Chinese ride-hailing giant Didi narrows losses in first quarter on back of improved demand as domestic competition heats up

Didi recorded a net loss of US$166 million in the first quarter, a significant improvement from its US$2.3 billion loss in the same period last year
Revenue reached US$5.9 billion, up from 35.8 billion yuan a year earlier, driven by a rapid recovery in daily transactions

Didi Chuxing

Iris Dengin ShenzhenandBen Jiangin Beijing

Published: 6:00pm, 10 Jul 2023

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Chinese ride-hailing giant Didi Global has substantially narrowed its losses in the first quarter on the back of improved demand, several months after regulators slapped it with an 8.026 billion (US$1.2 billion) fine for data violations and amid increased domestic competition.

Didi recorded a net loss of 1.2 billion yuan in the first three months of this year, a 93 per cent improvement from its 16.3 billion yuan loss in the same period in 2022, the Beijing-based company reported on Sunday.

First-quarter revenue reached 42.7 billion yuan, up 19.1 per cent from 35.8 billion yuan a year earlier, driven by a rapid recovery in daily transactions after a period of lacklustre demand during the Lunar New Year holiday in January.

Operations on the mainland, which account for Didi’s primary revenue source, increased 18.7 per cent year on year to 39 billion yuan, while the company’s international business grew 40.7 per cent to 1.7 billion yuan.

People walk past the headquarters of Chinese ride-hailing giant Didi Chuxing in Beijing on July 2, 2021. Photo: Agence France-Presse

Didi’s adjusted Ebitda – earnings before interest, taxes, depreciation and amortisation – for its domestic operations showed a gain of 1 billion yuan, compared to a 6.2 billion yuan loss in the first quarter last year, which was the period when it booked the hefty fine for data violations imposed by internet regulator the Cyberspace Administration of China (CAC). The fine was announced publicly last July.

The company’s strong performance this first quarter showed how it continues to dominate China’s ride-hailing market, despite going through a year-long cybersecurity investigation and efforts to “rectify” its operations. The CAC said in July last year that Didi had committed 16 offences involving the illegal collection of data from drivers and passengers.

This first quarter marked Didi’s first earnings result since it returned to mainland app stores and resumed new user sign-ups.

Didi was only able to resume registrations of new users and make its main app available for download again in China in January this year, nearly 18 months after it was ordered to halt customer enrolment in line with the CAC’s investigation.

Didi zooms past big fine and Covid-19 to narrow losses in 2022

Didi, which conducted its initial public offering on the New York Stock Exchange under the name Didi Global in June 30, 2021, started trading on the over-the-counter market in June last year, following a shareholder vote to delist the company from the NYSE where it raised US$4.4 billion in a public listing that angered Beijing.

The firm’s return to local app stores this year was marred by weak macroeconomic conditions and fresh competition from a number of Big Tech companies, including on-demand delivery platform operator Meituan, telecommunications equipment giant Huawei Technologies, Tencent Holdings’ WeChat and ByteDance-owned Douyin.

A total of 313 ride-hailing platform companies had obtained licences to operate by the end of May this year, compared to 236 in June 2021 before Didi was put under a cybersecurity investigation, according to data from China’s Ministry of Transport.

A growing number of Chinese cities – including Dongguan and Zhuhai in southern Guangdong province, Wenzhou in eastern Zhejiang province, Jinan in eastern Shandong province and Sanya in southern Hainan province – have issued a raft of notices in April and May that state how their ride-hailing markets are either saturated or would soon be in such a state.

China reduces penalties imposed on a range of ride-hailing violations

The local transport agency in Sanya, for example, has stopped issuing permits to new drivers since May 5, citing the “nearly saturated capacity after the rapid increase of ride-hailing platforms and cars in recent years”. Ride-hailing platforms also faced a deluge of new drivers, as the country’s macroeconomic environment weakened.

China had 5.1 million registered online taxi drivers at the end of last year, up 76 per cent from 2.9 million in 2020, according to the country’s transport ministry. By contrast, the number of ride-hailing passengers grew just 20 per cent in the same span to 437 million last year from 365 million in 2020, according to the China Internet Network Information Centre.

A Didi driver in Beijing surnamed Zhang, who joined the platform in March after being laid off four months earlier, said his daily orders and pay have steadily declined.

“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,” said Zhang, who is in his late 20s.

The jobless rate for people aged 16 to 24 notched another record high of 20.8 per cent in May, according to the latest data released by the National Bureau of Statistics. Meanwhile, nearly 11.6 million college graduates are set to enter the workforce later this year. The country’s overall unemployment rate remains unchanged at 5.2 per cent.