Alibaba- and Tencent-backed Transportation Rivals Merge

The two Chinese truck fleet management startups have combined to create a transportation giant.
Jun. 07, 2022 20:05
Alibaba- and Tencent-backed Transportation Rivals Merge

(CapitalWatch, June 7, Hong Kong) The Chinese truck fleet management startups are going from rivals to partners in a merger that will create a massive team of over 700,000 freight managers. 

G7 Connect and E6 Technology will continue to maintain their own brands, but now the merged entity will dominate the market together.

G7 is backed by Tencent (OTC: TCEHY; HKEX: 0700) and was founded in 2010. The company uses AI and IoT technology to manage its logistics services. Before the merger, G7 was reportedly considering a Hong Kong initial public offering. 

Backed by Alibaba (NYSE: BABA; HKEX: 9988), E6 is a digital solutions provider with clients mainly based in consumer markets such as retail and food.

Before the merger, the two companies combined controlled around 80% of the world's largest road cargo market. According to data from Chyxx.com, China's road freight market was worth over $933 billion in 2020. 

The combined valuation of the merged companies wasn't disclosed, but Jielong Zhang, the chief financial officer of the merged entity, said G7 alone was valued at around $2.2 billion before the deal.

Freight transportation in China has been hit hard by the country's pandemic resurgence and lockdowns. Roadways have been intermittently closed to lock down specific areas. Shanghai's over 60-day lockdown cut access to certain areas and drew out deliveries while drivers verified their Covid-negative status at certain checkpoints.

Now that Shanghai has been open again for about a week, the major port is working on a backlog of deliveries. Many analysts fear that the logistical nightmare caused for shipping and supply chains by the lockdown will cause chaos as the city resumes operations. This summer's shipping surge could be even more disorganized than last year. 

It's likely that companies such as G7 and E6 will need to work in overdrive to keep a handle on the influx of transit to come.