Hitchhiking app company files for listing
Print Edition
BEIJING-BASED hitchhiking service Dida Inc is expected to become the first major Chinese carpooling provider to go public, but that doesn’t mean the road ahead is smooth.
The company has filed preliminary documents for an initial public offering in Hong Kong. It hasn’t disclosed a timetable or how much it will seek to raise. The Nikkei Asia website, citing unidentified people familiar with the issue, put the figure at between US$300 million and US$500 million.
Dida, founded six years ago, is getting a jump on much larger rival Didi Chuxing, which is backed by Tencent and Alibaba, and is believed to be considering its own IPO at some point.
Whereas Didi provides Uber-style online services that include taxi-hailing, carpooling, private car transport and valet driving, Dida specializes in the hitchhiking business, where private car owners offer a vacant seat to passengers sharing a similar route or destination.
Domestic consultancy iiMedia Research forecasts that hitchhikers in China will increase to 249 million by the end of this year, compared with about 198 million in 2019.
The hitchhiking business doesn’t require the large operational costs of traditional car-hailing platforms and is relatively less-regulated. That raises concerns about criminal risks.
Didi suspended its hitchhiking service in 2018 following the murder of two female passengers by drivers. It came under fire for not offering sufficient safety measures.
The service resumed a year ago but is limited to 300 cities. The Didi site has eliminated functions where drivers could leave comments on passengers’ appearances and personalities.
Hitch drivers more often operate on a spontaneous basis without strict service guidelines. Passengers and drivers negotiate terms and schedules.
Dida said it had provided shared rides to 180 million app users in 366 cities as of June, involving 19.2 million certified private car owners. It is estimated to have about two-thirds of the carpooling market.
In 2019, its hitchhiking service generated about 178.5 million rides. It recorded 194.2 million yuan (US$28.6 million) of profit in 2017, but registered losses of 1.67 billion yuan and 755.8 million yuan in 2018 and 2019. In the first half, net loss swelled to 721.7 million yuan.
Dida has raised an aggregate US$206 million in several funding rounds between 2014 and 2018. Its institutional shareholders include electrical vehicle maker NIO Inc, e-commerce giant JD.com and venture investors IDG Capital and Renaissance Capital.
The choice of Hong Kong for the IPO is an interesting one. Officials have been trying to attract companies that might otherwise list offshore, even creating the new STAR Market in Shanghai, where relaxed requirements make it easier for loss-making companies to list.
Dida’s financing structure would require the company to carry out a Hong Kong listing instead of a yuan-denominated share sale, according to independent analyst Guan Jian who is familiar with Chinese companies’ overseas listing.
The big test for Dida is steering public sentiment on car-hailing services its way.
Crystal Jiang, who lives in Shanghai’s Minhang District, said she usually uses Didi because of its large fleet supply and varied price ranges.
“But Dida can be useful sometimes if I want to hail a ride during the morning rush hour, when too many users are hailing rides through Didi,” she said.
Summer Miao, another Shanghai resident, said she now prefers the Alibaba-owned mapping service Amap.
“Amap links with several smaller car-hailing services, so I can book a ride without shifting through many apps to find the fastest ride available,” she said.
Amap currently links with about a dozen services, with price ranging from entry level to luxury vehicles.
Amap recorded surges of between 70 percent and 160 percent in online hailing and taxi-booking services on October 1, the first day of the eight-day National Day holiday.
Tencent’s mapping service is also considering adding an integrated car-hailing function covering Didi and other regional service providers, such as Shouqi Group’s car-hailing affiliate and Caocao Chuxing.
Researcher Chen Liteng at private consultancy China E-commerce Research Center said Dida’s listing could help spread the company’s brand name, giving it a competitive advantage over rivals.
“Its limited service format puts it in a better position to focus on operations and to turn a profit,” he said. “However, it may also be vulnerable to challenges from other smaller players and its lack of fuller services might prove a drawback.”
Dida said it intends to use the proceeds of the IPO to attract more riders and increase their engagement with the platform by offering coupons and a loyalty program.
The company has been expanding into online taxi-hailing, with ties to cab companies in 86 cities as of June. The company said it intends to expand into at least 150 cities in the next three years.
Meanwhile, Didi isn’t resting on its laurels. It upgraded its taxi service last month and offered 100 million yuan worth of coupons under the Kuaidi brand, a smaller rival it acquired in early 2015.
Existing players are carving out niche markets to test the response before expanding to larger-scale operations. Smaller players with sporadic hitchhiking services include HelloBike, a Shanghai-based company due to expand into at least 150 cities in the next three year.
China’s Haitong International Capital and Japan’s Nomura International are co-handlers of the IPO.
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