Didi Chuxing enters fast food delivery sector

By JING GAO

China’s Uber-like service, Didi Chuxing, is entering the fast food delivery sector through investing in leading app, Ele.me, in an effort to further build upon its vast urban logistics network, a news report says.

Zhu Xiaohu, Managing Director at GSR Ventures Management, said that Didi Kuaidi will acquire a strategic stake in Ele.me, although he did not specify percentages, Tencent Tech reported on Sunday. Zhu also said a cross-industry board of directors and cross-ownership can be expected.

It has been reported that Didi Chuxing and Ele.me will be experimenting with their working relationship shortly. Didi will deliver food orders on behalf of Ele.me using its fleet. The pilot program will start from Beijing and target specialty restaurants and high-end consumers. In the future, they will expand their partnership to offer courier delivery, grocery delivery and shopping services

Ele.me unveiled its web-based distribution platform in mid-August, whereas Didi Dache, in celebration of its third anniversary last week, renamed itself Didi Chuxing, or ‘Commuting’ in English. The name change appears to reflect a significant adjustment in its car-hailing business, which has expanded from taxi-booking at its birth, to include ride-sharing, premium cars, car-pooling, a chauffeur service and buses. It aims to become a gateway to all transportation solutions, a “super app”.

Analysts told Tencent Tech that Ele.me and Didi Chuxing, both venture-backed, share some of the same investors, including GSR, Tencent and CITIC Private Equity, allowing the two to bond through “half-brotherhood.” Therefore, a partnership in the form of either resource sharing or shareholding is not only reasonable, but mutually reinforcing.

Didi Chuxing is not the only car-hailing service that has made forays into food delivery. Uber has since April launched UberEats, a meal delivery service, in six U.S. cities and in Barcelona, Spain.

In February, Didi Dache backed by Alibaba merged with Kuaidi Dache, the second largest Chinese car hailing app to become Didi Kuaidi, in order to compete with Uber in the Chinese market. In order to carve out a larger share of the Chinese market, both have raised astronomical funds and burnt cash. Didi has even invested in Lyft, Uber’s main rival in the U.S.

Ele.me is the second largest delivery service in China after Meituan, commanding a market share of 38.75% for the first half of 2015, according to research from Analysys International. Didi Kuaidi boasts an average of 6 million rides a day, or six times Uber’s volume, CEO Cheng Wei was quoted as saying by Xinmin Evening News.

However, Ele.me and Didi are both far away from turning a profit. Ele.me is allegedly squandering RMB seven million (USD 1.1 million) per day, while Didi is operating at a net loss that is more than three times its revenues, according to a PwC financial report cited by the Financial Times.