Uber, cab hailing app founded by Travis Kalanick with presence in over 84 countries has proven to be a jewel in its own times. Business has not been limited to cab services only but also merged with some local businesses to ease logistics and transportation.
The presence and channelized network around the globe still did not help Uber manage its operations in various cities. After revoking from China, Uber shuts its operations in Southeast Asia to Grab Inc.
Uber vs Grab
Uber technologies is peer-to-peer ride sharing, food delivery and transportation network. It is headed by CEO Dara Khosrowshahi has a net revenue of US $ 7.5 billion but the net loss is huge, nearly about US $ 4.8 billion. It was founded in 2009 and formerly known as UberCab. Soon, it started expanding its business through mergers and collaborations. Diversification was brought in. Now, it has UberEats under its umbrella. It provides transport solutions to food distribution (Food Delivery).
Uber entered in its southeast Asian operations in the year 2013. And faced a huge competition from its local rivals. This increased the cost of operations and money burning scenarios to drive them through the tough times.
Uber invested US $ 700 million in Southeast Asian countries like Cambodia, Indonesia, Malaysia, Philipines, Singapore, Thailand and Vietnam and additional US $ 2 billion in China. But, this resulted only in cash outflow without much considerable revenue incoming.
On the other hand, Grab founded by Anthony Tan and Didi Chuxing (China) have marked their territory with strong customer base. Now the business model was very much same and started 3 years after. But after all indigenous products are more appealing. They know what the customer wants.
What is going right now?
Uber is selling its ride sharing and food delivery businesses in Southeast Asia to local rival Grab. After a year long competition, both the companies arrive at a strategic solution. Grab acquires the business in exchange of 27.5% stake to Uber.
Mr. Khosrowshahi will be on Grab’s Board. It indicates a win-win situation for both the companies and customers as well.
Grab’s Chief Executive Anthony Tan said, “The deal marks a beginning of a new era” which is placed to serve customer in a better way. Mr. Khosrowshahi also added that the deal will help them grow and invest in better products and technology.
But the profitability is still a distant dream for Uber technologies.
This move marks the third retreat from International business after losing business to Yandex in Russia and Didi Chuxing in China.
Uber may lose its Brand image in international borders as a result of the mergers. But the stake in different companies will help them to recover the losses and add to profits.
What actually went wrong?
- Underestimating local conditions – The conditions in Eastern world is very different from that of Western world. Uber did not take that into account.
- Non-uniformity – Unlike the U.S, the government policies in the countries like Singapore are very dissimilar to that of Bangkok. Adhering to all the policies at the same time and under the same umbrella is very difficult. e.g. Bangkok levies a huge municipality tax whereas in Singapore, Uber had to purchase vehicles and rent out.
- Loss of tweaks to suit customers – Uber remain unchanged and kept the app as it was in U.S. Companies like Grab and Didi chuxing added features to match customer needs.
- Low fare – Fare for 10 km were a little bit high as per the users. This helped the local rivals win over Uber users and swayed them to avail services from the local companies.
Good News to Indian customers
Now we have some good news for Indians amidst all these acquisition and mergers. Uber is not going to stop their operations in India despite all the losses. So, there is not much to worry. But there is still a chance if local rivals emerge in the transportation sector.
Uber’s main rival Ola is backed by SoftBank. Softbank also backed Grab and after a turmoil in the southeast asian market, the deal belonged to Softbank. Though it is unable to predict the future results. But Ola might overtake Uber India operations. And they might have to confine themselves to their national boundary only.
Future seems to be away but in reality, future is here. They need to find out what to change and come out better to protect itself from the local rivals.