Meituan, China’s leading O2O and e-commerce platform, is triggering a subsidy war as it is making a foray into the ride-hailing sector, offering users an average RMB 20 ($3) subsidy per order, local media reports.
Offering subsidies may be the easiest and the most effective way for Meituan to secure a larger user base as it expands in the field where Didi Chuxing pretty much dominates the market. Meituan has already started its subsidy policy. In December 2017, users who had completed eight orders could be rewarded RMB 60 ($9.22), and those completing 13 orders could receive RMB 100 ($15.37). Meituan also offers some other subsidies during peak hours.
Meituan is ambitiously expanding and has announced in December 2017 that the firm had a team of over 200 employees to run its ride-hailing business. After its first testing in Nanjing that began in February last year, Meituan plans to roll out the service in seven other cities, including Beijing, Shanghai, Chengdu, Hangzhou, Fuzhou, Wenzhou, and Xiamen.
On top of that, in order to recruit more drivers, Meituan will give a three-month fee waiver for the first 50,000 drivers in Beijing, saying that the platform will not draw a portion from the drivers’ earnings.
All of these moves from Meituan reflect its determination to take on Didi. The war in the ride-hailing industry was assumably settled after Didi acquired Uber’s China operations in August 2016. Now with Meituan entering the battlefield, Didi’s position might be shaken. In October 2017, Meituan landed a $4 billion Series C round of financing led by Tencent and was valued at $30 billion.