Over the past few years, China has allowed its tech giants to develop at breakneck speed, showing great tolerance towards them. It was at this point that Didi Chuxing, a VTC driver service, decided to make its mark, to the point of representing 90% of the market in its home country. 

Didi Chuxing is one of those Chinese tech companies that enjoyed a meteoric rise in the 2010s. However, tensions between China and Washington have slowed their expansion. Beijing now exercises tighter control over its digital giants in order to prevent data leaks abroad.

How did Didi Chuxing manage to establish itself in the world's most populous country in such a short space of time? What are the consequences of the Chinese government's tightened controls? How can the company bounce back from these restrictions? Dive with us into the heart of the Sino-American conflict to understand what's at stake.

Didi Chuxing, a leading VTC service in China 

Two years after its creation in 2015Didi Chuxing claims to control 90% of the VTC market in China. This success is due to a perfect understanding of the Chinese market, but also to effective partnerships.

A symbol of Chinese success

In 2012, Chen Xengthe brand's founder, decided to offer China a chauffeur-driven vehicle (VTC) service. The concept, already present in the United States at the time, soon won over the inhabitants of the Middle Kingdom: China is experiencing unprecedented economic development since its opening up to the capitalist system, with businesses flourishing and large, ultra-dynamic cities in perpetual motion.

Ordinary locals, but especially entrepreneurs and businessmen, have to get around in the crowded streets of Beijing, Shanghai or Shenzhen. The VTC service is an obvious choice, offering far more affordable fares than cabs. What's more, the intuitive use of the mobile application makes booking a ride much easier than calling a cab.

This is how Didi Chuxing has succeeded in establishing its monopoly on VTC services in China. Finally, in February 2018, the company launched its electric car-sharing platform. Didi Chuxing is determined to accompany its country in the development of technologies by offering ever more innovative services.

A successful merger

Didi Chuxing is the result of a merger between two Chinese transport giants: Didi Dache and Kuaidi Dache. The latter, backed by China's two Web behemoths Tencent and Ali Babawere the masters of the VTC market in China.

The merger of these two entities enabled the app to raise over $5 billion in 2017 to become Asia's most valuable start-up. By bringing together two of China's biggest VTC players, Didi Chuxing has pulled off a real tour de force, giving it a monopoly on an ultra-flourishing market destined for a prosperous future.

Conquering the international market

Didi Chuxing has succeeded in conquering the huge Chinese market, but doesn't intend to stop there. That's why, in 2017, the company signed an agreement with Estonia's Taxify by acquiring part of its capital. Established in Europe and Africa to a lesser extent, the company is a benchmark in the transportation sector. Thanks to Taxify, Didi Chuxing now has a foothold in the European and African markets.

On its own continent, Didi Chuxing is also implementing a policy of expansion: it first invested in the Indian taxi-booking company Ola (in 2015), then forged a partnership with SoftBank Group and developed taxi-booking services in Japan. The Asian market is the one with the most consumers in the world, and Didi Chuxing intends to play its part.

Didi Chuxing is also investing in the American market, both in the US and elsewhere. The company began by acquiring shares in Lyft (Uber's main competitor in the United States). It is then looking to develop its artificial intelligence research in Silicon Valley to develop its own autonomous cars. Finally, Didi Chuxing tackles the gigantic Brazilian market by investing $100 million in VTC 99.

Progress at a slower pace

As Didi Chuxing begins to expand internationally, the Chinese state is forced to control its unicorns and other start-ups. The barely concealed conflict between Beijing and Washington is increasingly weighing on the economies of both countries, to the great detriment of their respective companies.

China: a threat to the U.S.tats-Unis

In recent years, China has experienced an unprecedented economic boom. The government, interested in the incredible financial windfall generated by digital technology, has put in place various measures to create a tax environment favorable to business start-ups. Thanks to these measures, becoming a unicorn in China takes just four years on average. By comparison, it takes seven years for a company to become a unicorn in the United States.

What's more, China is the world's second-largest supplier of unicorns: 29% of the world's unicorns are Chinese. Although the United States remains at the top of the list, with 50% of unicorns originating in the country, China is gradually catching up with its competitor, and may well catch up sooner or later. Finally, Chinese start-ups account for 41% of global unicorn capitalization, compared with 46% for the USA. The gap between the two giants is thus narrowing, and tensions are rising.

The Chinese population has embraced new technologies at breakneck speed, becoming one of the most connected people in the world. The market offers enormous potential, much to the delight of investors.

A contested IPO

In 2014, Chinese giant Ali Baba achieved the biggest IPO of all time, raising $25 billion. A few years later (2020), it was the turn of Didi Chuxing to go public on Wall Street raising some $4.4 billion. Water under the bridge, however, and the rivalry between China and the United States got the better of the Chinese start-up, which left the American stock market just five months after its IPO.

With its new Beijing-based stock exchangeChina is now encouraging its nuggets to stay at home. The government, which fears a leak of sensitive data to Uncle Sam's country, is pulling out all the stops to convince China's technology stars to seek financing on the various Chinese stock exchanges (Beijing, Shanghai, Hong Kong and Shenzhen).

To force the VTC giant back into China, officials had opened an administrative investigation against Didi Chuxing aimed at controlling its collection of private data. The Chinese government even went so far as to ban the downloading of its application throughout the country. However, users who had downloaded the application beforehand were not affected by the measure.

A listing on the Hong Kong stock exchange is more than ever on the cards

To qualify for financing, Didi Chuxing has begun "preparatory work for a listing in Hong Kong"as they announced in a brief press release shortly after delisting from the New York Stock Exchange.

According to Angela Zhang, a specialist in Chinese law at the University of Hong Kong, this decision comes as no surprise. What's more, Beijing's strict sanctioning of Didi Chuxing should serve as an example for Chinese companies potentially interested in an IPO in New York: "From now on, all Chinese technology companies will take data security issues seriously", says the specialist.

In addition to the restrictions put in place by Beijing, the United States has also taken steps to control the listing of foreign companies. The SEC now has the right to delist companies that fail to have their accounts audited by an approved firm. Chinese companies are used to not complying with this kind of procedure, and the measure is likely to curb their desire to go public.

Didi Chuxing: key information 

In 2020, VTC company Didi Chuxing had 13,000 employees.

In 2020, Didi Chuxing had sales of $21.6 billion.

Didi Chuxing had planned to go public on the New York Stock Exchange in 2020. However, rivalries between Beijing and Washington pushed the company off Wall Street just 5 months after its IPO.

Didi Chuxing aims to expand its activities in Africa, Asia, Europe and the Americas. In addition, following its delisting from the New York Stock Exchange, Didi Chuxing is preparing to list on the Hong Kong Stock Exchange.

Despite its meteoric rise, Didi Chuxing is losing momentum and its future is uncertain. Restrictions put in place by the Chinese government and its forced exit from Wall Street have forced it to review its plans.

More than a journey, the World's leading transportation platform. (More than a journey, the World's leading transportation platform.)