Didi’s woes grow as Beijing tightens ride-hailing rules

Chinese regulators on Tuesday announced new regulations to rein in the country’s ride-hailing industry in a move that has increased pressure on the sector’s leader Didi.

Rules from the six regulators include limits on the fees companies can earn from each ride they send and urge them to offer benefits such as insurance to their drivers.

It is the latest development to hit SoftBank-backed Didi and other Chinese tech companies as Beijing ramps up regulatory scrutiny of the sector and seeks to reshape its digital economy.

Didi, listed in New York in June, has lose land to rivals since July, when Chinese officials began investigating the company on the basis of confidential data related to US stock offerings.

The company is still banned from registering new users, and China’s cyber regulator has ordered app stores to remove 25 other Didi apps, including those that register new drivers. .

The head of a large private equity firm with a stake in the company said Chinese regulators were still considering options to punish the group.

“Delisting is one of the extreme options,” he added. “The other extreme is to keep the status quo, which is not feasible because a business cannot go on for a long time without acquiring new customers and without new functionality or product releases.”

The new guidelines also push ride-hailing companies to officially hire some drivers, a change Didi warned earlier that would require the company to “fundamentally” change its business model. its business.

In China, as in other countries, authorities and companies have debated whether ride-hailing groups can treat drivers as independent contractors or should employ them formally.

Li Chengdong, head of internet research organization Haitun, said the rules are intended to give drivers the option to become full-time employees and enjoy related benefits.

“For Didi, that means the costs are going to go up, it’s going to have a huge impact.”

In its prospectus, Didi warned investors that reclassifying drivers as employees “could require us to fundamentally change our business model, with unintended consequences. “.

Aidan Chau, at China Labor Bulletin, said the government has been trying to help workers in the contract economy get the benefits but noted that this continues to be a challenge for workers.

“Implementing this policy in good faith will be very difficult,” he said of the latest booking rules.

Didi did not immediately respond to a request for comment. The company and its executives have spoken very little publicly since Beijing launched a multi-agency investigation into its data practices.

Didi also skipped the release of quarterly earnings reports and held regular calls with Wall Street analysts, confusing shareholders as to how the investigation was affecting its business. how.

More relaxed US regulations for foreign groups mean Didi has no obligation to report quarterly financials. Regulators also ordered Didi and other motorbike taxi drivers to only use drivers with mandatory industry licenses, another setback for the Beijing-based group.

Didi shares have fallen more than 44% since its IPO in New York and The opponents have increased new rounds of funding from state-owned funds as it tries to lure its customers with promotions.

Additional reporting by Emma Zhou from Beijing

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