Under Tongcheng's leadership, Dida Chuxing strives to return to growth

Didichuxing, which has been under operational pressure, has now secured agreement from a majority of its shareholders to sell their stakes to Tongcheng Travel, China's leading online travel platform.

Key points:

• Nearly 52% of Didichuxing shareholders have accepted Tongcheng Travel’s share offer.

• The struggling ride-sharing platform stands to benefit from Tongcheng Travel’s 250 million registered users, most of whom come from lower-tier markets—the same regions where Didichuxing has primarily focused its operations.

By Yang Ge

China’s fiercely competitive and constantly evolving shared mobility market has seen another significant development. The online travel platformTongcheng Travel Holdings Limited（$TONGCHENGTRAVEL (00780.HK)$) has proposed acquiring the troubledDidi Chuxing（$DIDA INC-PF (02559.HK)$), and the related tender offer is nearing completion. The deal was first announced at the end of June and crossed a key threshold this week. In its announcement released this week,announcementTongcheng Travel stated that as of August 5, investors holding 51.74% of Didichuxing’s shares had validly accepted the share offer.

This level of acceptance is not surprising, as five major investors—who collectively held 53.7% of Dida Inc.—had already indicated their intention to sell their stakes when the deal was first announced on June 29. Trip.com Group proposed to acquire Dida shares at HK$1.3875 per share, a slight discount to the prevailing market price, valuing the transaction at HK$1.42 billion. Trip.com Group also stated that, upon fulfillment of all conditions of the deal, it would pay a special cash dividend of HK$1.1745 per share.

This marks Trip.com Group’s second major acquisition following its purchase last year of the hotel business from Wanda, a troubled real estate giant, for RMB 2.5 billion (USD 370 million). In both deals, Trip.com Group acquired assets at relatively low prices due to significant pressure faced by the sellers. China’s property market has remained weak for an extended period, and Wanda is under heavy debt repayment pressure.

Meanwhile, Dida’s situation continues to deteriorate. The company faces not only challenges with its business model and intense competition from other ride-sharing firms, but also disruption from the rapid rise of next-generation autonomous ride-hailing services. Reflecting this operational pressure, Dida’s revenue fell 36.2% year-over-year to RMB 502 million last year, and it swung to a loss in the second half. The company priced its initial public offering in 2024 at HK$6 per share, and its stock price has since declined by roughly three-quarters.

This transaction appears to offer mutual benefits for both Trip.com Group and Dida, which may explain why Trip.com Group’s share price has risen approximately 10% since the acquisition was announced.

Trip.com Group is one of China’s leading online travel platforms, capturing roughly 10% to 15% of the country’s vast travel market. Unlike most competitors that focus on affluent tier-1 cities such as Beijing, Shanghai, and Shenzhen, Trip.com Group has carved out a unique positioning by primarily targeting lower-tier cities. The company states that 87% of its 250 million registered users come from these lower-tier markets.

Dida similarly focuses on these lower-tier markets and holds a distinctive position within the ride-sharing industry by specializing in carpooling services. By contrast, larger competitors such as DiDi Global andCao Cao Mobility（$CAOCAO INC (02643.HK)$) primarily offer traditional point-to-point services with one driver transporting one passenger. The carpooling model typically involves one driver picking up multiple passengers on the same route and dropping them off at their respective destinations.

This model is significantly cheaper than the one-passenger-per-vehicle approach, though passengers usually spend more time reaching their destinations. Dida identifies long trip durations as a key 'pain point' and has previously stated it is developing technology to optimize routing more effectively for individual drivers. Nonetheless, Dida’s low-cost service aligns well with lower-tier markets, which tend to be more price-sensitive than larger cities.

Can one plus one equal more than two?

Trip.com Group stated it can leverage its extensive resources—not only capital but also its large user base—to help Dida enhance its technology and operational efficiency, thereby competing more effectively against larger ride-sharing companies, many of which are backed by deep-pocketed shareholders.

In its initial announcement, Tongcheng Travel stated that the company 'intends to deeply integrate its established mass tourism ecosystem with Didi Chuxing’s asset-light carpooling model, aiming to build a comprehensive 'door-to-door' smart mobility platform covering both intercity and intra-city transportation.' 'By combining Didi Chuxing’s mobility service capabilities with Tongcheng Travel’s extensive user base, the enlarged group will be well-positioned to offer seamless end-to-end transportation and travel solutions to a broader and more highly retained user base.'

Although Didi Chuxing’s revenue has continued to decline, from a balance sheet perspective, Tongcheng Travel is acquiring a company with a relatively sound financial foundation. Last year, Didi Chuxing held RMB 967 million in cash, equivalent to roughly two-thirds of its current market capitalization. More importantly, the company’s total liabilities amounted to just RMB 566 million—significantly lower than its cash holdings—with the majority consisting of accounts payable and other payables.

Another attractive feature of Didi Chuxing is its gross margin. Thanks to its asset-light model—in which drivers provide their own vehicles—and the carpooling model’s ability to generate relatively high revenue per trip, the company has maintained a high gross margin. Its gross margin last year stood at 66.3%, compared with approximately 40% for major U.S. mobility giantsUber（$Uber Technologies (UBER.US)$and just 9.4% for Cao Cao Mobility last year; Cao Cao Mobility owns all vehicles in its fleet, resulting in significantly higher costs than Didi Chuxing.

Tongcheng Travel also reported a gross margin of 66.3% last year, suggesting strong alignment between the two companies on this metric. However, it is worth noting that Didi Chuxing’s gross margin reached as high as 72% in 2024, indicating a rapid recent decline—an issue Tongcheng Travel must address swiftly to stabilize the situation.

Didi Chuxing also faces competition from multiple fronts. One major threat stems fromBaidu（$Baidu (BIDU.US)$；$BIDU-W (09888.HK)$and Amap’s emerging aggregator platforms. These platforms enable smaller ride-sharing companies to more easily access passengers without bearing the high costs of developing expensive proprietary apps like Didi Chuxing’s. Another challenge comes from next-generation autonomous robotaxis operated by companies such as Baidu,WeRide（$WeRide (WRD.US)$) andPony AI（$Pony AI (PONY.US)$and Pony AI. However, for now at least, most of these services remain in pilot phases and, even if commercialized, are likely to initially focus primarily on major metropolitan areas.

Moreover, Tongcheng Travel may still pursue a full privatization of Didi Chuxing in the future. If it offers a premium buyout, this could create upside potential for Didi Chuxing shareholders. Even without a full acquisition, however, Tongcheng Travel’s investment could restore attractiveness to Didi Chuxing’s shares. Provided Didi Chuxing effectively leverages the resources and synergies offered by its new controlling shareholder, it stands a good chance of reversing its revenue decline and returning to a path of growth and profitability.

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