The Crackdown on Didi Chuxing in China Triggers Restructuring in the Ride-Sharing Industry

User Numbers of Competitors Double After Didi Chuxing's Exit

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Suhwan] As Didi Chuxing, China's largest ride-sharing company, faces strong pressure from Chinese regulatory authorities, there are expectations that the structure of the ride-sharing industry in China will undergo a complete overhaul.

Earlier, just four days after Didi Chuxing's successful IPO (Initial Public Offering) on the U.S. stock market, on the 4th (local time), Chinese authorities ordered domestic app stores to remove Didi Chuxing and announced an official investigation into the company's legal violations.

Given that Didi Chuxing holds a 90% market share in China, the authorities' actions are expected to have significant repercussions not only for workers in the ride-sharing industry but also for drivers and consumers.

The apparent reason for the sudden removal of the Didi Chuxing app from app stores by Chinese authorities was concerns over Didi Chuxing's personal information collection practices.

The authorities pointed out that Didi Chuxing was collecting users' data without consent and seriously violating regulations on the use of personal information.

The Cyberspace Administration of China (CAC), the top internet security supervisory body that took this action, stated the regulatory reasons as "preventing national data security risks, safeguarding national security, and protecting public interest" based on the National Security Law and the Cybersecurity Law.

Didi Chuxing currently has 377 million annual users and 13 million drivers registered on its platform, which, according to the authorities, poses risks of data collection and misuse of consumer information.

However, experts generally view this regulatory action as part of a broader crackdown on China's big tech companies.

Previously, Chinese authorities had increased regulatory pressure out of concern that rapidly growing big tech companies were escaping regulatory control.

Earlier this year, Chinese authorities imposed the largest-ever antitrust fine of 18.228 billion yuan (approximately 3.2 trillion KRW) on the e-commerce giant Alibaba Group.

On the 12th, foreign media reported that Chinese authorities are expected to order Tencent Music, a music streaming subsidiary of the Chinese internet giant Tencent, to relinquish its global record label streaming exclusivity rights.

Notably, the investigation into Didi Chuxing was justified by citing a "national security threat," which is unusual. Until now, regulatory logic against big tech companies had focused on "antitrust violations."

There is also an interpretation that Didi Chuxing faced harsh regulation because, as the biggest IPO candidate in this year's market, it chose to list in the U.S. stock market instead of the Chinese stock market, which displeased Chinese authorities.

In response to this strong government stance, there are expectations that the structure of the ride-sharing industry in China will be reorganized.

A Didi Chuxing driver operating in Shanghai told Bloomberg News that since the regulatory investigation began, the number of rides requested by users has dropped by about 30%.

In particular, after Didi Chuxing disappeared from app stores, users have been flocking to its competitor, Kaokao Chuxing.

According to research firm Sensor Tower, after Didi Chuxing was removed from app stores, the number of users of Kaokao Chuxing more than doubled.

Considering that Chinese users do not show strong loyalty to any particular ride-sharing company, the removal of Didi Chuxing from app stores is likely to lead to the rapid rise of competitors.

Moreover, the dominant market view is that even if Didi Chuxing, which holds a 90% market share, is removed, the Chinese ride-sharing industry will not collapse.

A driver who used to work with Didi Chuxing told major foreign media, "If there is a platform that pays more money, it is natural to move there," adding, "Users also flexibly switch platforms."

He further predicted, "We will not return to the old days of picking up passengers on the street without an app."

This content was produced with the assistance of AI translation services.