Meituan-Dianping to launch car-hailing services in a challenge to Didi

Meituan-Dianping, China's largest online platform for ordering food, buying movie tickets, and booking restaurants, will soon launch its own car-hailing service in seven Chinese cities.

The cities include Beijing, Shanghai, Chengdu, Hangzhou, Fuzhou, Wenzhou, and Xiamen. The tech firm has been testing its car-hailing app in Nanjing for 10 months.

News about Meituan's car-hailing service came three weeks after its CEO Wang Xing announced a corporate reshuffle in which the company's travel and transport department was promoted to become one of the most important departments in the company. The department currently employs more than 200 people.

The move could put Meituan in direct rivalry with Didi Chuxing, which currently claims an estimated 90% of China's car-hailing market. In Nanjing, Meiyuan is already challenging Didi by providing drivers with huge financial incentives.

"For the money I earn from using hailing apps, Meituan only keeps 8%, whereas Didi takes 20%. Meituan also offers many kinds of subsidies and bonuses, which differ from one driver to another. Those bonuses are randomly distributed," said a taxi driver in Nanjing.

Meituan also gives discounts to passengers who use its app to hail taxis in Nanjing. Along with discounted taxi fares, passengers sometimes receive discounts they can use when they buy movie tickets, food, and drinks through Meituan.

Photo shows a car used by Meituan-Dianping for its pilot car-hailing services in Nanjing. [Photo: www.thepaper.cn]

The current scenario is reminiscent of the war of subsidies between Didi and Kuaidi in 2014 before Kuaidi was taken over in early 2015.

Didi announced on Thursday that it had raised $4 billion from a consortium led by Softbank in its latest round of fundraising. Didi said the cash would be used to fund its Artificial Intelligence projects, overseas expansion, and new-energy vehicle service networks.

Meituan's most recent fundraising took place in October. The $4-billion investment was led by the company's longtime biggest shareholder Tencent. The Beijing-based tech firm is considering an initial public offering in the US as early as the first half of 2018. A listing could raise at least $3 billion, according to analysts.

"When Wang Xing told me about his plan to enter the car-hailing market, I thought it was a good idea. Although Didi is an established player in this field, there are still places where Meituan has more advantages. It's estimated 30% of the car-hailers are on their way to restaurants. So there is a big overlap between car-hailers and Meituan's existing users, so car-hailing is something worth doing for Meituan," said Xu Xin, founder of Capital Today, a Chinese private equity firm.

Xu's firm participated in a $3.3 billion investment in Meituan in early 2016.

Meituan has claimed a 54% share of China's on-demand food delivery market in 2017, easily beating its main rival Ele.me, according to DCCI, an Internet market research firm. Ele.me acquired Baidu Takeaway, another major player in the market, in August in a move which analysts say could pose a big challenge to Meituan.

There are unconfirmed rumors that Didi is developing its own on-demand food ordering services.