(News Bulletin 247) – PDD Holdings, which owns Temu, a major rival of Alibaba, fell 28.5% on Monday after warning that its growth would slow further.

PDD Holdings, the parent company of Chinese e-commerce site Temu, known for its cheap items and sometimes criticized for the quality of its products, is suffering a setback. And its stock is plummeting.

On Monday, PDD Holdings’ ADR – a certificate that allows American investors to take a position on shares of a foreign company – plunged 28.5% on Wall Street, the biggest historical drop for the stock since its IPO in 2018. On Tuesday, the stock fell another 1% in pre-market trading.

In the second quarter, PDD Holdings posted revenue of $13.36 billion, up 86% year-on-year, compared to +131% in the previous quarter.

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A brake that will become more pronounced

The slowdown is likely to worsen further. “In the latest quarter, our revenue growth rate slowed compared with the previous quarter. Going forward, revenue growth will inevitably come under pressure due to intensified competition and external challenges,” Jun Liu, vice president of finance at PDD Holdings, said in a statement. “Profitability will also likely be affected as we continue to invest aggressively,” she warned.

“Competition is here to stay and is expected to intensify in our industry,” Lei Chen, co-CEO, told analysts, as quoted by Bloomberg. “Strong revenue growth is not sustainable and a downward trend in profitability is inevitable,” he added.

For several quarters, Temu has been undercutting Alibaba and other e-commerce sites, thanks to its ultra-aggressive pricing policy, as the Wall Street Journal points out. This has had a certain resonance in China, where the economy continues to stall and consumers have become more demanding on prices.

Its international expansion has also been rapid and dazzling. But its practices have attracted the attention of regulators. In June, the European Commission asked the e-commerce platform (as well as Shein) to provide it with information on the DSA (Digital Services Regulation) on various aspects. In particular on its online interfaces, to prevent these interfaces from misleading or manipulating its users.