, the largest amount of funds raised by a ride-hailing business since 2020. Investors in Cao Cao Mobility include entities affiliated with the Suzhou municipal government.

It has been reported by Chinese media outlet LatePost, citing unnamed sources, that Meituan Dache is looking to accelerate growth in 2021. Backer Meituan has been handing out ride-hailing coupons via its main online services app. Meanwhile T3 Chuxing, another Didi rival, has activated services in 12 cities within a month, according to LatePost

The latest data from China’s Ministry of Transport for July showed that ride-hailing orders at Cao Cao increased 32.2 per cent in July from June while Meituan Dache orders rose 23.8 per cent, against 13.1 per cent growth for Didi over the same period.

However, Didi’s growth remained higher than the national total of 10.7 per cent, indicating that its dominance remains intact despite the regulatory challenges.

The regulatory storm began in early July, two days after Didi’s US$4.4 billion New York initial public offering, with Beijing ordering a cybersecurity review. Didi is still awaiting the final verdict of regulators.

Tu Le, managing director of mobility consultancy Sino Auto Insights, said the Chinese government may want to see more competitors for Didi, as the ride-hailing giant may have become “too big to control”.

Didi became the biggest player in China’s ride-hailing market after it merged with rival Kuaidi Dache in 2015 and acquired Uber China in 2016. It has also benefited from the backing of global venture capitalists such as Softbank’s Masayoshi Son.

The number of ride-hailing users in China has continued to grow rapidly despite tighter government scrutiny, reaching nearly 400 million as of June 30 this year, an increase of 31.2 million from December 2020 and accounting for about 40 per cent of China’s total netizen population.

At the end of the first half, more than 200 ride-hailing companies were licensed to provide services in more than 400 cities across the country, official data showed.

According to Li Zhao, a Beijing-based tech investor, disruptive technologies such as autonomous driving could also offer opportunities for existing players and new entrants to forge ahead in the ride-hailing market.

“There will be new players once the regulatory dust settles and people get a clear view about how the market will develop because the moat surrounding the ride-hailing sector is not unbreachable,” said Li.

Additional reporting by Coco Feng

This article appeared in the South China Morning Post print edition as: Didi’s challengers step up efforts to grab market share