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Meituan Dianping Expands Its Ride-hailing Service to 15 Cities
Meituan Dianping Expands Its Ride-hailing Service to 15 Cities
Low light photography of street cars. Photo by Antonio DiCaterina on Unsplash
Associated Company
Didi Chuxing Didi Chuxing

Meituan Dianping (3690.HK), the biggest food delivery platform in China, announced it has expanded its aggregated ride-hailing services to an additional 15 cities in China, in a move that will likely heighten the rivalry with its key competitor DiDi Chuxing, dubbed China’s Uber,

Meituan Dianping introduced its ride-hailing operation Meituan Dache in February 2018 in Nanjing and expanded the service to Shanghai in March of the same year. In April, the company announced the aggerated model that grants users to access to different ride-hailing providers such as Shouqi Yueche, Caocao Zhuanche, and Shenzhou Zhuanche.  

Meituan now has operations in a handful of cities in eastern China including Suzhou, Hangzhou, and Ningbo, as well as Xi’an, Chengdu, Wuhan, and Shenzhen.

The company, however, is not the only player that enables riders to book services from multiple suppliers. Incumbents include Autonavi and Baidu Map. As Meituan competes with these map providers, it has another advantage to rely on when it comes to attracting users. Known as the Yelp of China, Meituan allows users to book a ride to a restaurant that users are browses on its app by simply pressing a button in the listing page. This function is set to expand the scope of listings to hotels and recreational facilities, Meituan claims.

To attract consumers, Meituan priced the rides hailed on its app at a flag-fall of CNY 5 (USD 0,75) when it launched the service last February, compared with the usual start fee of CNY 14 charged by a regular taxi. In May 2018, local authorities criticized this kind of price war as unfair competition. Meituan waived its subsidies, which led to its market share decreasing on the sides of both drivers and customers. DiDi’s market share rebounded as a result (we discuss more in the DiDi report, please click here to get the full report).

This reflects the low switching costs and limited customer loyalty in the ride-hailing sector. Meituan halted the expansion of the services last September because DiDi’s safety issue - two female passengers were killed during rides booked through the firm's hitchhiking service DiDi Hitch - has changed the market dynamics, according to its prospectus it filed with the Securities and Futures Commission of Hong Kong.

Meituan apparently has decided to be back in the game, saying there will be no more heavy subsidies issued to drivers and passengers. Instead, the company will focus more on the involvement of technology in upgrading its services. Meituan is taking a more cautious approach to expanding Meituan Dache, its ride-hailing arm, amid increased regulation pressure and in light of the CNY 1.86 billion net losses in the fourth quarter of 2018.

It is too risky for Meituan to barge into the new cities on the strength of heavy subsidies even with its wide range of partnerships. Thus, considering the limited scale of its program and its moderated business strategy, we believe it still too early to conclude that it can take on DiDi.

Enterprise Information

Didi Chuxing is a mobile transportation platform, offering a full range of commuting options to 400 cities in China.
CATEGORIES: Auto, AI
Last Funding Type
Strategic Investment
Number of Employees
5001-10000
Number of Funding Rounds
20
Total Funding Amount
21.85B

Enterprise Information

Didi Chuxing
Didi Chuxing is a mobile transportation platform, offering a full range of commuting options to 400 cities in China.
CATEGORIES: Auto, AI
Last Funding Type
Strategic Investment
Number of Employees
5001-10000
Number of Funding Rounds
20
Total Funding Amount
21.85B

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