What’s The News?Apple and Softbank backed DiDi has announced that they will fire 2000 employees to cut back on expenses, and to focus on ‘core areas’. Click To Tweet
This means 15% of DiDi’s workforce will be terminated, in one single go.
DiDi is China’s largest app-based on-demand cab service, and this announcement of firing 2000 employees has been declared as one of the worst layoffs seen in China, in recent times.
What Does This Mean?
DiDi’s Chief executive Cheng Wei announced the news of firing 2000 employees in their internal meeting. As per the information shared, DiDi will now scale back spendings on non-core areas and focus on areas such as safety technology, product engineering, offline driver management, and international operations.
Interestingly, Cheng also informed that by the time 2019 ends, DiDi will hire 3000 employees across their core verticals, and once that happens, a total of 13,000 employees will be working for DiDi.
DiDi is backed by investors such as Apple, and Softbank and even Uber had to surrender their fight in China and accept defeat against DiDi.
In 2016, Uber’s China unit and DiDi merged together, ending the fierce multi-billion dollar battle which was fought between them since 2013. Uber was spending $1 billion per year to fight the competition, even as 90% of all rides were happening on DiDi in 2016.
But it seems that the defeat of Uber didn’t do much good to DiDi, as they continued to struggle.
Why Does This Matter?
The Bigger Picture: DiDi has been under loss for last 6 years. And that’s one of the biggest reasons why these layoffs have been announced.
In the first half of 2018-19 financial year, DiDi reported a loss of 4 billion yuan ($590 million). They lost $1.6 billion in 2018 and $1.67 billion was spent by DiDi on subsidies for drivers in the same period.
Weak financial results are a big concern for DiDi, and on top of that, they encountered severe Govt. restrictions on their operations as well.
Last year, two high ladies were murdered by DiDi drivers, and they received a lot of negativity, as users publically deleted their app. This prompted the Chinese Govt. to impose restrictions on the number of drivers allowed to drive, and the types of cars allowed.
Operational excellence of DiDi, which was their USP, took a major hit. Waiting time for passengers are rising, and revenues are falling.
And besides these issues, DiDi is also facing some major competition from their local rival Meituan-Dianping, China’s food-delivery giant.
Combined with all these factors, DiDi is facing an uncertain future in their own country, and the decision to terminate 2000 employees perfectly reflects the state of the company.
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