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China’s premier Didi Chuxing app will debut on the New York Stock Exchange after that Defeating Uber and becoming dominant on the streets of the country’s major cities, but concerned with growth and regulation on the horizon.
With the name of his holding company Xiaoju Kuaizhi, Didi raised at least $ 4 billion in one of the largest initial public offerings off the 2014 Alibaba list after pricing shares at the top of the marketed range. Didi sold the shares for $ 14 a piece, according to information about the deal, giving it a market capitalization of at least $ 67 billion. The company refused.
Didi’s market value would be above the $ 65 billion valuation the private investors bought at the fundraising company for 2018, perhaps due to investors ’interest in the trip due to the disappointing disappointment of 2019 UB U.S. rivals.
Unlike when Uber hit the market, Didi may have a profitability in the core business of 2019 rides, tailored to interest, taxes, amortization and pre-amortization earnings. This core business is expected to raise 94 percent of Dmb’s Rmb142bn ($ 22 billion) by 2020.
This is a much higher share of revenue than Uber or Grab, as they are based on fast-growing but loss-making food distributions of 35% and 49% of revenue, respectively. In China, Meidian and Ele.me formidable rivals leave Didi out of the distribution sector.
Although Didi’s main business is profitable, its margin on each ride it reserves is much lower than that of its international rivals, about 3 percent compared to Uber’s 20 percent.
Coronavirus blockages reduced Didi’s reserves by a third in the first quarter of last year, but China had a sharp and successful virus content.
In the first quarter of 2021, Didi made an overall positive net profit for the first time, largely because it deconfirmed its Chengxin Technology group’s acquisition business, which led to Rmb9.1bn ($ 1.4 billion).
Analysts questioned whether Didi could reach saturation in China’s largest cities, such as Beijing and Shanghai, which take up half of its reserves, and whether it could create new businesses to boost growth.
“Didi’s main question is whether his main mobility in China can generate enough dry dust to finance the emerging new business, such as autonomous driving,” analysts Bernstein wrote in a recent note.
The head of capital markets at a U.S. bank in Hong Kong said the initial IPO of $ 100 billion was “never a reasonable starting point” because of Didi’s market constraints. “Their main problem is that they’re not as easy to deploy from the outside as Uber. The equivalent of Uber Eats and logistics is already crowded in China,” the person said.
Abroad, Didi has expanded to large developing economies, such as Brazil, but China is less than 2 percent of its business revenue.
Its dominance in China, however, is beyond doubt. Since buying Uber in 2016, Didi has reached 90 percent of all online car bookings in 2020, of which about two-thirds are in the top 30 cities.
If there is any competition in smaller cities and towns, more than 200 rivals compete across the country. The rival, backed by T3, Alibaba, Tencent and three Chinese car manufacturers, has been successful in building market share in Nanjing and Chongqing due to low prices and its owned fleet.
“Right now the profits are big, but as competitiveness heats up in smaller cities, prices will have to fall,” said analyst Cherry Leung Bernstein.
Didi’s aides argued that profitability is scalable because competitors are unlikely to wage a price war between the three. Didi, home rival Kuaidi Dache and Uber, and from there Cheng Wei, Didi’s chair, emerged victorious in 2016.
Cheng and Jean LiuThe former Goldman Sachs banker, who became Didi’s president in 2015, has so far tried to force more expensive subsidies to defend rivals.
“It’s a very simple question: If you want to do the same for Didi, are you ready to attract $ 20 billion in users?” said Kevin Wang, founding partner of Ameba Capital and first investor at Kuaidi Dache batu With Didi in 2015.
After losing to Didi, Uber has maintained a high stake, now at around 12.8 percent. Other major investors include SoftBank’s Vision Fund with 21.5 percent and Tencent with 6.8 percent.
It is more urgent than the competition to know whether Didi can do a tougher regulatory scrutiny in a broad crackdown on technological groups that are growing too strong, too fast.
The company is not insured due to various issues passenger safety concerned about unfair competition and low driver salaries.
Earlier this month, a financial publication from the official Xinhua news agency said anti-monopoly investigations were a “hanging sword” in the IPO, citing concerns about pricing and an investigation into Didi’s deal to take over Uber’s Chinese business. they never released it.
In May, Didi executives, along with more than 30 other companies, called the Ministry of Transport out of concern over the driver’s salary after Didi complained that he was making a 30 percent reduction in some fares.
The company said it had applied to less than 3 percent of breakdown cases and vowed that drivers would do better to ensure fair pay.
However, the company has issued a clear warning to authorities: “If Didi does not correct his behavior immediately, regulatory action could be intensified,” said Angela Zhang, a Chinese antitrust law firm at the University of Hong Kong. .
In the future, Didi still sees promise in autonomous driving, with the hope of eliminating the need to pay drivers, who account for 50% of the company’s costs.
But an Alibaba-sponsored start-up has taken a more cautious approach than rivals like Baidu and AutoX than those who have begun to remove safety drivers from driving vehicles. Last year, Shanghai obtained a driver’s license to drive a car last year, but said little about the trials.
Zhang Xiang, an independent automotive analyst based in China, said that Didi’s autonomous driving investment is a way to differentiate itself from Uber after the U.S. company. abandoned self-driving by the end of 2020 and to ensure high valuation for autonomous business.
“It doesn’t make sense to launch a robotaxi as a purely autonomous service,” said one of Didi’s first investors. “It will have to be a hybrid built into Didi’s mobility business, which has been building the back-end technology platform for many years.”
Additional report by Emma Zhou in Beijing
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