M&A

Keep on trucking

A merger between the leading duo in an Uber-like truck service

Trucks-w

Waiting for a job

In 2011 a Fulbright scholar embarked on a marathon journey across China, grabbing lifts from a few of the five million or so truckers that haul cargo around the country. By her own estimate, Rachel Katz travelled 6,000 miles in the company of hauliers, giving her the inside knowledge for Cargo Girl: A Year Hitchhiking with Truckers Across China.

Katz also grew familiar with the sight of empty trucks idling in congested lots on the outskirts of cities, while their drivers waited around for new consignments.

At these “road ports”, agents scrawl job information on blackboards and truckers wait to pick up a contract. It hardly sounds like an efficient system for organising 80% of China’s intercity freight.

Truck drivers can spend hours waiting at these ports, adding to the time it takes to move to their final destinations. It amounts to a huge drain on the industry. According to the International Finance Corporation (IFC), the average truck stands empty 40% of the time. More efficient coordination has been a challenge since the industry is so fragmented: 90% of the cargo lorries are owned by their drivers.

So who is going to streamline the sector? According to Bloomberg, about 200 firms are trying but two of the industry leaders, Huochebang and Yunmanman, now look best positioned, after agreeing to put their differences behind them and unveiling an unexpected merger last week.

Huochebang is commonly described by the international press as the “Uber for trucks”. It offers an app that allows factories and drivers to connect directly, minimising the amount of time a truck needs to spend on the road or sitting in a hub waiting for instructions from middlemen.

In December last year, the Tencent-backed start-up was valued at over $1 billion after raising $115 million from investors including IFC and All-Stars Investments, making it another Chinese unicorn.

A few months earlier, Yunmanman also claimed unicorn status, with backing from Sequoia Capital and Jack Ma’s Yunfeng Capital.

According to the Nanjing Daily, Yunmanman is the larger of the two, with four million registered drivers and a million consigners on its platform. Huochebang is only slightly behind with 3.5 million truckers and 800,000 consigners.

While Huochebang enjoys its “Uber” status, local media has called Yunmanman “Didi for trucks”, which makes the story of the merger all the more familiar.

Just like in the original Didi-Uber feud (the duo ended up merging in China as well, see WiC336), profits have been slim for Yunmanman and Huochebang, with each competitor burning through cash in a bid to grab a bigger market share.

The rivalry between the two made a merger look unlikely and Yunmanman told Bloomberg last month that the rumour that a combination was imminent was “false information” (perhaps a more zeitgeist translation would be “fake news”).

Working together may not be easy. In the past, the fierce competition has even seen both firms seek help from the police. Huochebang accused its rival of harassing its customers with phone calls, which led to a number of Yunmanman staff being arrested. Yunmanman alleged that Huochebang had hacked into its computer system to steal data. The case went to trial and Huochebang’s chief executive stepped down as a result.

With some of the former leaders at both firms scarred by their warring pasts, Wang Gang, effectively an outsider, is being brought in as chief executive of the new entity. Bloomberg reports that Wang previously held a management role at Alibaba before becoming an angel investor in Didi Chuxing. He is also a backer of Yunmanman but he hasn’t held any executive roles there or at its former rival.


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