Chinese Didi Chuxing loses $585m in just six months

Beleaguered ride-hailing giant, the world’s second most valuable start-up, has failed to generate a profit in the six years since its founding

Didi, which is backed by Softbank and Apple, doled out about $1.7bn in subsidies and discounts to passengers and drivers in the first half. AFP

Chinese ride-hailing company Didi Chuxing lost 4 billion yuan (Dh 2.14bn) in the first six months of 2018, highlighting its problems with competition and unprecedented regulatory scrutiny.

The Beijing-based start-up, backed by SoftBank and Apple, doled out about $1.7bn in subsidies and discounts to passengers and drivers in the first half to neutralise hard-charging rivals such as Meituan Dianping, the people said, requesting not to be named.

Didi, the world's second most valuable start-up, has failed to generate a profit in the six years since its founding. Its cash-burn recalls that of Uber Technologies, which ran through billions of dollars but is reining in losses ahead of an initial public offering. The Chinese company also has to deal this year with blowback from the deaths of two passengers allegedly murdered by Didi drivers, which has drawn fire from the government and triggered a #deleteDidi online campaign.

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Didi has since put some expansion plans on hold while it shakes up its compliance and safety measures. Founder and chief executive Cheng Wei told employees the company needs to overhaul a culture that put business growth before the well-being of its customers.

"We have to ask some hard questions: does Didi have core values, are we only a company that focuses on interests and ignores safety and social responsibilities," Mr Cheng said in an email, according to people who've seen the memo. "The problem is within ourselves. Our desire for success caused us to forget our mission. The expansion frenzy planted seeds of trouble and our internal system couldn't keep up with our expansion."

Such is the cost of competition that Meituan this week declared it’s halting further spending on ride-hailing as it prepares for a Hong Kong IPO.

Didi still returns most of its revenue via subsidies to riders and drivers, one of the people said. It consequently generated a wafer-thin 1.6 per cent gross margin in the first half, the person said. Only about 16 per cent of its transactions across its mobility or transport businesses becomes revenue, the people said. The company declined to comment in an emailed statement.

Didi’s troubled 2018 comes after a successful years-long run, when it raised billions of dollars and forced Uber out of China after a costly subsidy war.