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China’s equivalent of Groupon to launch car hailing service
 
Meituan's valuation puts it ahead of high-flying startups Airbnb and Space X. Photo: REUTERS
 
Meituan Dianping, China’s leading online-to-offline (O2O) service provider, is now recruiting taxi drivers as it has determined to expand its business to ride hailing sector.
 
After testing the car hailing business in the city of Nanjing, capital of east China’s Jiangsu province, in February 2017, the company is taking a step forward to expand the service to seven other cities in China, including Beijing, Shanghai, Chengdu, Hangzhou, Fuzhou, Wenzhou, and Xiamen, according to the Caijing Magazine, a Chinese business magazine.
 
Meituan Dianping has unveiled a new booking icon on its mobile app and pledged last week to start services in Beijing as soon as it collects 200,000 sign-up clicks from future customers and drivers. It has collected more than 80,000 registrations as of Wednesday, according to data shown on its app.
 
While many believed that the war in China’s ride-hailing industry was settled after Didi Chuxing acquired Uber’s China operations last August, which has made the former a dominant player in the sector, Meituan Dianping’s latest decision could shake Didi’s position in the industry. But some market participants say Meituan Dianping’s entry into the battlefield may not immediately change the overall pattern of China’s taxi hailing market dominated by Didi Chuxing, while it could be easier for Meituan Dianping to start with its large user base.
 
In late December, Didi Chuxing raised over $4 billion in a new equity funding round led by Japanese conglomerate SoftBank Group Corp, which lifted the company’s valuation to about $56 billion, according to the South China Morning Post citing a person familiar with the matter. According to the company’s statement, the new funding will be used to support its AI capacity-building, international expansion, and new business initiatives, including the development of new energy vehicle service networks.
 
In terms of user scale, Didi Chuxing has a monthly active user base of 92 million people, while Meituan Dianping is serving nearly 150 million monthly active users, according to tmtpost.com, a Chinese local media.
 
After raising $4 billion in its latest funding round in October, which was led by Chinese tech giant Tencent, Meituan Dianping has been valued at $30 billion behind Uber, Didi Chuxing, Xiaomi and Airbnb, and ahead of SpaceX, the South China Morning Post reported, citing CB Insights, a venture capital research firm. US-based Priceline Group, an online travel company, is also a new strategic investor in Meituan Dianping.
 
Meituan.com and Dianping Holding merged in 2015, after which the merged company became China’s major player in services such as finding deals at local restaurants and booking cinema tickets through smartphones as well as group-buying of coupons and accessing ratings, similar to those offered by Groupon Inc and Yelp Inc.
 
Meituan Dianping’s entry into the ride hailing sector has prompted speculations on whether there would be a new round of price war between the two unicorns. In a recent interview with the Caijing Magazine, Cheng Wei, the cofounder and CEO of Didi Chuxing, said Didi has “PKed countless rivals” including Kuaidi and Uber, adding that “Meituan may not be the weakest, but it may not be the strongest either.”
 
“If you want war, you will get war,” he said.
 
Didi Chuxing, which is also backed by Apple, Alibaba, and Tencent, was formed with the merger of Didi Dache and Kuaidi Dache, two rival ride hailing companies that had engaged in a fierce price war. After the merger in 2015, the combined entity Didi Chuxing took on Uber which pulled out of China in 2016 in return for a minority stake in Didi Chuxing.
 
According to Chinese media, Didi is now working toward the launch of food delivery service, one of Meituan Dianping’s core business. In 2015, Didi strategically partnered with Eleme.com, a rival of Meitua Dianping in food delivery and sponsored by Alibaba and Tencent, according to qichacha.com.
 
“Both companies are entering into a market which has already been defined, and when you take an old road which others have taken, will there be other approaches to win out other than burning money?” the Caijing Magazine cited a person familiar with both Meituan Dianping and Didi Chuxing as saying.

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