China Ride-Hailing Giant Didi Puts Europe Expansion on Hold
(Bloomberg) -- Didi Global Inc. suspended plans to expand in Europe partly because of government concerns over how the Chinese ride-hailing company handles passenger data, according to a person familiar with the matter.
Plans to challenge Uber Technologies Inc. in Europe, including several British cities, have stalled and some jobs will be cut, said the person, who asked not to be identified discussing private information. The European expansion will be paused for at least a year, according to the Telegraph, which earlier reported the news of the suspension.
The company is undergoing unprecedented scrutiny at home, with Chinese regulators cracking down on the country’s powerful new generation of tech giants. In that context, Didi wants to avoid additional criticism from U.K. lawmakers, the person said.
In an article in the Times earlier this month, U.K. lawmakers called for Didi’s rollout in the country to be closely monitored over concerns that local user data could be accessed by China. Prime Minister Boris Johnson’s government is pushing back against Chinese companies’ attempts to expand into the country. It passed rules banning compatriot Huawei Technologies Co.’s equipment from 5G networks last year. Chinese-owned Nexperia’s plan to buy Welsh semiconductor maker Newport Wafer Fab Ltd. is also being examined for national security threats.
“We have established an international talent hub in the U.K., recognizing the exceptional quality of people in the market,” a Didi spokesperson said in a statement. “Beyond that, any personnel matters remain strictly confidential.” The Didi representative also said that the company will “continue to explore additional new markets,” and had recently launched services in South Africa, Ecuador and Kazakhstan.
The Chinese transportation giant had initially considered rolling out service in European markets including the U.K., France and Germany as soon as the first half of this year, people familiar with the matter told Bloomberg News in February. At the time, the company was hiring locally and setting up a team dedicated to Europe, they said.
The news that the company, which is dominant in China, might be expanding sent shares of potential rivals, such as Uber and Berlin-based Delivery Hero SE lower. Didi began offering car-hailing services in Russia last year, marking its first direct foray into Europe, and it was previously an investor in Estonia-based Bolt Technology OU.
Since then, the company said it’s subject to a Chinese government review into its cybersecurity practices. The Cyberspace Administration of China said the move is to prevent data security risks, safeguard national security and protect public interest.
China has also begun a regulatory crackdown on ride-hailing fees. The new restrictions could cut Didi’s margin in the business in half, according to calculations from Bloomberg Intelligence analysts. The new regulation “may accelerate an exit from unprofitable international markets where it faces unrelenting competition in ride sharing,” the analysts wrote in a report earlier this month.
What Bloomberg Intelligence Says:
“DiDi’s position internationally in markets such as Australia and Europe is fairly weak while marketing costs to acquire users from rivals may sustain hefty losses. With much smaller domestic profits to offset international losses, DiDi may need to rethink its international strategy.”
-- Matthew Kanterman and Tiffany Tam, BI Technology Analysts
Didi’s American depositary receipts rose 3.4% to $7.72 in New York on Monday. The stock has declined 45% since its initial public offering.
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