Dec. 26 (NBD) -- Meituan-Dianping, a newcomer to the app-based ride-hailing industry, is reportedly winning over drivers with low commissions. The company is formed by a multi-billion dollar merger in 2015 between a Groupon-like website backed by e-commerce powerhouse Alibaba and a Tencent-backed restaurant review smartphone app. 

NBD later confirmed the matter through a dialogue with the company's customer service center, and also learned the industry newcomer only charges drivers a eight percent commission. 

Meituan-Dianping is busy recruiting

On December 1, Meituan-Dianping founder and CEO Wang Xing announced the plan to set up an online ride-hailing department. According to reports, the new division will expand its footprint to 7 more Chinese cities. However, the company gave no comment on it.

An insider with Meituan-Dianping told NBD that the ride-hailing department, which now has over 200 employees, is busy recruiting, and its algorithm team will draw on the experience of Didi Research, the America-based research institute of Didi Chuxing. It doesn't make sense for the company to hire so many people if it won't expand, he added.

It was said that Meituan-Dianping offers heavy incentives in a bid to lure new drivers. Among the motivating measures include low commissions, morning rush-hour bonus, winter bonus, and other rewards depending on the number of trips completed at different time.

It's worth noting that Meituan-Dianping's ride-hailing app offers a 50 percent discount when launched in Nanjing this July.

The source said that the news of the company's planned expansion came about one year after its service launch in Nanjing, which indicates that Meituan-Dianping has found a replicable operating model. In the future, it's inevitable for the company to take on the ride-railing giant Didi.

Ride-hailing just a part of Meituan-Dianping's big picture

NBD found that Meituan-Dianping mainly offers private ride and taxi services, and its business structure is currently less diversified as compared to Didi's.

Meituan-Dianping announced in October that it has raised 4 billion U.S. dollars in a new funding round. Didi, too, announced it has raised over 4 billion U.S. dollars in a new equity funding round this December.

The new funding will be used to support Didi's AI capacity-building, international expansion, and new business initiatives like new energy vehicle service, according to the company's statement. Industry insiders said Didi won't allow its core businesses to be taken away by others.

Online ride-hailing platforms Uber and Didi too have competed with each other by heavily subsidize drivers in earlier years. After the merger of the two companies, the online ride-hailing market start to be more balanced. Didi takes up the most market share, while the remaining market is shared by other smaller platforms, such as Shouqi Limoushine & Chauffeur and Caocao. 

Subsidies have been gradually cancelled when the ride-hailing market cooled down. But will Meituan-Dianping wage another war of subsidies?

An industry insider noted that a price war is sure to come, but the scale will be much smaller, because the ride-hailing landscape has almost been settled.

Zhu Wei, deputy director of the Institute for Communications Law Studies, China University of Political Science and Law, told NBD that in fact, internet-based platforms are competing to build a more well-rounded ecosystem. Ride-hailing service is just a part of Meituan-Dianping's business layout, not specially designed to shake the landscape of the ride-hailing market. 

Email: tanyuhan@nbd.com.cn