On Wednesday, May 29, Chinese ride-hailing giant Didi Chuxing released its financial report for the first quarter, showing a widened net loss of 1.86 billion U.S. dollars. The increase in marketing costs and losses from its stake in Xiaopeng Motors outweighed the growth in revenue.
Although Didi’s revenue in the first quarter increased by 14.9% year-on-year to 78 billion U.S. dollars, the net loss of 1.86 billion U.S. dollars widened compared to the 1.6 billion U.S. dollars of net loss in the same period last year.
In August last year, Didi sold its electric vehicle business to Xiaopeng Motors for 744 million U.S. dollars in exchange for around 3.25% stake in the latter.
According to Bloomberg, in the first quarter of this year, the rising driver operational costs in China and more costly consumer incentive measures weakened Didi’s profitability. During this period, the company also incurred a 1.8 billion U.S. dollar investment loss, mainly from its equity in electric car manufacturer Xiaopeng Motors.
Xiaopeng Motors’ financial report released on March 19 showed a net loss of 1.894 billion U.S. dollars in the first quarter of 2024, compared to a net loss of 103.8 billion U.S. dollars in 2023, reflecting a widened deficit. The economic downturn in China has reduced consumer spending, weakening the demand for electric vehicles and leading to fierce price wars and declining profit margins in the electric car market.
Bloomberg reported this month that some Chinese electric vehicle manufacturers are facing the need for longer periods to settle accounts payable due to the impact of price wars and declining profits.
The Chinese government’s crackdown on the country’s robust internet industry in recent years has dealt a blow to Didi, which has been striving to revive its growth. After conducting a 4.4 billion U.S. dollars initial public offering (IPO) in the United States at the end of June 2021, Didi came under investigation by Chinese regulatory authorities within four days. Regulatory authorities ordered mobile app stores to remove Didi’s main applications in China, blocking new customers from using them, causing a sharp drop in Didi’s stock price.
Faced with regulatory pressures, on December 3 of the same year, Didi announced it would immediately start the process of delisting from the New York Stock Exchange. However, the regulatory pressure from the Chinese government did not stop after Didi’s delisting in the U.S. In July 2022, Chinese regulators fined Didi 1.2 billion U.S. dollars for violating data security laws, and in early 2023 allowed the company to reintroduce its applications.
At the time of Didi’s announcement of its first-quarter financial report, the company is undergoing significant changes at the senior level. Co-founder Jean Liu resigned from her positions as Didi’s President and board member this month. Liu, known for helping the company secure support from tech giants like Tencent, has now become a permanent partner at Didi.