~ by Charmaine Mirza
“…you cannot ignore a fifth of the world’s population…as an entrepreneur, if you have the opportunity to build both Amazon and Alibaba at the same time, you’d be crazy not to try.”
– Travis Kalenick, CEO Uber.
Is Uber’s unicorn cowboy trying to do precisely this?
As the date for its hyped up IPO draws closer, investors are questioning whether the unicorn will be a rainmaker – or be reined in.
On the surface, it appears as if Kalenick has sacrificed his Alibaba genie for the Amazonian advantage. After losing two billion USD initially in a head to head battle with Chinese rival Didi Chuxing, Uber has “closed” its China operations, a move that investors see as positive, given the losses it has racked up – but will it turn the tide completely for Uber’s global push?
Inchin Closer reviews the situation from an Asian perspective.
- Is Uber moving out of China or simply taking a strategic side-step that may light its candle at both ends – for its US IPO, and its Chinese market share?
- Is Didi a friendly investor or a dragon crouching in the shadows, waiting for the right moment?
- Is Uber really being bought out, as it claims, or buying in?
Didi Chuxing, a local ride sharing brand that has the backing of the Chinese government, has bought out Uber China for one billion USD, and given Uber a 17.5% stake in its business.
In itself, not unusual, but what makes it more interesting is that Didi is also an investor in Uber’s other home-grown global rivals viz. India’s OLA, the USA’s LYFT, and South East Asia’s GRAB TAXI, which covers Malaysia, Singapore, Thailand, Vietnam, Indonesia and the Philippines.
In fact, Didi is a key player in a strategic alliance called GOLD (Grab, OLA, Lyft, Didi), which was created specifically to counter Uber’s aggressive forays onto their home turf.
GOLD, if implemented across all markets, will allow users from each country to book alliance partner vehicles on their local app. Therefore a Lyft user from the US will be able to book an OLA cab, while traveling in India, using the Lyft app.
While the alliance has still to be implemented in practical terms, it gives global ride-sharing an interesting twist that the OLAs of the world may not have anticipated – will Uber’s 17.5% stake in Didi, affect Didi’s dynamic with its Asian counterparts – both as an investor and a strategic alliance partner?
Didi is also a direct investor in OLA, and Softbank, the Japanese investment bank, is a financial backer in both companies.
Could Uber’s backdoor stake in Didi, influence it to edge out its rivals in other regions, and gain market share? Perhaps. While Uber will “exit” China, it will continue to oversee the running of its app’s operations in China. Therefore, is a potential Uber-Didi conglomerate also eyeing other Asian markets, such as India, which are lucrative opportunities thanks to their high volume of traffic, and waiting in the wings to swallow up homegrown entities like OLA?
Which opens the door to a much bigger question – are China’s big boys like Alibaba and others biding their time for India’s economic bubble to burst and consolidations to happen so that they can swoop in and bottom fish the Indian Ocean?
Uber is already in India in several metros though its footprint is currently smaller than OLA’s. Now that China is out of the way, it makes sense for Uber to focus on ramping up its India operations. Uber has already earmarked a large chunk of investment funds for the Indian market – OLA would have to match it. Uber is already making profits after two years of operation. OLA is mired in losses.
If Didi gets into the fray and backs Uber India’s growth, it could seriously topple an already precarious apple- cart.
Didi has hedged its bets either way – it will be interesting to see who gets taken for a ride.