Full Truck Alliance Gets New Lesson In Economics

Core Insights - Full Truck Alliance is facing challenges due to a planned rate hike for its freight brokerage services, which could lead to a significant decline in that business and adversely affect profits [2][3][6] - The company is navigating a slowing Chinese economy and has made adjustments such as layoffs and increasing lending to small businesses, which are its core clients [4][8] Financial Performance - In the first quarter, Full Truck Alliance's revenue rose 19% year-on-year to 2.7 billion yuan, with core transaction services increasing by 51.5% to 1.05 billion yuan [14][15] - The freight brokerage services revenue was roughly flat at about 966 million yuan, and the new price hike is expected to lead to a contraction in this revenue stream starting in the third quarter [16] - The company's gross margin improved from 54.6% last year to 69.2% in the first quarter, aided by a decrease in government value-added tax [17] Business Adjustments - The company is raising rates for its freight brokerage services to ensure sustainability amid the winding down of government assistance, which previously provided 467 million yuan ($65 million) in support, down 41% from the previous year [5][8] - Full Truck Alliance's outstanding loans to small businesses grew 25% year-on-year in the first quarter, with a non-performing loan ratio rising to 2.2% [8][10] Market Position - The company has an asset-light business model centered on its apps, Huochebang and Yunmanman, which link truckers and shippers, making it relatively attractive despite the economic pressures [9] - The stock price fell 7.7% during the trading day before the announcement, indicating that the market had anticipated the news [7]