Meituan to Reduce Investment in Ride-Hailing Sector
According to an internal notice circulated by Chinese food delivery giant Meituan on March 6, the company will reduce resources and manpower investment in its online ride-hailing sector. Some team members will be deployed to other business lines, and the sector will now be developed into an integrated platform that offers access to the ride-hailing services provided by many partners, LatePost reported.
Meituan started piloting the ride-hailing service in 2017 and swiftly took a 30% market share in just one week after entering Shanghai the following year. However, due to poor efficiency, the platform started shifting into an aggregator role as it integrated other service providers in 2019.
In July, 2021, Didi was reviewed by Chinese regulators and Meituan seized the opportunity to expand its operations to 37 cities across the country within that same month. However, after the end of the third quarter of 2021, the company once again slowed down the pace of its expansion.
In 2022, the daily order volume target of Meituan‘s car-hailing business was 1.2 million, and there was no requirement for profit, focusing on Shanghai, Hangzhou, Nanjing and Chengdu.
At present, Meituan‘s daily ride-hailing orders total about 1 million. The company set an annual goal at the beginning of this year for the sector – to reduce its loss rate from 15% in 2022 to less than 8%, and increase the average daily order volume from 1 million to 1.5 million. At that time, the upper limit of Meituan‘s investment in the sector in 2023 was 1 billion yuan ($144 million).
In order to control losses, Meituan has stopped subsidizing its self-operated drivers as of the beginning of this year. In December last year, it had about 120,000 daily active self-operated drivers, mainly concentrated in Shanghai, Nanjing, Chengdu and other cities, and, as of February this year, the number was reduced by nearly 50%.
A person close to Meituan believed that the background of this adjustment is that all the main businesses of the company are facing great pressure this year. Another person thought that this adjustment couldn’t be regarded as the end, but may be another beginning. Meituan hoped to promote its business faster at a lower cost and in a more streamlined way.
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At the beginning of January this year, Meituan started to work with several other ride-hailing service providers. In the future, the company may make deals with Alibaba Group’s AutoNavi and Didi. As a platform with 120 million daily active users, AutoNavi stably provided more than 5 million orders for its partners every day in 2022.