TechCrunch reported last Friday that Mobike has scrapped operations across the Asia Pacific region as a key step towards a long-term plan to scale back its international business. On Monday, its parent company Meituan confirmed that the pioneer in China’s bike rental sector will shut down most of its foreign markets.
“Mobike international business is undergoing restructuring, which will result in the closure of most international markets,” Meituan’s chief financial executive Chen Shaohui told analysts on a conference call on Monday.
However, Mobike later clarified that what Chen meant is Meituan would eventually divest the rest of Mobike’s overseas asset and take the segment off its balance sheet.
When inquired by TechCrunch on Monday about its international plans for Mobike, Meituan curiously directed us to the bike department. A spokesperson from Mobike confirmed it will shut down “in some markets, particularly in certain Asia countries” but “international operations will continue in North-East Asia, Latin America and Europe.”
“Looking ahead, we are continuing discussions with potential strategic partners to maintain sustainable International business,” the spokesperson added.
The decision to withdraw from Mobike’s international operations came as Meituan plans to further narrow the operating loss of the bike unit, added the executive. Mobike has lost 4.55 billion yuan ($680 million) since April 4, 2018 when Meituan, the app that aspires to be the “Amazon for services”, bought it out. That compares to the 1.5 billion yuan ($220 million) the bike service generated in revenues over the same period, notes Meituan’s earnings latest report.
Backpedaling from foreign markets is also consistent with Meituan’s long-held strategy to stay focus on China. The Beijing-based firm earns most of its income by ferrying food and providing travel booking services inside its home country, and international expansion never seemed to be on the cards.
“Meituan has no international division of any shape or form and probably doesn’t want one, and when it acquired Mobike, it acquired the international arm,” the Financial Times reported earlier citing sources.
Tipsters who told us about Mobike’s withdrawal from APAC found the statement “vague” and saw it as a gesture to placate the public. One needs to also remember that APAC is Mobike’s major foreign market in terms of overall fleet size, which includes both bikes deployed on the street and in storage, although the region generates less income than Europe. A retreat from APAC is thus a telling sign of the bike unit’s global plans, save for Meituan’s ballooning losses that may spur a further rollback of its money-burning, non-core businesses.
While Meituan’s revenues from the fourth quarter almost doubled to 19.8 billion yuan ($2.94 billion), net loss widened to 3.4 billion yuan ($510 million) from 2.2 billion yuan a year ago. Investments in “new initiatives,” which include bike sharing and car-hailing, have “tempered” the firm’s rising profitability. Meanwhile, its core units of food delivery, in-store services like software for restaurant owners, and travel booking earned positive operating profits in 2018.
Update (March 12, 2019, 08:11 AM): Spelling of Chen Xiaohui’s name was corrected.
Update (March 12, 2019, 16:00 PM): Added more details on Mobike’s overseas withdrawal and market size.