Chinese-based multinational ride-hailing company DiDi Chuxing will close down its South African operations tomorrow, exactly one year since it launched locally.
Billed as the second biggest ride-hailing firm in the world after Uber, DiDi established its local offices in April last year, starting with a pilot project in Gqeberha, Eastern Cape. Several weeks later, it established a presence in Cape Town, followed by the opening of its Gauteng business.
The Uber and Bolt competitor, backed by Softbank, operates in five continents across the globe. The South African expansion marked the e-hailing firm’s first presence in Africa and the 17th active country globally.
In an e-mail sent to ITWeb, the company confirmed it’s in the process of winding down its local operations, with today marking the last day of its mobile app availability in SA.
“Currently, we are operating in several cities in South Africa. However, due to our strategy adjustments; we regret to inform you that as of 8 April, the DiDi app will no longer be available in all areas of South Africa. The closure of business is part of our strategy adjustment from our managerial levels, though sad news for our loyal users,” notes the e-mail.
ITWeb this week learnt from DiDi driver partners and two e-hailing industry leaders that the company had left them confused when it sent SMSes and app notifications to all driver partners and vehicle operators in the last week of March, informing them the service will no longer be available in their city.
While this came as a shock to some, many people were not surprised, they say.
The company, which reportedly has over 500 million customers across the globe, couldn’t have launched at a worse time, setting up office at the height of the pandemic, two months before the third wave hit SA in July.
DiDi also launched when competition in the local market was becoming increasingly intense. While dominated by international players Uber and Bolt, the industry has seen an influx of new start-ups, such as InDriver, NextNow, Taxi Live Africa and Africa Ride, among others entering the market.
Felled by competitors
Melithemba Mnguni, secretary general of the E-hailing Operators Interim Committee, told ITWeb the dominance of Uber and Bolt in SA is a key contributor to the demise of DiDi locally.
“DiDi succumbed to the monopoly by Uber and Bolt and, as a result, they failed to penetrate the market. DiDi was charging driver partners 13% commissions, which is only half of what Bolt and Uber are charging their driver partners. However, DiDi's customer prices were slightly higher, as they were based on vehicle running costs.
“On the other hand, Bolt and Uber prices are charged below running costs, but riders are subsidised through continuous discounts that DiDi could not keep up with in the long run.”
According to Mnguni, DiDi invested over $10 million (R140 million) in setting up its local operations and a significant part of that went towards bearing the expense of running the launch promotions and discounts for drivers and riders.
DiDi launched with three services on the platform: DiDi Go, the low-cost alternative for price-sensitive riders; DiDi Express, the standard service for those seeking a balance between price and comfort; and DiDi XL, for those who need more space, with a capacity of up to seven seats.
DiDi Express is charged at a base fare of R15 and a distance rate of R10 per kilometre. The service competed with Uber’s normal price, which starts from R7.50/km, and Bolt’s normal price, which starts from R6.00/km.
In an interview with ITWeb, Vhatuka Mbelengwa, national e-hailing spokesperson for the Private Public Transport Association of South Africa, said he is aware of DiDi closing its operations, noting it as a loss to the local industry.
“From what we understand, DiDi is permanently leaving the country nationally and I think this is an indication of how unequal the e-hailing market is in South Africa. If a global financially-strong company like DiDi can’t secure some market share in SA, what does that mean for local e-hailing start-ups who don’t have the same financial backing? The DiDi drivers were only busy for a moment when the service initially launched, as customers were after promotions,” Mbelengwa points out.
A DiDi driver who also drives for other local e-hailing services and did not want to be named, told ITWeb he was never as busy on the DiDi app as he was on the other services.
“When the promotions ended, I would drive around the whole day before I got one notification from DiDi, telling me to go and pick up a customer,” he says.
Unfulfilled ambitions
During a DiDi media briefing in September, Carina Smith-Allin, DiDi head of public relations and communications for Sub-Saharan Africa, announced the company was preparing to expand beyond its three provinces of operation. But as it later turned out, this was not to be.
A once hopeful DiDi rider told ITWeb she was initially excited when she heard DiDi was piloting its service in her hometown, Gqeberha.
“My excitement soon faded when it became near impossible to locate a ride/car via the app, which wasn't the case with other ride-hailing services. I completely lost interest when I wasn't able to get a ride from the Gautrain station in January; I ended up returning to Uber, as the service has yet to disappoint me.”
Over the last few years, ride-hailing services in SA gained popularity, with more customers ditching their private or public modes of transport due to mobility-sharing advantages such as convenience, reduced travel costs, less traffic congestion and lower emissions.
However, the impact of COVID-19 resulted in the global ride-hailing market, along with other digital economy companies, taking a punch. The global market was evaluated by experts to have lost a significant share of customers as a result of job losses, the tough economic climate and some people preferring to return to using their private vehicles to protect themselves from the spread of the virus.
In SA, other concerns that plague the industry include safety issues, the lack of regulation and drivers crying foul over low wages. The past few years have seen e-hailing drivers and operators holding nationwide protests across all provinces, urging government to intervene by regulating the industry.
Many e-hailing drivers have also lost their lives at the hands of criminals and metered taxi operators, who have been opposing the service since Uber made its local debut in August 2013.
DiDi is no stranger to facing winds of opposition. Last year, the Chinese tech giant was forced to halt it plans to launch in the UK and in some parts of Europe, amid regulatory crackdowns on Chinese tech companies.
In December 2021, DiDi announced it had started delisting from the New York Stock Exchange, less than six months after its initial public offering, after Chinese regulators reportedly expressed concern over the company leaking sensitive data.
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