Cheng Wei: This risk taker pushed Uber out of China. Now he might be too big for Beijing

Didi refused to make Cheng available for an interview, and the company did not answer questions about Cheng or his activities.

A rapid and explosive rise

Prior to founding Didi in 2012, Cheng was Sales Director at Alibaba. Starting out as an entry-level salesperson earning the equivalent of about $ 200 per month, he quickly progressed to become the company’s youngest regional manager in seven years.

“I was thinking, how about creating a rideshare app, so that there are fewer poor rain drenched losers?” Cheng said, recalling a depressing experience in Beijing when he couldn’t hail a taxi for hours during a storm, according to the media outlet.

The Chinese central government at the time encouraged rapid innovation, and carpooling was never explicitly banned in China. And on July 28, 2016, carpooling was finally legalized in China. A few days later, Didi acquired Uber China.

“Reform and innovation always come at a cost,” they wrote. “The smart travel revolution has just started … [We want to] create a world-class technology company! “

After 2016, Didi continued to consolidate its mastery of Chinese VTC and, in 2018, controlled 90% of the Chinese market. That year, the company expanded to Australia, Brazil and Mexico as it targeted customers outside of its home country.

Problem with regulators

This pressure foreshadowed Didi’s problems this year. Beijing has taken a sharp turn against internet companies it says have grown too big and powerful, resulting in a massive crackdown that has affected technology, education, entertainment and other industries.

Under President Xi Jinping, the Communist Party is acting aggressively to curb unhindered private enterprise and send a clear signal that Chinese organizations must work closely with the government. Businesses that have outgrown too quickly will be monitored to ensure they are aligned with government priorities.

Cheng went ahead, but like other Didi leaders, he kept a low profile during the IPO that came on the eve of the Chinese Communist Party’s 100th anniversary. He did not ring the opening bell or spread the news on the company’s Chinese social media accounts.

Days later, the Cyberspace Administration of China banned Didi from app stores, preventing the company from registering new users. The internet watchdog accused the company of illegally collecting and abusing user data – a wealth of places and routes with sensitive information about Chinese traffic, roads and citizens.

“From the government’s point of view, Didi has become too important to be controlled. He obviously wants to limit Didi’s growth in China, ”said Tu Le, founder and managing director of Beijing-based consulting firm Sino Auto Insights. “The government also wants to make an example of Didi that no one can be out of step with the Party.”

Didi too faces the anger and mistrust of foreign investors.

To many analysts, Cheng’s decision to go ahead with the IPO appeared confusing or reckless.

“No Chinese company can openly challenge the Chinese Communist Party and expect leniency,” said Alex Capri, researcher at the Hinrich Foundation. “[Didi] is too big and too powerful for its own good and has already crossed a threshold with the Chinese leadership. “

The company may have had a rationale in the form of pressure from investors to be listed on the stock exchange, as it had raised billions of dollars from venture capitalists. Another urgent reason was the adoption of a new law on data security in According to Winston Ma, adjunct professor at New York University School of Law, all Chinese entities must obtain government approval before providing China-based data to judicial or law enforcement agencies. foreigners.

A “fierce market”

Didi still operates in China, as users who downloaded the app before the July ban have access to it, and the company insists it maintains “normal operations globally.” But hundreds of apps are rushing to take advantage of Didi’s struggles and cut its lead in the market by aggressively expanding, advertising, and offering big discounts.

Didi’s former rival Meituan, for example, relaunched its standalone ridesharing app after Didi was pulled from stores, offered coupons to new users and exempted new drivers from commission fees for a week. Other services backed by Alibaba and Geely Auto have also announced cash incentives or coupons.

“It’s a fierce market,” said Tu of Sino Auto Insights. “Everyone wants to get into this multibillion dollar industry, including traditional automakers.”

Still, Tu said, rivals are unlikely to fully threaten Didi’s dominance. He pointed out that Didi has spent tens of billions to acquire clients, and that it is a difficult business to run without a lot of funding because clients are usually not brand loyal if someone else can. reduce their prices.

Initial government data suggested that Didi’s existing business was not affected after the ban, although it could not register new users. The company processed 13% more orders in July than in June, according to China’s transportation ministry.

“The government just wants a healthier market, not kill Didi,” Tu said, adding that he expected Didi to survive, albeit with a “less daring” expansion plan.

Capri, the Hinrich Foundation researcher, was less optimistic about Didi’s future, especially as long as he continues to trade in the United States. “Parts could be nationalized,” he said. “Beijing will also actively fund smaller competitors to equalize the market and more easily exert control over major players. “

“The longer it will remain listed on the American market,” he added, “the more it will attract the ire of Beijing.”