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Didi Chuxing

China ride-hailing war seen erupting again with new challenger to Didi

World’s No 4 unicorn Meituan to launch ride-hailing services in multiple mainland Chinese cities in direct competition with market giant Didi Chuxing

PUBLISHED : Friday, 02 March, 2018, 8:02am
UPDATED : Friday, 02 March, 2018, 3:23pm

Meituan Dianping, one of China’s most valuable private tech firms, is gearing up to challenge the monopoly of ride hailing giant Didi Chuxing, a move almost certain to trigger a new price war.

Beijing-based Meituan, known as the Chinese Yelp for its online-to-offline business model offering services from restaurant reviews, food delivery, movie ticketing and travel bookings, is expected to launch a national expansion of its ride-hailing business after debuting the service in Nanjing city in December, according to a Meituan employee familiar with the plans who asked not to be named because the discussions are private.

The employee confirmed that the company will soon launch ride-hailing services in at least five cities including Beijing, Shanghai and Xiamen in south China’s Fujian province.

“A warrior’s oath has been sworn at internal meetings,” said the source, referring to a motivational technique to spur employees to battle it out for the ride hailing market.

“Services (in several cities)are slated to kick off by the end of this month,” said the source.

Meituan declined to comment on its ride hailing expansion plans, which were reported earlier by Tencent News.

Didi, which counts tech giants Apple, Alibaba Group Holding and Tencent Holdings among its biggest shareholders, has been the dominant player in China’s ride-hailing market after pushing Uber Technologies out of the country in 2016. Didi and Uber engaged in a destructive price war for dominance in China, with billions of yuan invested to buy loyalty from riders and drivers, effectively giving consumers free rides to win market share.

“Didi and Uber splurged money to cultivate user habits, and by coming to the market late we can save this cost,” the Meituan source said. “As Didi begins to profit by charging a higher commission from drivers, we stand to gain public favour.”

China’s ride-hailing king channels Genghis Khan in preparation for a new price war

Meituan raised US$4.1 billion in its latest funding round in October, providing a war chest for future investment in existing businesses and new business development. The company’s private valuation of US$30 billion puts it behind Uber, Didi Chuxing and Xiaomi, and ahead of Airbnb, as the world’s fourth most valuable unicorn, according to venture capital research firm CB Insights.

With a strong player such as Meituan joining the nationwide ride-hailing market, a new price war is inevitable, said Zhao Xiang, an analyst at Beijing-based consultancy Analysys.

“As a late mover in the market Meituan will need to invest money to make its name in the ride-hailing business, especially given Didi’s well-established position in China,” she said.

Meituan is reportedly offering drivers low commission fees and high bonuses to entice them over to its app, and incentives to lure consumers are set to follow, according to Zhao.

The app for Meituan drivers is ranked number 89 under the category of “tools”, according to iTunes China store, with user comments including posts such as “hoping Meituan will come to Xi’an city soon”, and “hoping Meituan will end the embarrassment of Didi being the sole player”.

For its part, Didi is not afraid of the competition, according to its chief executive Cheng Wei. “Didi has withstood the fiercest competition in history, from Kuaidi to Uber. We have PK’ed countless rivals,” said Cheng, using local slang for beating an opponent in games. “Meituan may not be the weakest, but it may not be the strongest either,” he said in an interview with Chinese media outlet Caijing in January, the transcript of which was verified by Didi.

Alibaba owns the South China Morning Post.