China’s dominating ride-hailer Didi incurred a whopping net loss of US$584 million in the first half of this year, according to people familiar with the matter cited by our parent 36Kr (link in Chinese), mostly on account of subsidies for both riders and drivers as well as rewards for drivers.
It was the subsidies dispersed in a price war from few years back that brought the Beijing-based unicorn to where it is today, it is also the subsidies that prevented from it from earning a profit.
In just six months, Didi has already amassed a loss that is greater than what it lost in the whole year of 2017 of $3 – 4 billion, a situation coupled by the nationwide shutdown of its only profit-making carpooling service, signalling a dimmer hope for the Beijing-based tech firm to turn a profit within the year as the company expected.
The company estimated in March that its core businesses would be profitable in 2018 to rake in a net revenue of close to $1 billion, with the whole company turning a small profit.
Didi to date has raised in total $20 billion through 17 rounds of financing. It annexed two of its largest competitors Kuaidi and Uber’s China unit to become the ride-hailing monopoly in China.
In addition to the high cost of subsidies, the suspension of carpooling service Didi Hitch also contributed to the company’s huge loss, as Didi Hitch was said to be the only operation that is raking in profits. Additionally, Didi also had to invest a great amount of money to enhance its widely-criticized customer service and rider security system following the second rape and killing of a female passenger.
Takeaways
– High subsidy costs, attack from new rivals like Meituan and Alibaba’s Autonavi, coupled by the suspension of its only money-making carpooling business all spelled a dim hope for Didi to turn a profit in 2018
– Didi is reportedly investing in Ofo together with Alibaba, a move that could further pressure its financials, just like what Mobike did to Meituan
Editor: Ben Jiang