 "Wounded Uber targets India after China loss")
India will now become the next big battleground for Uber Technologies after it accepted defeat in China by opting to merge with local rival Didi Chuxing. The fight might have also taught Uber that throwing money without the likelihood of profits in sight can hurt its business.
“Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there. Getting to profitability is the only way to build a sustainable business that can best serve Chinese riders, drivers and cities over the long term,” Uber Chief Executive Officer (CEO) Travis Kalanick wrote in a blog post. Uber is estimated to have lost around $2 billion in China.
In India, it is fighting a pitched battle against Ola. Uber, armed with a substantial part of the $3.5 billion it raised from Saudi Arabia’s Public Investment Fund, has become aggressive in India, stepping up advertising spend and dropping fares to incredibly low rates, besides offering three-fold incentives to drivers. Being no slouch, Ola too is said to be in talks to raise $1 billion, but has not finalised a deal yet. Didi, which has absorbed Uber in China, is a strategic investor in Ola.
However, Ola too is losing money in its fight against Uber. In the financial year 2014-15 (FY15), the last financial year for which data are available, Ola reported losses at Rs 796 crore, 20 times more than the previous year, on revenue of Rs 421 crore. Uber’s financials are not publicly available.
“In China, Uber realised they were not going anywhere in the long term. They were burning a lot of money, but that wasn’t the issue. The issue was that they were not progressing (in terms of growing market share). However, in India their market share is growing quite rapidly and they are giving Ola a good fight,” said Anil Kumar, the founder and managing director of Redseer Consulting.
While Uber launched both its India and China services in August 2013, it has been far more successful at grabbing market share in India. That’s partly because India is a nascent market compared to China, and Ola was a fairly small player when Uber arrived. Bhavish Aggarwal, the co-founder and CEO of Ola, had said the company was doing a mere 2,000 rides when Uber launched its service in the country.
Ola claims it has 450,000 cabs and 120,000 autorickshaws on its platform, while Uber claims to have 350,000 cars on its platform. While both claim market leadership, researcher Redseer says Ola has approximately two-thirds share.
Uber was seen as one of the few US technology firms making in-roads into the Chinese market, where even giants Google, Facebook and Amazon failed.
India, on the other hand, offers a much easier environment for western firms to thrive, with Google ruling search, Facebook dominating social networking and Amazon giving e-commerce leader Flipkart a run for its money.
Interestingly, Didi Chuxing and its investor SoftBank have backed Ola. It is also part of a global alliance of taxi aggregators that include US-based Lyft and Southeast Asian GrabTaxi, stitched together by SoftBank and Alibaba, to take on Uber.
The alliance seems to have tasted its first victory with Uber’s China exit. However, this has also created a situation where Didi is now an investor in Uber, making SoftBank, Alibaba and even Apple (which invested $1 billion in Didi earlier this year) indirect stakeholders in Uber.
“Uber is just another example of a western company unable to make inroads in China. India is the second largest Internet market that is open for business. Firms like Amazon and Uber will now focus their energy on playing a longer-term battle in India,” said Haresh Chawla, partner at India Value Fund Advisors.
In its efforts to fend off Uber’s growth in the country, Ola is looking at falling in line with local laws, while Uber staunchly opposes them. Ola has already obtained a licence to operate in Karnataka, the first state in India to introduce rules to regulate taxi aggregators, and has also applied for a licence in Delhi.
Uber, on the other hand, is fighting cases against both the Delhi and Karnataka governments in the respective high courts over the validity of state-specific rules and their ability of states to regulate it under the Central Motor Vehicle Act. Uber claims it is a technology platform and should fall under the ambit of the Information Technology Act.
Smaller competitors fear customers and drivers on both Uber and Ola may get impacted if India goes the China way, if the two aggregators merge.
“There is a high probability that a similar arrangement can happen in India and that will lead to a clear monopoly being established. If that happens, fears of drivers will significantly increase and passengers will be left with no other options,” said Siddhartha Pawha, CEO of Meru.
