Meituan drives in by launching car-hailing service in Shanghai

Lifestyle services website Meituan Dianping has launched a car-hailing service in Shanghai to take on leading player Didi Chuxing and raising concern of a new round of price war. 

Meituan, which launched a similar application in Nanjing last year, said its app will allow Shanghai customers to hail taxi or private chauffeur rides. 

But the app was warned by Shanghai's traffic authority, police and market watchdog for its advertising strategies and licensing of cars right after its new service debuted on Wednesday.

Meituan was also ordered on Wednesday to remove an advertisement on its official WeChat account that highlighted low prices. The traffic authority said the advertisement could be misleading and it was worried about possible vicious competition. 

Meituan Dianping, which is known for its online-to-offline (O2O) business model that offers services from restaurant reviews, food delivery, movie ticketing and travel booking, said car hailing is an indispensable part of its O2O ecosystem to help link consumers with various service providers. 

"We still see unmet ride-hailing demand and it also helps connect users with our existing business offering such as food delivery, movie ticketing and restaurant reviews," it said, adding this could strengthen its advantage for one-stop O2O service in one integrated platform. 

Customers who search for places to dine on Meituan Dianping's smartphone application can hail a ride inside the app directly without opening a separate software.

In the first three months of its operation in Shanghai, Meituan will waive an eight percent commission from drivers. Didi drivers are charged a 20 to 25 percent commission.

Meituan Dianping also offers an extra subsidy for taxi and chauffeur drivers as they are guranteed a 600 yuan daily income. If drivers take over 600 yuan fair every day, the company will award them an extra 200 yuan. 

It grants 14 yuan in digital coupons for the first three rides on its platform to riders who get an additional 50 yuan subsidy if they invite friends to use the new service.

Previously, Didi and its smaller rival Kuaidi and Uber China had offered similar incentives to drivers and riders as competition heated up. In the end they merged operations and Didi became the dominant player.

Didi, whose stakeholders include Apple, Alibaba Group Holding and Tencent Holdings, has taken the lion's share of  the domestic ride-hailing market. But Meituan Dianping, which raised US$4 billion in October last year from investors such as existing shareholder Tencent, is poised to challenge that position.