Saturday, January 5, 2019

Major Chinese bike-sharing companies makes cut backs.

Meituan Dianping a major player in the competitive race to drive Chinese around is losing some of its steam, and is putting the brakes on its bike-sharing and ride-hailing business it said on Thursday.

The company has expanded aggressively
Meituan is probably best known for competing with Alibaba owned Ele.me in delivering food. This is the part of its business that makes up most of its sales. However, it is also known for hotel bookings. It has also branched out into transportation including ride-hailing and bike-sharing.
Acquisition of Mobike
This April, Meituan entered the very competitive bike-sharing business with a bang as it bought Mobike a top player in the field for $2.7 billion in order to compete with the Albaba backed company Ofo. Meituan is supported by the giant Chinese firm Ten Cent. Both companies had been burning through investor funds by trying to win users by subsidizing rides. However, recently the two have softened their stance to each other as the subsidies are hurting both.
Meituan CEO Wang Xing said that the company will build a new future with Mobike.
The bike-sharing market is having problems
Mobike is making its fleet smaller so as to avoid oversupply as the market is faltering, according to chief financial officer Chen Shaohul. Ofo is acting similarly scaling back some operations and even closing international operations.
Competitor Ofo has already pulled out of some international markets including Australia, Austria, Germany, India and Israel. In other more successful markets it is concentrating on cities where it is doing well.
In some places company bikes are being impounded by authorities for violations such as blocking paths. Many are shown in the appended photo.
Competition with DIdi the ride-hailing company
Meituan says it has no plans to expand operations in two cities it is operating pilot projects, Shanghai and Nanjing after it ventured into competition with Didi Chuxing in the two cities last December. The firm offered a huge $4.2 public offering in Hong Kong in September.
Didi took over the Chinese platform of Uber in 2016. After two passenger murders on Didi, Chinese regulators launched strict verification requirements for drivers across all ride-hailing apps. This has created fewer drivers and made it more difficult to hail rides on Didi or on its competitors.
Overall the company is doing well
Meituan posted a 97.2 percent jump in revenues in the 3rd quarter ended in September, earning 19.1 billion yuan or $2.75 billion dollars. However, its new initiatives, including ride-hailing and bike-sharing showed increased operating losses at 3.45 billion yuan nearly three times that of a year ago. Meituan shares suffered a loss of 14 percent at the end of the week no doubt because of its losses in the expanded businesses

Previously published in Digital Journal

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