Zhou Hang, founder and CEO of China’s ride-hailing service Yidao, said yesterday in a statement that the company is facing financial troubles. He later blamed LeEco, the company’s controlling shareholder, that it has diverted RMB 1.3 billion (USD 188 million) funds from Yidao to maintain LeEco’s operations.
In response to Zhou’s remarks, LeEco and Yidao released a joint statement calling Zhou’s statement a smear. LeEco stressed that the RMB 1.3 billion in dispute here is part of the RMB 1.4 billion syndicated loan to Yidao with a LeEco property as collateral. According to LeEco, the two parties involved have agreed to use the loan for turnover of capital – RMB 100 million of which will go to Yidao, and the rest will be used to fund LeSEE’s business.
Yidao, once Uber and Didi’s major rival, has shown signs that its business is in decline. In October 2015, LeEco invested USD 700 million in Yidao and acquired 70 percent of its shares. However, the capital investment didn’t come as effective as expected at the end of the day.
According to a CNIT-Research report, Didi Chuxing, the country’s largest car-hailing platform which acquired Uber last August, held 94.6 percent share of China’s ride-hailing market last year, with Yidao’s at 3.6 percent.
Yidao is embroiled in its troubling financial issues. Just recently, rants against the ride-hailing company have been growing, with its drivers flocking to Yidao’s Beijing headquarters in droves to demand payment. Local media reported that the drivers were unable to cash in their income, failing to withdraw money from their company accounts. Some Yidao drivers in Shanghai and Nanjing lined up at the offices to get paid while questioning the financing trouble, local media reported on Wednesday.
LeEco itself is not doing quite well either. The Chinese Internet giant has faced a huge cash flow crunch mostly because of its ambitious and excessive expansion plan. The company has reportedly delayed payroll for its employees in the United States and halted its plan to acquire American television company Vizio for USD 2 billion.
Silicon Valley Business Journal reported that LeEco has sold its headquarters in San Jose, which the company has since denied and said that it rented the building in the first place. Also, there have been talks in the industry that the company is planning to lay off a third of its U.S. workforce.
The futures of both Yidao and LeEco seem dim. Both companies will have to look for more financial assistance in order to survive these turbulent times.
(Top photo from Baidu images)