Ride hailing platforms under spotlight as China’s transport watchdog slams ‘one sided’ pursuit of traffic, subsidies to achieve growth
- Didi co-founder Cheng Wei announced a 15 per cent cut to its workforce at an internal meeting earlier this month
The one-sided pursuit of higher user traffic and lofty fare subsidies were key factors behind the difficulties experienced by Chinese ride-hailing platforms, according to the country’s transport watchdog.
The assessment was made at a briefing by the State Council Information Office (SCIO) on Thursday, as job cuts and financial losses have come under the spotlight in an industry that was once seen as the poster child of a booming sharing economy.
“It is true that new types of industry players gained rapid growth thanks to investment piling in at the start and the enabling role of the internet,” said Liu Xiaoming, vice-minister of transport, according to a verified transcript published on the SCIO’s website. “[But] behind the rise is companies sparing no cost to achieve breakneck growth and chasing traffic and valuations.”
These companies failed to develop a truly “profitable or sustainable” business model and did not allocate enough resources to administration which exposed safety risks, Liu said.
The criticism comes after China decided to drop its “techno-utilitarian” approach to the ride hailing sector in favour of tighter regulations to reinforce safety measures after the murder of two passengers by Didi Chuxing drivers last year.
When ride-hailing was first introduced in China around 2010, it was held up not only as a way to cut air pollution by taking cars off the roads, but also as a potential provider of jobs to millions of people. Private car sharing was common practice by the time the government gave it legal status in late 2016.