Cao Cao Mobility, a ridesharing app, has reaped the benefits of investments from Chinese state investors as rival Didi sees itself mired in regulatory issues, the Financial Times (FT) reported Monday (Sept. 6).
The company said it had raised $588 million from a group of state investors based in the eastern city of Suzhou, the report stated. Cao Cao will be using the new capital to expedite expansion and make drivers safer.
The company is currently benefiting from the backlash to Didi, with Suzhou Xiangcheng Financial Holding Group and Suzhou Innovation Capital among five investors searching for a domestic rival to Didi, according to the report. Cao Cao Mobility now operates in 62 cities in China.
Didi’s troubles include a ban on the company from registering new users until regulators have concluded an investigation into its data security.
This is a reversal from the situation just two years ago, when Didi was viewed by investors as largely bulletproof and rival companies were starved for capital. After the regulatory investigation into Didi was announced, things changed. In one instance, China’s leading food delivery platform, Meituan, jump-started the ridesharing service it had stopped offering in 2019, according to the report.
“The government wants tech players to have state-owned money,” said Shaun Rein, founder of China Market Research Group, per the report. “Beijing was not happy about Didi trading overseas, with the backing of foreign players including SoftBank and Uber.”
Regulators have been more closely scrutinizing unfair market practices by ridesharing companies, including Didi and Meituan. One example of such unfair market practices alleges unlicensed or unregulated drivers are hired by ridesharing companies, with the risk of operation then put onto those drivers. There’s also the order regulators have given to the ridesharing companies to quit taking so much of a percentage from transactions and to better protect users’ data.
The Transport Ministry advised ridesharing companies to “maintain a fair competitive market environment” and promote the “healthy and sustainable development” of the transportation sector.