Regulators in China have imposed new rules for the country’s ride-hailing sector, a development that puts additional pressure on Didi, the industry’s leader.
As the Financial Times reported on Tuesday (Nov. 30), the new regulations include limits on the dispatch fees companies can earn, while also urging companies to offer their drivers benefits such as insurance.
This is the latest in a string of setbacks for Didi as China increases its regulatory scrutiny on the ride-hailing industry. The company did not immediately respond to a request for comment, the FT piece noted.
Read more: Amid Didi’s Regulatory Pressures, China Invests in Rival Mobility Platform
As PYMNTS reported in September, Didi had previously faced a ban on registering new users until regulators had finished a probe into the company’s data security. The government ordered app stores to remove 25 of Didi’s apps, including its driver registration tool.
Regulators had also alleged that Didi and other similar companies engaged in unfair market practices, such hiring unlicensed drivers and making them assume the risk for each trip. In addition, regulators have ordered rideshare companies to reduce the percentage they take from drivers and to do a better job guarding user data.
China has ordered the companies — which also include the ride-hailing arm of the shopping platform Meituan — to fix these issues by the end of the year.
Read more: Didi, Meituan Among 11 Ride-Hailing Firms Ordered to Fix Problems in China
The Financial Times spoke to the head of a private-equity firm with a stake in Didi, who said the regulators were still mulling their options for penalizing the company.
“Delisting is one extreme option,” he said. “The other extreme is staying with the status quo, which is not feasible because the business cannot sustain a prolonged period of time with no new customer acquisitions and no new product functions or releases.”
China’s new regulations also call on ride-hailing firms to make some drivers official employees, a shift that Didi has said would mean “fundamentally” altering its business model. “For Didi, that would mean costs would go way up, it would have a huge impact,” said Li Chengdong, head of internet think-tank Haitun.
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