Didi suspends its carpooling service in China

According to reports, Didi Chuxing, the largest ride sharing company in China, has temporarily suspended its carpooling service. The company, which was already facing considerable backlash from customers due to extremely long wait times, was forced to take this decision after a passenger was killed in one of its vehicles.

Following this incident, not only is it likely for Didi Chuxing's vetting procedures for new drivers to come under intense scrutiny, but there is also a strong possibility for its existing drivers to be affected by the negative spotlight. As a result, there was a higher than average chance for the already dwindling driver numbers to further plunge, thus further increasing customer wait times.

Bill Russo, head of Shanghai-based consultancy Automobility Ltd, said: "There is certainly room for others to serve the market, and such incidents expose an apparent weakness in Didi's business model: aggressive expansion without adequate control of the integrity of the drivers on their platform."

Didi Chuxing is much celebrated in China as it is it falls in a rare breed of Chinese companies that have attained the "unicorn" status. The company currently controls 90% of the Chinese ride share market and already boasts of 10 billion trips a year. Valued at $56 billion last year, it not only bought up Uber's China business in 2016, but is also looking at massive expansion plans around the globe, which includes a giant initial public offering as early as next year.

While founder Cheng Wei and President Jean Liu issued a lengthy and deeply apologetic statement saying "our vanity overtook our original beliefs", this isn't the first instance of passenger death. Only in May, another passenger was killed by a Didi driver and had triggered public and government backlash.

As a result of the latest incident, regulators in Beijing, Chongqing, Dongguan, Guangzhou and Shanghai have ordered the company to suspend drivers without proper operating licenses and stop new registrations for unqualified drivers, and it is very likely for this to be just the tip of the iceberg and more regulations to follow.

While competition has already begun chipping away on Didi's market share, whether or not this will be the final nail in the coffin for the Chinese unicorn remains to be seen.