• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

FedEx Foul-Up Could Provide Opportunity to Its Competitors in China

FedEx's falling out of favor in China over the Huawei delivery issue could open the door to its foes.
By KEVIN CURRAN May 28, 2019 | 10:22 AM EDT
Stocks quotes in this article: FDX, DPSGY, BABA, ZTO, UPS

As FedEx (FDX) draws the focus of Chinese regulators over a dispute with telecoms giant Huawei, key competitors could be poised to seize on the tenuous situation.

The U.S. based shipping giant is at risk of losing market share in the Chinese market that it has spent years building relationships in, as its very existence in the Chinese market comes into question after Huawei's incendiary allegations of package rerouting.

There are rising calls for China's postal service regulator to cut off Fedex from China market, as Huawei has accused the US express courier of diverting and rerouting its packages. (Photo: VCG) pic.twitter.com/42geohdhSL

— Global Times (@globaltimesnews) May 28, 2019

FedEx is currently the king of the Chinese logistics market, occupying a 54.6% market share according to technographics provision firm Datanyze. The company's entry into the Chinese market came in 1984, far before many of its peers, and has paid dividends for its market share. The company's recent purchase of the Dutch-based TNT Express in 2016 cemented its dominance.

While there are a number of smaller domestic players in the region, headlined by the U.S.-listed and Alibaba (BABA) backed ZTO Express (ZTO) , the overall market is still dominated by American and German companies. According to a report, DHL (DPSGY) is the second largest player in the country with a 25.07% market share and United Parcel Service (UPS) rounds out the top three with a 16.94% market share.

Both UPS and DHL generate about 3.5% of their overall revenue from mainland China, or about half of the comparable revenue generated by FedEx.

What is hurting FedEx in terms of what Huawei expects is the direction by outside forces to cut off certain shipments and that could be an opportunity for each competitor to pick up the slack.

Trade War Fears Have a Far Reach

The outlook is somewhat more tenuous for Atlanta-based UPS given the fact that U.S. administrative restrictions on shipments would necessarily hit them just the same as FedEx. 

For DHL, its Bonn, Germany headquarters could be a key advantage, as European restrictions have not been nearly as hawkish on Huawei as comparable U.S. directives.

DHL has also shown its intention to extend its reach to the region in recent years, extending a Vienna to China rail connection to Chengdu, China in mid-2018. The rail line offers the company significant inroads into inland and Western China that can accelerate deliveries sans port access.

The company also has a partnership over the next ten years alongside Chinese courier SF Express after selling supply chain units based in Beijing and Hong Kong that offer services across mainland China, Hong Kong and Macau.

"SF's local market expertise in China has real advantages for our customers across all industries including technology, health care, retail, automotive, and e-commerce," DHL CEO Frank Appel said in a statement. "Combined with our global operations standards and network support, the agreement provides a solid foundation to continue exploring further opportunities in China in the coming years."

Shares of the German logistics leader opened Tuesday's trading positively, in contrast to both UPS and FedEx.

Of course, nationalistic tendencies could prevent U.S. and international competitors more broadly from capitalizing on what many analysts propose will be the largest logistics market in the world in short order.

DHL's revenue sharing agreement with SF Express may insulate it from the fury of Chinese regulators, but there is still fear that Chinese regulators will overwhelmingly favor domestic options for shipping needs as the sector grows.

While there is a lack of a dominant domestic player and China is likely to lean on existing multi-nationals in the near term, longer term investors will need to be mindful of how regulatory frameworks and reciprocal restrictions are outlined by China and the movements of its most prominent couriers to scoop up market share in this potential vacuum.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are restricted from trading individual securities.

TAGS: Regulation | Litigation | Investing | Politics | Stocks | Technology | Transportation | E-Commerce | China | Stock of the Day

More from Stocks

Tesla's Rally Gets More Juice Thanks to General Motors

Bruce Kamich
Jun 9, 2023 6:46 AM EDT

The electric vehicle maker's stock already was trending higher and is receiving a boost from a deal with GM to use Tesla charging stations.

The Bull Is Out of the Gate

Helene Meisler
Jun 9, 2023 6:00 AM EDT

Look how quickly we got bulled up. Let's check sentiment, the surveys and the International Securities Exchange call/put ratio.

A Roundabout on Wall Street

James "Rev Shark" DePorre
Jun 8, 2023 4:25 PM EDT

The big caps turn out big again, with Apple, Microsoft and Nvidia at the wheel.

Ignore Carvana's Backseat Drivers

Ed Ponsi
Jun 8, 2023 1:09 PM EDT

I'll take a ride with CVNA, but I will wear my safety belt -- and know when to get out.

GameStop Needs to Unlock a Secret Door to a New Business

Stephen Guilfoyle
Jun 8, 2023 12:27 PM EDT

After another GME earnings blunder and change of players, I see the stock as this: pure speculation with a strong balance sheet. But I believe the company can find a way to the next level -- though it could get zapped before getting there.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 07:19 PM EDT CHRIS VERSACE

    AAP Podcast: This Company Is Not Going 'Solo'

    Listen in as I talk with the very diversified Solo...
  • 01:51 PM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Adjusting Your Trading Approach to Shifting Market...
  • 06:54 PM EDT CHRIS VERSACE

    AAP Podcast: A Tongue -- and a Market -- Twister: 'Get a Debt Deal Done'

    Listen in as the Action Alerts PLUS Podcast tackle...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login