In China, the combined entity will be valued at $35 billion, according to a Bloomberg report, with Uber China controlling a 20 per cent stake. Apart from this, Didi will invest $1 billion in Uber at a valuation of $68 billion.
“Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there. Getting to profitability is the only way to build a sustainable business that can best serve Chinese riders, drivers and cities over the long term,” Uber Chief Executive Officer (CEO) Travis Kalanick wrote in a blog post. Uber is estimated to have lost around $2 billion in China.
In India, it is fighting a pitched battle against Ola. Uber, armed with a substantial part of the $3.5 billion it raised from Saudi Arabia’s Public Investment Fund, has become aggressive in India, stepping up advertising spend and dropping fares to incredibly low rates, besides offering three-fold incentives to drivers. Being no slouch, Ola too is said to be in talks to raise $1 billion, but has not finalised a deal yet. Didi, which has absorbed Uber in China, is a strategic investor in Ola.
However, Ola too is losing money in its fight against Uber. In the financial year 2014-15 (FY15), the last financial year for which data are available, Ola reported losses at Rs 796 crore, 20 times more than the previous year, on revenue of Rs 421 crore. Uber’s financials are not publicly available.
“In China, Uber realised they were not going anywhere in the long term. They were burning a lot of money, but that wasn’t the issue. The issue was that they were not progressing (in terms of growing market share). However, in India their market share is growing quite rapidly and they are giving Ola a good fight,” said Anil Kumar, the founder and managing director of Redseer Consulting.
While Uber launched both its India and China services in August 2013, it has been far more successful at grabbing market share in India. That’s partly because India is a nascent market compared to China, and Ola was a fairly small player when Uber arrived. Bhavish Aggarwal, the co-founder and CEO of Ola, had said the company was doing a mere 2,000 rides when Uber launched its service in the country.
Ola claims it has 450,000 cabs and 120,000 autorickshaws on its platform, while Uber claims to have 350,000 cars on its platform. While both claim market leadership, researcher Redseer says Ola has approximately two-thirds share.
Uber was seen as one of the few US technology firms making in-roads into the Chinese market, where even giants Google, Facebook and Amazon failed.
India, on the other hand, offers a much easier environment for western firms to thrive, with Google ruling search, Facebook dominating social networking and Amazon giving e-commerce leader Flipkart a run for its money.
Interestingly, Didi Chuxing and its investor SoftBank have backed Ola. It is also part of a global alliance of taxi aggregators that include US-based Lyft and Southeast Asian GrabTaxi, stitched together by SoftBank and Alibaba, to take on Uber.
The alliance seems to have tasted its first victory with Uber’s China exit. However, this has also created a situation where Didi is now an investor in Uber, making SoftBank, Alibaba and even Apple (which invested $1 billion in Didi earlier this year) indirect stakeholders in Uber.
“Uber is just another example of a western company unable to make inroads in China. India is the second largest Internet market that is open for business. Firms like Amazon and Uber will now focus their energy on playing a longer-term battle in India,” said Haresh Chawla, partner at India Value Fund Advisors.
In its efforts to fend off Uber’s growth in the country, Ola is looking at falling in line with local laws, while Uber staunchly opposes them. Ola has already obtained a licence to operate in Karnataka, the first state in India to introduce rules to regulate taxi aggregators, and has also applied for a licence in Delhi.
Uber, on the other hand, is fighting cases against both the Delhi and Karnataka governments in the respective high courts over the validity of state-specific rules and their ability of states to regulate it under the Central Motor Vehicle Act. Uber claims it is a technology platform and should fall under the ambit of the Information Technology Act.
Smaller competitors fear customers and drivers on both Uber and Ola may get impacted if India goes the China way, if the two aggregators merge.
“There is a high probability that a similar arrangement can happen in India and that will lead to a clear monopoly being established. If that happens, fears of drivers will significantly increase and passengers will be left with no other options,” said Siddhartha Pawha, CEO of Meru.
In China, the combined entity will be valued at $35 billion, according to a Bloomberg report, with Uber China controlling a 20 per cent stake. Apart from this, Didi will invest $1 billion in Uber at a valuation of $68 billion.