On Sunday, China’s cyberspace regulator said that it had ordered smartphone app stores to stop offering Didi Global’s app after finding that the ride-hailing giant had illegally collected users’ personal data.
The Cyberspace Administration of China (CAC) said it had told Didi to make changes to comply with Chinese data protection rules four days after Didi began trading on the New York Stock Exchange, having raised $4.4 billion in an initial public offering.
Didi responded by saying it had stopped registering new users and would remove its app from app stores. It said it would make changes to comply with rules and protect users’ rights.
China has been clamping down on its home-grown technology giants over antitrust and data security concerns.
Didi’s debut in Trading world
Didi made its trading debut on Wednesday in an IPO that valued the company at $67.5 billion, well down from the $100 billion it had hoped for, which potential investors had resisted.
Redex Research director Kirk Boodry, who publishes on Smartkarma, said the CAC’s move appeared “aggressive.”
“(It) indicates the process could take a while, but they have a large installed base so near-term impact (is) likely muted for now,” he said.
Investigation
Didi’s app was still working in China for people who had already downloaded it. It offers over 20 million rides in China every day, on average.
CAC on Friday announced an investigation into Didi to protect “national security and the public interest,” prompting a 5.3% fall in its share price to $15.53.
The stock was sold at $14 per share in the IPO — the top of the indicated range.
Didi, which offers services in China and more than 15 other markets, gathers vast amounts of real-time mobility data every day. It uses some of the data for autonomous driving technologies and traffic analysis.
Didi had flagged Chinese regulations in its IPO prospectus and said: “We follow strict procedures in collecting, transmitting, storing, and using user data according to our data security and privacy policies.”
A notice on Didi’s China app showed it had updated its user information and data privacy policy on June 29, the day before its trading debut. In a statement to Reuters, Didi described the move as a “regular update” after adding two new services on the app under its chauffeur business.
Founded by Will Cheng in 2012, the company had previously been subject to regulatory probes in China over safety and its operating license.
Conclusion
According to its listing prospectus, more than 90% of Didi’s first-quarter revenue came from ride-hailing in China. By contrast, rival Uber Technologies Inc.’s core ride business accounted for just 29% of its first-quarter revenue; food delivery brought in 60%.
Didi had 96% of China’s ride-hailing market in 2018, according to researcher Deloitte. In recent years, rivals have whittled that down to around 80% to 90%, according to Cherry Leung, an analyst at Sanford C. Bernstein in Hong Kong. She estimates that Didi could lose about 6 million new customer installs over the period of the data-security investigation, assuming the probe lasts the standard duration of six weeks.
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