China trucking startup ‘Uber of trucks’ is a semi success

The Chinese startup dubbed the "Uber of trucks" has attracted foreign investors from Alphabet, Inc. to SoftBank Group Corp. on the premise that it can make a lot of money from connecting the nation's truckers with shippers who need goods carried.

Millions of users – both truckers and shippers – have signed on to the platform run by Manbang Group, or Full Truck Alliance, which is valued at $6 billion. But Manbang has been giving away its main service of matching truckers with shippers for free, and is still figuring out who, and how much, it can charge. After several months of study, it says it decided a few months ago not to charge the truckers who make up the bulk of its users.

The industry is fragile: Many truckers say Manbang's apps are damaging their profits, because they are competing against a much bigger pool of truckers for work, and prices they can charge are dropping. "Tomorrow, I'm going to be a beggar because of those apps," said Li Yuchao, a trucker from northeastern China.

Manbang says its apps are making China's trucking industry more efficient, and that it is close to breaking even on its operations. But as Manbang tries to raise another billion dollars at a valuation of $10 billion, investors are becoming skeptical, people familiar with the situation said. The company still has to figure out how to make money, one investor said.

Manbang's challenges are a reminder of how difficult it often is to realize big paydays despite the massive size and potential of China's tech market. Chinese startups have gotten more money this year than their US counterparts, as an increasingly global cast of funders bet that the sheer size of the country's markets means outsize returns. While investors have turned more cautious lately, valuations are still high: China now has many of the world's biggest, fastest-growing billion-dollar-plus "unicorns."

Profits haven't necessarily followed. Many of China's biggest startups – from ride-hailing giant Didi Chuxing Technology Co. to food-delivery leader Meituan Dianping – are still burning through cash despite commanding market shares, and don't know when they will make money. Chinese tech companies are also feeling a chill from tightening regulations at home and a deepening trade war with the US.

China has an estimated seven million trucks – 80% or more owned by independent drivers – which handle the bulk of the country's long-distance hauling and take in around $700 billion a year in shipping fees. Traditionally, those truckers contracted for loads at logistics centers near big cities, camping out in motels for days while they made the rounds of shipping agents.

Connecting those millions of truckers and shippers via smartphone instead should generate big savings, Manbang says. Truckers would have less downtime and lower expenses; shippers wouldn't have to rent offices. App makers could charge membership or transaction fees for the convenience, which would add up to a lot of money. Competitors have charged in, with as many as 200 firms battling at one point, Manbang says. (WSJ)