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(Bloomberg) — While much of the world is focused on a volatile international trade war, two of China’s largest internet companies are inflicting greater damage on each other at home.
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JD.com Inc. (JD) has launched a costly battle to steal market share away from food-delivery leader Meituan, while the latter has been encroaching on the former’s e-commerce stronghold. The companies’ Hong Kong-listed stocks have dropped about 30% each from March highs, shedding around $70 billion in combined market value.
Investors are bracing for a prolonged struggle that will hurt earnings for the pair. Analysts have cut price targets for both stocks, and defensive positioning has ramped up in the options market.
“Both sides are worse off in the near term, and it’s unclear how long this battle will last,” said Daisy Li, a fund manager at EFG Asset Management HK Ltd. The intense level of competition in the Chinese food-delivery market will damage profitability, she added.
Even as Donald Trump’s tariffs have taken steam out of the recent China tech rally, the impact of this domestic rivalry stands out. Meituan and JD.com rank among the worst eight performers on the Hang Seng Tech Index this year after both were in the top half in 2024.
The switch came as JD.com deployed a cash-burning strategy to promote its JD Takeaway food platform, which was officially launched in February. The Beijing-based company has announced over $1.4 billion in discounts for consumers, waved commission fees for some merchants and aims to hire 100,000 full-time delivery riders.
JPMorgan Chase & Co. (JPM) estimates JD.com has taken about 5% share of China’s food delivery market, which was previously divided at about 75% for Meituan and 25% for Alibaba Group Holding Ltd.’s (BABA) Ele.me. The brokerage estimates that at the current scale, JD Takeaway could generate up to 18 billion yuan ($2.5 billion) in annualized losses, wiping out 36% of its parent’s operating profit for 2025.
“We don’t think this is a sustainable strategy because of the financial impact on group P&L,” analyst Alex Yao wrote in a note Tuesday. “It is cost prohibitive for a new entrant to gain significant market share in China’s food delivery market through a deeply subsidized growth strategy.”