Didi is a battle-hardened company, but also a weary one.
Some of our friends believe that the company, ever since it failed to launch its own payment (it adopted Tencent’s WeChat instead, after taking Tencent on as a major investor in its early days), the company has lost the ability to control its own fate, and justify its valuation.
In addition, so many other forces have been trying to chip away Didi’s market share and dominance in ride hailing:
There are even rumours that Tencent, which has always been a strong Didi backer, is challenging Didi through its own ride-hailing service.
Most of these attempts will probably not change the fact that Didi is still the dominant player in China, but it is tiring for Didi to have to keep defending itself, while it does not have the energy or capacity to launch offensives.
Enter the virus
As if these attacks, plus the safety and other incidents, are not enough. Didi is now hit by the coronavirus outbreak – hard.
The reason is simple – with cities locked down, and people worried about their lives, there is just a massive reduction of demand for ride hailing.
The chatter from different cities in China point to a reduction of order volume between 50 – 80% across a few major Chinese cities.
The reduction of demand causes many drivers to give up, returning their cars to the rental companies or driving their own cars elsewhere. The same chatter suggests that in some cities, as far as 40-50% of the drivers gave up driving.
At the same time, Alibaba, Meituan and Tencent are chipping away commuter traffic, through their own services or aggregators.
Blessing in disguise?
However, this might not be all bad for Didi. While the likes of Alibaba and Tencent are dominating consumer traffic, they do not have the capability, experience and probably the willingness to deal with supply – millions of drivers.
Well, Alibaba used to be able to, but since it has transitioned from a ground sales company to an advertising company, it has lost that ability.
Its top lieutenant, Gan Jiawei, later joined Meituan and was instrumental in building Meituan’s offline merchant acquisition.
The state owned companies have never been a proper threat to Didi, despite all the rhetoric.
So Didi remains the leader in this field. Its size also means it is much easier to survive a major drop in demand, as compared to its smaller competitors.
But when will Didi be able to eventually IPO, and deliver the exit that its investors have been longing for for years?