In span of a year, Uber, which is considered a global ride-hailing operator, appears to have turned into a service for the world with investments in emerging markets. San Francisco-based company, which boasts of having a technological advantage over its competitor, has been done in by local competitors in two most important markets China and Russia.
In 2016, Uber in its first retreat left China, most populous country in exchange for a 17.5 percent stake in local rival Didi Chuxing, after losing more than $2 billion fighting its competitor. Now in its second retreat, the company is merging with Rusian local Yandex with $225 million investment in lieu of 36.6 percent stake. The deal is valued at $3.73 billion. Following the development, Yandex shares jumped 19 percent in early trade to $32.44, which highest level in three years.
The deal is valued at $3.73 billion.
The deal might appear to be good for the ride-hailing company, but it has raised a serious question on its operation being bested by local players in major countries. Uber is currently operative in more than 70 countries.
One country, where it does not want to get drubbing now is India.
Investors are raising questions as recently as this month about Uber’s continued losses in India. And it is being asked whether the company would be better served by cutting deals with home-grown Ola.
Technology and supply-side execution has been its strength. But it has not brought desired results for the firm.
In India, Uber has had to play catch-up to Ola in some cities, as it is currently operating in 29 cities whereas Ola is active in more than 100 cities. Despite this Uber is not panicked and being content with the current position. According to Uber official, the company wants to win its 80% market share in cities it is operating in, which they think will lead their growth in other cities. US-based ride hailing firm also does not have a payments solution of its own, unlike Ola Money.
Instead, Uber relies primarily on Paytm for its payments, even though it also started supporting Jio Money earlier this year. However, they are reportedly planning to launch their payment venture next month.
In terms of product, Uber has launched UberPAAS, UberEats, UberMoto and UberPool. Out of four, only UberPool managed to get some positive response from consumers in the country. Whereas Ola on marketing, implementing local technology and operation front has been ahead of Uber.
Founded in 2010, Ola better understanding of market and its needs, gives them a competitive advantage over Uber. Ola ensures developing and implementing technology that has enabled the emergence of organised personal transport. Ola fleet-management service is by far better and popular among users. Simply because, it allows fleet owners track all their cabs on a single dashboard, including trips and payments. Uber does not have an answer for this.
Of late, drivers have also increasingly grown dissatisfied with Uber over its salary issues. In 2013, drivers were heavily incentivised by Uber, and later the company cut down incentives bringing down their monthly income to 40,000-50000 from 90000- 120000. The firm also was in news for all wrong reasons. Uber is in a legal soup with Waymo, Google’s self-driving car unit, over intellectual property theft. The company has been accused of stealing trade secrets and infringing on patents.
Uber CEO Travis Kalanick was asked to step down after series of allegations against the company and officials came to light. The search continues for a new CEO, chief financial officer and chief operating officer.
Till date, Ola has got about $1.5 billion funding from investors such as SoftBank, Tiger Global Management, Falcon Edge, DST Global and Matrix Partners India. It also counts Chinese cab-hailing giant Didi Chuxing as an investor.
Uber has an advantage in funding-front. It is a well-funded startup with over $15 billion raised in cash and debt, and valuation of close to $70 billion. Besides, in a visit to India in January 2016, Kalanick had said that his company could double its pledged investment of $1billion if it sees more than five times the return. In may, the cab-aggregator had infused about $7.9 million into its Indian arms.
According to sources, Uber board members are also in talks with Softbank, which is largest investor in Ola, to invest in Uber. If that happens, then there would be anti-competition concern.
Until that happens, with an advantage of having deep pocket, Uber must imply lessons learnt from its drubbing in China and Russia, to win India.