A major player in the race to transport Chinese people around is losing steam. Meituan Dianping, the Tencent-backed, all-encompassing platform for local services, continues to put the brakes on bike-sharing and ride-hailing, the company said on its earnings call on Thursday.
The eight-year-old firm is best known for competing with Alibaba-owned Ele.me in food deliveries — the segment that makes up the majority of its sales — and hotel booking, but it’s aggressively branched into various fronts like transportation.
In April, Meituan entered the bike-sharing fray after it scooped up top player Mobike for $2.7 billion to face off Alibaba-backed Ofo. Over the past few years, Mobike and Ofo were burning through large sums of investor money in a bid to win users from subsidized rides, but both have shown signs of softening their stance recently
Mobike is downsizing its fleets to “avoid an oversupply” as the bike-sharing market falters, Meituan’s chief financial officer Chen Shaohui said during the earnings call. Ofo has also scaled back by closing down many of its international operations.
In the meantime, Meituan said it has no plans to expand car-hailing beyond its two piloting cities — Shanghai and Nanjing — after venturing into the field to take on Didi Chuxing last December. The update is consistent with what the firm announced in its prospectus ahead of a blockbuster $4.2 billion initial public offering in Hong Kong this September.
The halt is likely related to changing dynamics in the country’s shared rides. Following two passenger murders on Didi, the Softbank-backed transportation platform that took over Uber China in 2016, Chinese regulators launched their strictest verification requirements for drivers across all ride-hailing apps. The mandate has squeezed driver numbers, making it harder to hire rides on Didi and its competitors.
During its third quarter that ended September 30, Meituan posted a 97.2 percent jump on revenues to 19.1 billion yuan, or $2.75 billion, on the back of strong growth in food delivery transactions. The firm’s investments in new initiatives – including ride-hailing and bike-sharing – took a toll as operating losses nearly tripled to 3.45 billion yuan compared to a year ago. Meituan shares plunged as much as 14 percent on Friday, the most since its spectacular listing.