Chinese ride-hailing company Didi has begun laying off employees as it grapples with stricter regulations, which have reduced order volume by 20% after its application was removed from Chinese app stores in July 2021. In all, 20% of Didi’s staff will be axed, and the dismissals will take place across nearly all of the company’s divisions, Chinese tech media outlet LatePost reported on Monday.
According to LatePost, Didi’s business units where the headcount will be trimmed include ride-hailing, logistics, bike-sharing, and group-buying. Staff from Didi’s food delivery department, R-Lab, will be hit particularly hard as the division has failed to convert Didi’s large user base into paying customers for this line of service. R-Lab has burned cash to entice customers with subsidies in an attempt to challenge the top players in the sector, but those efforts have not translated into user growth or profit.
Two departments—internationalization and autonomous driving—will not be affected by the layoffs. Didi had over 15,000 employees around the globe at the end of 2020, according to its IPO prospectus filed in June 2021.
Daily trips booked on Didi fell to around 20 million in January 2022, 20% lower than the 25 million mark published in the IPO prospectus just seven months prior. The company’s market share in the ride-hailing sector has also dropped from nearly 90% to 70%, LatePost said, citing an internal source.
In 2021’s third quarter, Didi’s rivals—including Alibaba-backed AutoNavi, auto giant Geely’s Cao Cao Mobility, and Meituan’s ride-hailing service—grew rapidly and gained customers who previously used Didi.
After its USD 4.4 billion debut on the New York Stock Exchange on June 30, 2021, Didi became the target of a strict cybersecurity review and was wiped from app stores by Chinese regulators in July 2021. The removal prevented new sign-ups and dragged the company into an RMB 30.4 billion (USD 4.77 billion) net loss in Q3 2021. This was 25% deeper in the red compared to the RMB 24.3 billion (USD 3.8 billion) loss in the previous quarter.
Didi’s share price on the NYSE has been on a constant downward trajectory and has lost over 70% of its value since its IPO in late June 2021. To comply with China’s current cybersecurity rules, Didi said in December 2021 that it plans to delist from the NYSE and seek a ticker code in Hong Kong instead.
However, the regulatory future and market environment for the embattled ride-hailing giant remains unclear as China continues to tighten control on the sector. As the gig economy keeps expanding, regulators have been urging platforms to raise pay for drivers and provide better protections for gig workers. Cargo delivery businesses have also been criticized by officials for failing to review the credentials of drivers who offer services through their platforms.
China is now rolling out new rules for ride-hailing platforms. On Monday, eight of China’s regulators, including the Ministry of Transportation, the State Administration for Market Supervision (SAMR), and the Ministry of Industry and Information Technology (MIIT), collectively revised rules overseeing the sector. This includes changes that say the platforms must review drivers’ credentials, prevent predatory pricing, and protect users’ privacy.
Companies could be removed from app stores and their platforms may be suspended if they fail to comply with the new regulations, the notice said.