China tech crackdown: Meituan, Ele.me, other on-demand delivery providers face dim prospects amid Beijing’s scrutiny, analysts say

Meituan lost about 20 per cent of its market value over the past two trading days since Beijing directed on-demand delivery providers to cut commission fees

What is at stake under the Chinese government’s scrutiny is the nation’s vast on-demand food delivery market, which is worth about US$105 billion

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Meituan lost about 20 per cent of its market value over the past two trading days since the National Development and Reform Commission issued its directive on cutting commission fees. Photo: Shutterstock

Published: 9:31pm, 21 Feb 2022Updated: 9:37pm, 21 Feb 2022

Chinese on-demand delivery services providers, led by Meituan and Ele.me, face gloomy prospects after Beijing directed these internet platforms to cut the fees they charge restaurants, which has put a cap on their profit margins, according to analysts.

“Since food delivery accounts for a big proportion of these platforms’ revenue, the reduced commission fee would have an impact [on their revenue],” said Zhang Yi, chief executive of market research firm iiMedia.

Beijing-based Meituan, operator of China’s largest food delivery and on-demand local services platform, has already lost about 20 per cent of its market value over the past two trading days since the directive was issued by the National Development and Reform Commission (NDRC) last Friday.

Meituan declined to comment on Monday. Its shares in Hong Kong closed down 3.99 per cent to HK$180.50 on the same day.

Ele.me did not immediately respond to a request for comment. The firm is run by e-commerce giant Alibaba Group Holding, parent of the South China Morning Post.

An Ele.me food delivery rider is seen on a street in Beijing on May 4, 2021. Photo: Shutterstock

Internet platforms will follow guidelines to “further lower the service fee standards for catering businesses to help them reduce costs”, according to the NDRC policy directive, part of Beijing’s initiative to help the country’s services sector. It said this move will drive preferential service fees “to catering companies in county-level administrative regions, where middle and high-risk areas are located”.