On July 21, over a year after initiating a cybersecurity review, the Cyberspace Administration of China (CAC) fined ride-sharing company Didi over 8 billion yuan (or US$ 1.2 billion) for data-security violations. CAC also fined Didi's chairman Cheng Wei and president Jean Liu one million yuan each (US$148,000). The company was said to have violated three laws that "threatened national security", according to CAC.
Even prior to this fine, the company has suffered from existing struggles. From June 13, Didi began trading on the OTC (over-the-counter) market after delisting from the New York Stock Exchange (NYSE). It left the US market after 11 months of trading on the NYSE. Didi was expected to end its cybersecurity probe in early June and lift the ban on adding new users.
It is still unknown when Didi apps will be restored to Chinese app stores. Media also reported that Didi aims to enter the electronic vehicle business by acquiring shares of a small automaker.
Stalled for over a year, Didi is losing users. According to the estimates from QuestMobile, Didi had 80.7 million monthly active users (MAUs) at the end of 2021, which is at least a 20% YoY decline. Having lost millions of users to its key competitors in China, such as Cao Cao Mobility, recruiting new users has become an obstacle to Didi’s future development even if the apps go back on (virtual) shelves.
Founded in 2012, Didi Chuxing grew quickly over the past few years and became the No.1 ride-hailing brand in China. The brand jumped on Asia's Top 1000 Brands list from 597 in 2018 to 45 in 2021 and ranked No.3 in the mainland market list in 2021, right after WeChat and Chanel.
Didi is not the first Chinese brand delisted from the US market in recent years. Luckin Coffee shifted to the OTC market, but not only survived the brand crisis but surged in China to make money and opened more stores than its competitor Starbucks despite a sluggish economy during the COVID-19 pandemic and massive lockdowns.
Will Didi be able to make a similarly stunning turnaround after its year-long probe? Two brand experts analysed Didi's domestic and international businesses and advised on what the company should do to fix its brand image and rebuild its reputation.
Kaitlin Zhang
CEO
Oval Branding
Chinese brands may be experiencing more scrutiny in Western countries but there are plenty of opportunities for growth for Didi in other areas such as Central Asia, Latin America and Africa. Lockdowns in major Chinese cities such as Beijing and Shanghai are certainly challenging to Didi. However, this would be the perfect time to expand Didi’s overseas market presence in other countries currently not in lockdown, as well as solidify their grocery and food delivery services in China.
In addition, the pandemic provides a valuable opportunity for Didi to improve its brand perception through corporate social responsibility initiatives. Didi should look at its brand values and find alignment in the type of social support it can offer to the users. For example, in the UK, Uber has committed 200,000 free rides and 100,000 free meals for England’s NHS and North Ireland’s HSC health professionals. Didi can do more to make a difference and generate more positive press coverage.
With Didi’s colossal presence in China, it should improve profitability to pre-pandemic levels if they are able to expand to other countries strategically, improve its brand perception and grow its delivery services. Perhaps even more importantly, the success of any Chinese tech company is crucially dependent on working with Chinese authorities on data privacy concerns to avoid fines and app removal.
Jolin Guan
Associate partner
Prophet
China's online ride-hailing market is currently in a state where the top giants coexist with small and medium players. Despite the devastating incident that caused major safety concerns, leading to many restrictions a few years ago, Didi still has nearly 500 million users and a 71% market share in China's online ride-hailing market (March 2022).
As a just-needed service to help people travel conveniently, the growth prospects of the online ride-hailing market are still optimistic. Based on this, I believe Didi will remain in the lead in China and other APAC markets, as long as it does not make overly disruptive moves in the short term.
In terms of brand building, Didi should go a step further as a top-of-mind ride-hailing brand and enhance people’s brand preference by reinforcing the sense of security. After all, the sense of security is crucial to both users and regulators. In addition to compliance, improving the quality of drivers and the interior environment of their cars are also important, since they are where consumers experience the ride most intuitively.
As for other businesses that Didi has invested in, it is recommended to keep the distance from Didi in terms of brand, so as to avoid a situation where both are lost.
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This post is filed under... Brand Health Check: We assess and (if necessary) solicit suggested remedies |
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