Self-driving startup Plus splits US and China operations amid tensions

Full Truck Alliance

11/10/2023 05:00

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.

 (Reporting by Zhang Yan, Roxanne Liu and Brenda Goh)
 ((（8610）6627-1277; Reuters Messaging:
roxanne.liu@thomsonreuters.com))