Alibaba loses $100b as China delivery price war escalates

Alibaba Group has lost US$100 billion in market value as competition in China’s food-delivery sector intensifies. Its shares have dropped 28% since peaking in March, falling more than the broader Chinese tech sector.

Along with Meituan and JD.com, Alibaba is engaged in aggressive price competition.

Nomura estimates a combined US$4 billion was spent on discounts in the June quarter.

Alibaba has integrated its delivery unit into core operations and increased subsidies in response to JD.com’s market entry.

Goldman Sachs expects Alibaba to post a 41 billion yuan (US$5.7 billion) loss in its food-delivery business by June 2026, about one-third of its recent annual net income. HSBC has also cut its price target by 15%.

While Alibaba’s stock trades at a relatively low price-to-earnings ratio below 11, investor caution remains.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ China’s food delivery wars follow historical patterns of unsustainable competition

Today’s battle between Alibaba, Meituan, and JD.com reflects a cyclical pattern of intense competition that has defined China’s food delivery sector for nearly a decade.

In 2016, German-based Delivery Hero exited China’s food delivery market after describing it as “anything but sane,” citing competitors offering free food and waiving restaurant commissions as unsustainable business practices1.

This pattern of extreme subsidies has been consistent. Even in 2015, industry players were engaged in discount wars while analysts projected the market would grow to $38.5 billion by 20182.

The current conflict has already burned approximately $4 billion on discounts in a single quarter across the three major players, according to Nomura Holdings estimates cited in the original article.

What makes this round notable is that competitors are financially stronger than in previous cycles, with “more cash and better cash flow positions,” potentially extending the duration and intensity of this battle.

2️⃣ Regulatory intervention follows predictable boom-bust patterns in Chinese tech

China’s approach to regulating tech competition has evolved into a pattern of alternating periods of hands-off growth and assertive intervention when competition becomes destructive.