A junction in Shanghai / Photo credit: Carlos ZGZ
In China, where ride-hailing company Didi Chuxing enjoys about 75 percent market share, there’s something new afoot: competition. The challenger? Meituan-Dianping, a startup sometimes known as the ‘Yelp of China.’
At first glance, Meituan-Dianping seems like an unlikely candidate to take on Didi’s stronghold in China – imagine Yelp forming its own ride-hailing unit to compete with Uber. In an interview with Chinese business magazine Caijing, Didi CEO Cheng Wei was openly dismissive of Meituan-Dianping, calling it just another private car service – one among hundreds.
Meituan-Dianping is considered part of China’s next generation of tech giants.
But the online booking platform, which covers food delivery, movie ticketing, travel, and more, is anything but another run-of-the-mill tech company. Like Didi, Meituan-Dianping is considered part of China’s next generation of tech giants, following Baidu, Alibaba, and Tencent. Estimated to be worth about US$30 billion after a US$4 billion round last October, Meituan is also one of the highest-valued startups in the country.
The company also has the ambition to match its capital. According to sources cited in a Reuters report, the Beijing-based company wants to raise at least US$3 billion on the New York Stock Exchange this year. If this pushes through, it would be the largest listing by a Chinese company since Alibaba’s in 2014.
Sometimes called ‘TMD,’ Toutiao (Bytedance’s news aggregation platform), Meituan-Dianping, and Didi Chuxing are considered China’s next tech giants. At a similar valuation is Chinese smartphone maker Xiaomi (Note: The US$45 billion figure comes from Xiaomi’s last funding round in 2014).
In order to reach the heights of Tencent or Alibaba, however, the booking platform will need to find new verticals for growth beyond food delivery – which makes up half its revenue, according to sources at The Information. That explains why Meituan-Dianping ventured into ride-hailing more than a year after Didi acquired Uber’s China unit in 2016.
According to Mo Jia, a Shanghai-based analyst at research firm Canalys, Meituan-Dianping and Ele.me – Baidu’s food-delivery unit – are “about equals” in the sector, so there’s not that much room for new opportunities.
“They must find another area for growth,” he adds.
In particular, ride-hailing could lead Meituan-Dianping to future opportunities in autonomous cars and artificial intelligence, he says. “As 5G rolls out and self-driving cars develop, ride-hailing-esque services will become future applications, so entering the industry early is another consideration for these companies. They’re looking at the long-term development of this industry.”
Subsidies 2.0
To take on Didi’s monopoly, Meituan-Dianping is kickstarting its ride-hailing business with good ol’ subsidies. This year, the company plans to roll out services in seven cities, including Beijing and Shanghai. The move comes after launching in Nanjing last October.
Meituan-Dianping is also offering drivers low commission fees – as low as under a dollar – for the first three months. This strategy targets one of the largest pain points of Didi drivers. A few drivers that Tech in Asia spoke to claimed that they lost as much as 25 percent of ride profits to the platform. For long distances, some drivers will even ask passengers to pay them directly to circumvent fees.
Regulatory hurdles
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