Didi spins off costly autonomous driving unit

It could make Didi’s balance sheet look neater for now, but the ride-hailing company is still far from being profitable.

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Didi spins off costly autonomous driving unit

Didi Chuxing, China’s largest ride-hailing platform, is spinning off its autonomous driving unit and establishing it as a standalone firm, with Didi CTO Zhang Bo as its CEO, the company said in a press release on Monday.

The move will allow Didi’s autonomous driving unit to focus on research and development, product application, and business development related to self-driving technologies.

The team in question was established in 2016, and now has 200 staff members that work in areas including HD mapping, perception, behavior prediction, planning and control, infrastructure and simulation, labeling, problem diagnosis, vehicle modifications, connectivity, and security.

At the moment, the team is developing and testing autonomous vehicles in China and the United States, and once presented such a car at a showcase in Eastern China’s Suzhou.

Didi has not revealed its equity interests in the independent company. It has not shared any funding plans either.

However, Didi said that Meng Xing, a former executive director of Shunwei China Internet Fund, will be the company’s COO. Shunwei, which was established in 2011 by Xiaomi founder and serial entrepreneur Lei Jun, manages funds worth USD 200 million.

For some time, there have been speculations that Didi might spin off its autonomous driving unit so that it can seek funding independently. Didi itself is seeking USD 2 billion in financing to weather constant losses.

The spin-off could reduce Didi’s losses on paper, as R&D for autonomous driving is costly, but that itself will not bring the company out of the red. Earlier in the year, a leak revealed that Didi had racked up a deficit reaching RMB 10.9 billion (USD 1.6 billion) in the 2018 financial year.

Additionally, the spin-off may limit Didi’s growth potential in the future, lowering its valuation when the ride-hailing firm seeks an initial public offering.