Didi Global’s abrupt reversal of its decision to shut its ride-hailing unit in Russia reflects pressure in China to publicly stick by Moscow as the government there comes under widespread sanction for its invasion of Ukraine.
Didi, which posted a loss of Rmb49.16bn for the first nine months of 2021, has been struggling to stem its red ink. It cited “market changes and other challenges” in announcing on February 21 that it would pull out of Russia and Kazakhstan.
But just five days later, it reversed course on Russia, saying that it would “continue to serve drivers and passengers in the future” there.
The switch comes amid efforts by the authorities and censors to amplify online voices supporting Russia and blame the US and Nato for the Ukraine conflict. On Weibo, the heavily censored Chinese equivalent of Twitter, Didi came under intense criticism over its pullout decision last week.
“Didi is a running dog [for the US]. Let’s delete the app and let it get out of China,” said one user. “Didi is obviously expressing loyalty to the US and Europe,” wrote another.
Junyi Zhang, who heads up the greater China automotive consulting practice of Oliver Wyman from Shanghai, said the company’s reversal appeared to be due to a “senior member of management pointing out that it would not be appropriate to withdraw from Russia at this time”.
Didi entered Russia’s ride-hailing market, its first in Europe, in August 2020, but appears to have failed to make much dent in the dominant market share held by local online platform Yandex. That company earlier this month forecast that its taxi segment, which includes ride-hailing, would generate up to Rbs720bn ($7.5bn) in transactions this year.
Didi said it would proceed with plans to shut down in Kazakhstan by March 4.
For the first nine months of 2021, Didi’s international operations in 18 countries posted an adjusted loss before interest, tax and amortisation of Rmb3.99bn on revenue of Rmb2.58bn.
“I think Didi is experiencing huge losses in Russia,” wrote one Weibo commentator, who then came under attack. “It is normal to withdraw from a market that is losing money.”
Didi is in the process of cutting 20 per cent of its staff, according to Chinese publication LatePost, which also recently reported that the company’s share of the domestic ride-hailing market had fallen to 70 per cent from about 90 per cent over the past seven months.
Its recent troubles came after it pushed ahead with a $4.4bn initial public offering in New York on the eve of celebrations of the Chinese Communist party’s centenary last July, despite official misgivings that the move might give US regulators access to sensitive domestic data.
The authorities responded by barring it from signing up new customers and evicting its apps from local app stores.
Didi shares closed at $4.02 on March 4, more than 70 per cent below their IPO price. Didi said in December that it would delist from the New York Stock Exchange and seek a listing in Hong Kong that would allow existing shareholders to convert their holdings.
A version of this article was first published by Nikkei Asia on February 28 2022. ©2022 Nikkei Inc. All rights reserved
