Didi Chuxing, one of the world’s most valuable start-ups with a near-monopoly over China’s ride-sharing market, was not mentioned and the new partnerships mean Meituan users can now hail a ride from any participating ride-sharing company through the Meituan app, upping competition in the sector across 50 Chinese cities.

This move is a big deal. Just as Didi is trying to recover from a scandal involving the deaths of female passengers at the hands of rogue drivers and facing increased regulatory pressure, Meituan is now offering a good chunk of its 400 million users access to non-Didi ride-sharing options.

Although it has brought a lot of financial pain so far, on-demand mobility matters to Meituan’s ecosystem. Meituan’s restaurant review, venue booking, ticket purchasing and hotel reservation services are all linked to a common theme – going out and having a good time.

This theme requires adjacent services to transport users from their homes to a venue, between venues, and back home again.

Meituan’s ride-sharing foray into Nanjing and Shanghai has been both expensive and instructive. It incurred US$660 million in driver-related expenses in 2018 to challenge Didi. Importantly, 40 per cent of these trips involved Meituan-listed venues. This is more than sufficient to show the importance of mobility to Meituan’s overall ecosystem.

In-app ride-hailing services that whisk users to and from where they want to go to, strengthen links between Meituan’s service offerings, increases user time and spend in-app and convinces more merchants about the platform’s value to their business. As such, it is fair to say on-demand mobility is one of the last missing links in Meituan’s ecosystem.

Last year, Meituan pledged it would be more “disciplined” and “selective” with noncore business initiatives, including on-demand mobility. That commitment was on the back of an adjusted net loss of 8.5 billion yuan (US$1.27 billion) over 2018. Mobike, the bike sharing firm Meituan paid an eye-watering US$2.7 billion for in April 2018, contributed half of this loss.

It is difficult to understate how much of a challenge the acquisition of Mobike has been for Meituan – for starters, it makes an awful mess of the balance sheet. For every 1 yuan of revenue Mobike makes, it bleeds 3 yuan. That is unlikely to change any time soon, even after shutting up shop in most overseas markets.

And the opportunity cost of the deal has been enormous. After the first weekend of Meituan entering Shanghai’s ride-hailing sector, it snatched one-third of the city’s market. Imagine the punches Meituan would have been able to inflict on Didi across key ride-sharing markets if it had passed on Mobike.

Against that backdrop, Meituan’s CEO Wang Xing is now trying to muscle into mobility in a less expensive way. Allowing ride-hailing players Caocao Chuxing, UCAR and Shouqi Limousine & Chauffeur to offer rides to Meituan users in the cities they operate is exactly that – cheap.

Meituan does not need to invest in expanding its own ride-hailing presence, and it does not need to incentivise uptake through user subsidies. Aside from cost-effectiveness, the solution is fairly elegant. By offering third-party ride-sharing services in its own app, Meituan gets a picture of ride-sharing demand in select cities and how its users move to and from different venues.

This insight takes on increased importance if, somewhere in the not-too-distant future, Meituan considers introducing its own services in new cities and working as part of a ‘competitive alliance’ to erode Didi’s market share in city-by-city guerilla warfare. Such coalitions aren’t new to ride-sharing.

Lyft, Didi, Ola and Grab banded together in Uber’s key markets a few years ago, precipitating the US company’s eventual retreat from China and Southeast Asia.

Meituan’s new ride-sharing partnerships come at a time when big-kid-on-the-block Didi is attempting to mend fences with both regulators and consumers. The murder of two Didi female passengers and a male Didi driver last year led to a government-issued sanction of Didi’s carpooling service and a ‘Delete Didi’ campaign in some parts of China.

This, in turn, knocked off about 4 million monthly active users (MAUs) between August and December 2018, That is only 6 per cent of Didi’s December MAUs, but China’s tech giants have seen an opportunity.

Hello Transtech, the Ant Financial-backed mobility upstart, launched its own nationwide car-pooling service at the beginning of the year after Didi’s service was suspended. Alibaba Group Holding and Tencent Holdings, alongside auto firms Automakers FAW Group, Dongfeng Motor and Changan Automobile, have invested in a US$1.45 billion “smart mobility ecosystem” which will debut in Nanjing later this year.

All this foreshadows a coming large-scale tussle in China’s on-demand mobility sector.

Balancing ambition and available financial ammunition, Meituan’s ride-sharing partnership is potentially the start of broader, bolder moves to chip away at Didi’s ride-sharing dominance.

If successful, even in a few key cities, Meituan has much to gain.

Michael Norris is currently AgencyChina’s Research & Strategy Manager, where he conducts in-depth market research to help domestic and foreign firms understand how China’s consumer and technology trends evolve.