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  HOME | Business & Economy (Click here for more)

China’s Ride Hailing App Says Operations Unsustainable without Price Rise

BEIJING – China’s ride-hailing app company Didi Chuxing, the country’s equivalent to Uber, has warned their operations would be unsustainable if they do not increase their commission fee from passengers for every trip, Chinese economic daily Caixin reported on Tuesday.

According to the report, during the last three months of 2018, Didi charged an average commission fee of around 19 percent of the amount each passenger paid, which was two percentage points less than the average cost for each ride.

This, the company said, would result in “unsustainable” operations and potential losses, according to Caixin.

Data provided by the company shows that around 40 out of 100 commission fees charged by Didi were higher than 25 percent or less than 15 percent.

Several Chinese media have reported that in 2018, Didi suffered losses to the tune of 10.9 billion yuan ($1.6 billion).

The ride hailing firm does not publish its financial results as it is not listed in the stock exchange.

However, in an internal letter, Didi CEO Cheng Wei had admitted losses of around 4 billion yuan for the first half of 2018, mainly due to spending on incentives for drivers and users.

According to Caixin, towards the end of 2018, Didi was valued at some $51.6 billion, 7.9 percent less than a year before.

Didi merged with the Chinese subsidiary of Uber in 2016 in an operation investigated by China’s anti-monopoly authorities.

Moreover, the country’s premier ride-hailing app firm, which enjoys more than 90 percent of the market share, found itself in soup due to several cases of sexual assault and murder of passengers by Didi drivers, which led to the government demanding that they ensure the security of their passengers.

Since then, Didi has announced measures such as an emergency button in its application and audio recordings during trips.

Despite question marks over its security and its financial condition, Didi has continued with its plan of expansion abroad as it expanded its services to countries such as Brazil and Mexico under the brand 99, and recently even announced its arrival in the Colombian market, where it has been recruiting drivers.

 

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