DHL-Sinotrans, the DHL Express joint venture in China, is pulling out of the country’s domesticexpress market due to continued losses just one year after a high-profile launch and will focus on
international express in future.The sale of three domestic express companies was announced by Sinotrans Air TransportationDevelopment Co Ltd, the other shareholder in the 50-50 venture, in a Chinese-language pressstatement. According to the Sinotrans statement, DHL-Sinotrans would sell a Shanghai-based company,Beijing Sinotrans Express Co Ltd and a Hong Kong-based company.
Deutsche Post DHL declined to comment when contacted by CEP-Research.
Reuters news agency said the three companies had been sold to Uni-top, which it described as “ a tiny Chinese delivery company”. Shenzhen-based Uni-top, with 300 employees, offers internationalfreight forwarding and domestic distribution services.
Sinotrans said that the three companies had been acquired in 2009 with the intention offorming a new domestic express business.
In June 2010, DHL-Sinotrans launched a newly-branded domestic operator under the‘Sinotrans-APEX’ name, offering same-day, next-day and deferred deliveries covering 662 towns andcities. The combined Sinotrans-APEX business had close to 8,000 employees, nearly 4,000 vehiclesand a network of 12 hubs. At the time, DHL-Sinotrans said the domestic express network would beexpanded to 25 hubs and cover 800 cities by end-2011.
However, by the end of 2010, the domestic express business had run up accumulated losses ofRMB 99.2 million ($15 million), according to Sinotrans.
Outlining some of the reasons for the decision to pull out of the domestic Chinese expressmarket, Sinotrans said that the sector was characterised by strong competition, high operatingcosts for foreign firms and ongoing uncertainty about the impact of the new Chinese postal law onthe sector.
After one year there was no sign that the domestic express losses would be reduced and it hadthus been decided to sell the companies, Sinotrans added. In future, DHL-Sinotrans would focus onthe Chinese international express market.
Earlier this month, several Chinese newspapers reported that one company, A Plus Express(APEX), which had been acquired for RMB 300 million (€32 million) in 2009, would be sold to Uni-topfor about RMB 100 million (€10.6 million).
The pullout marks a major strategic U-turn from DHL Express’ previous aim of large-scaleexpansion in the domestic Chinese express market. It is also the latest in a series of exits fromdomestic express markets around the world, including the USA, Canada, the UK, France and Ireland,which were made due to large financial losses.
The Chinese international express market was estimated to be worth €1.7 billion in 2009 whilethe domestic express market is believed to have overtaken the international market due to thedramatic growth of e-commerce in the country.
