By Reuters | Updated: 11 October 2023
SHANGHAI, Oct 11 (Reuters) – Self-driving truck startup Plus has split its Chinese and U.S. operations and struck a deal in which a key shareholder, China’s Full Truck Alliance (FTA) (YMM.N), will focus on the China unit, Plus said on Wednesday.
The company told Reuters it had completed the split. Three sources familiar with the matter had said that FTA, known as China’s “Uber for trucks”, and Plus were looking to insulate themselves from rising U.S.-China tensions and tightening regulatory oversight from Beijing.
Plus’ move to split its China and U.S. businesses follow similar measures by the likes of U.S. venture capital firms Sequoia and GGV Capital amid heightened geopolitical tensions between the world’s two biggest economies.
Plus, which had headquarters in Suzhou, China, and California, separated its operations into two independent companies.
The Chinese unit, Zhijia Technology, will focus on China and develop a self-driving truck fleet for the Chinese market with FTA, while the U.S. entity – which will retain the name Plus – will expand in the rest of the world, the company said.
FTA increased its stake in Zhijia Technology via a stock swap arrangement that reduced its ownership in Plus, the company said.
Two of the three sources said that FTA, which held more than 30% in Plus before the separation, had become the controlling shareholder of Zhijia Technology and that before the split the bulk of Plus’ business came from China. Plus declined to comment on the size of FTA’s shareholding in Zhijia Technology.
Formed in 2017 in the merger of digital freight platforms Yunmanman and Huochebang, FTA runs a mobile app that connects truck drivers with people who need to ship items within China. The stake in Zhijia Technology will help the company’s work to develop autonomous trucking fleets – a potentially lucrative market amid a truck driver shortage in China.
While China’s trucking market is enormous, worth some 4 trillion yuan ($550 billion) annually, the industry is highly fragmented, with more than 7 million heavy trucks on the road in 2021, and profit margins tend to be thin.
FTA did not respond to a request for comment.
TWO-YEAR EFFORT
The two companies were part of a wave of Chinese and Chinese-linked tech startups that enthusiastically pursued opportunities in both countries before U.S.-China tensions intensified.
About two weeks after FTA raised nearly $1.6 billion via a listing on the New York Stock Exchange in June 2021, China’s cyberspace regulator expanded an inquiry targeting national data security risks to FTA.
Plus that year announced plans to go public by merging with a blank-check company in the United States but called it off, citing “regulatory concerns”.
The first two sources said Plus had been persuaded to pull back by FTA because of the regulatory climate, and because FTA was concerned how its stake in Plus could look to Chinese regulators.
With FTA’s backing, Plus started exploring a restructuring, they said.
“The whole process is as painful as separating conjoined twins,” said one of the people, who was directly involved in the restructuring.
China’s cyberspace regulator did not respond to a request for comment.
Plus confirmed that FTA had suggested it pause its SPAC listing after the cybersecurity investigation was launched.
“Subsequently Plus began to split off its China and U.S. business, to cope with the increasingly stringent regulatory environment on both sides due to tensions between China and the United States,” the company said.
© Thomson Reuters 2023
