Didi Warns Of Hit To Its Revenues Due To App Removal In China

Following an order from Chinese regulators, Didi Chuxing, China’s biggest ride-hailing company removed its app from its app stores and later issued a warning that this move will have an impact on the revenues of the company.

The app was removed after an investigation by the Chinese regulators allegedly found that the company had violated data protection rules by illegally collecting personal data of its users.

It was just days before that the ride hailing company had made its stock market debut in New York.

The existing users of the company who have already downloaded the app will not be barred from using the services of the company. However new users will not be able to register on the biggest ride hailing platform of China.

“The company will strive to rectify any problems, improve its risk prevention awareness and technological capabilities, protect users’ privacy and data security, and continue to provide secure and convenient services to its users,” Didi said in a statement.

This occurred following statement from the Cyberspace Administration of China (CAC): “After checks and verification, the Didi Chuxing app was found to be in serious violation of regulations in its collection and use of personal information.”

Last Friday, an announcement was made by the CAC that it was probing the company to protect “national security and the public interest”. This caused a 5.3 per cent drop in the shares of the newly listed company.

Large amounts of real time data is gathered every day by the company through its app. Some of the data is used for autonomous driving technologies and traffic analysis by the company.

The company was valued at almost $74.5bn after the launch of its IPO on the New York Stock Exchange last week. The IPO helped the company to raise $4.4bn which was highest for any Chinese company getting listed in the United States since the listing of Alibaba in 2014.

The current business environment in China for its home frown tech giants is somewhat tricky with the Chinese regulator clamping down on them to reduce the influence they have over the market.

The action against Didi is viewed as a part of a wider crackdown on Chinese tech by regulators – which, according to some analysts, are aimed at Chinese authorities seeking to gain more control of this burgeoning and dynamic sector.   

Some analysts have also cautioned that this could only be the start of troubles for Didi and other Chinese tech firms. Chinese companies seeking to get listed in the US will have to face more questions from investors about the regulatory outlook in China and if the current trend continues, the companies will find it hard to convince potential investors.

Didi was founded in 2012 and currently operates in 15 markets apart from China. Revenues of about 42.2bn yuan ($6.52bn) for the three months to the end of March was reported by the company in June.

(Adapted from BBC.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability

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