The largest ride-hailing business in China, Didi Chuxing suspended the carpooling service it has after one of its passengers was killed. It likely will be facing tighter oversight which will squeeze its driver numbers and in turn will extend waiting times for customers.
The incident follows a similar killing by a driver of Didi last May, and this week triggered both government and public backlash creating an opening for rival ride-hailing services to eat into the dominance Didi has had in China, said analysts in the industry.
One analyst based in Shanghai said room exists for other companies to take more market share and such incidents are able to expose weakness in the business model of Didi that has been characterized as aggressive expansion that lacks adequate control of the drivers on its platform.
The founder of Didi Cheng Wei and current President Jean Liu released a long and very apologetic letter on Thursday saying vanity had overtaken the company’s original beliefs. It was a very humbling move for a company in China.
Didi controls over 90% of the ride-hailing market in China and it said it makes over 10 billion trips annually.
With a value following last year’s fundraising round of $56 billion, Didi is attempting to expand internationally and is looking into a huge initial public offering that could come as soon as 2019. It bought out rival Uber’s business in China during 2016.
However, now it might have to step on the brakes. Regulators in several big cities that included Beijing, Dongguan, Shanghai, and Guangzhou amongst others, ordered Didi officials to suspend all its drivers that did not have proper licenses and to stop all new registrations for drivers that are unqualified, said statements released by government offices.
Tighter safety measures and screenings of drivers are likely to take place said analysts. Already, Didi has said it rejects thousands of applications from unqualified drivers each day.
Didi has faced growing public frustration over the length of waiting lines for rides and concerns not enough had been done following the killing in May. Drivers complained that working for Didi was not as lucrative as it once was.
In a prepared statement the company said it would do all it could institutionally and technologically it could to prevent crime adding it uses technology as a way to improve its efficiency.