China's delivery giants could face greater credit costs due to the introduction of social security benefits for riders, S&P Global Ratings said in a Wednesday release.
Increased costs could pressure the companies' profitability and cause a shift in the competitive dynamics between on-demand delivery players, S&P said.
Some of the companies that may be affected by the rule include Meituan (HKG:3690), JD.com (HKG:9618) through Dada Nexus and its new food delivery business, and Alibaba Group Holding (HKG:9988) through Ele.me.
Given more intense competition, the three companies plan to streamline operations and assess profitability, S&P said.
Even if companies choose to extend the benefit to select riders, government policy shifts and rising competition could quicken the rollout and amplify costs in the next 12 to 18 months, according to the rating agency.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.