PDD Profit Falls 12% as Price Wars and Overseas Tariffs Bite
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PDD Holdings posted a 12 per cent drop in second-quarter net profit to 27.2 billion yuan as domestic price discounting squeezed margins. Revenue at the Chinese e-commerce group rose 8 per cent to 112.36 billion yuan ($15.7 billion) in the three months ended June 30, missing the 116.35 billion yuan consensus collected by LSEG.
Adjusted earnings per American depositary share reached 19.33 yuan, beating analyst expectations. Shares rose 2.3 per cent in early New York trading following the release.
Domestic price wars and margin compression
The company operates discount platform Pinduoduo in China, where it trades against Alibaba Group’s Taobao and Tmall, JD.com, and ByteDance’s Douyin. Weak consumer confidence, real estate market weakness, and persistent employment worries kept shoppers cautious through the peak ‘618’ shopping festival in June. Platform operators responded with direct subsidies, price-matching guarantees, and merchant incentives, pushing profitability down across the sector.
Management told analysts that platform governance spending will increase as the fight for market share continues. PDD increased spending on logistics and merchant support programmes during the quarter to lower consumer prices and protect seller retention.
For retailers across Asia, PDD’s slowing topline growth shows the limits of low-price customer acquisition when competitors match subsidies yuan for yuan. Alibaba and JD.com have reoriented their core marketplaces around low-price algorithms over the past year, stripping Pinduoduo of the uncontested cost advantage it held during its initial expansion.
Cross-border tariff friction in Western markets
Temu, the group’s international marketplace, confronts tightening import policies in its core Western territories. The platform built its market share by dispatching low-cost parcels directly from Chinese factories to consumers, using de minimis customs exemptions to bypass import duties.
Policy changes in the United States have eliminated duty-free status for low-value Chinese parcels, while the European Union introduced a customs fee on small inbound packages in July. Rising shipping and compliance overheads have forced marketplace merchants to lift retail prices, slowing cross-border parcel volumes.
“In the short term, cross-border orders in the affected markets will face slower fulfilment efficiency and higher costs which will have a considerable impact on those parts of our business,” said PDD co-chief executive Chen Lei.
Investors now await third-quarter customs clearance data from European ports and the platform’s upcoming gross merchandise volume figures during the year-end holiday shopping cycle.