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Uber drives out of China, to sharpen its focus on India

business Updated: Aug 02, 2016 10:50 IST
Sunny Sen
Uber

Uber will be the third American technology behemoth after Amazon and Apple, to double down on India, after having failed to make a breakthrough in China.(Reuters)

After merging its China business with rival taxi-aggregator Didi Chuxing, US cab-hailing firm Uber will put is India expansion plans in top gear.

If that happens, Uber will be the third American technology behemoth after Amazon and Apple, to double down on India, after having failed to make a breakthrough in China.

The Didi-Uber combined entity will be valued at $35 billion.

“If Uber is not going to work actively in China, it will put all its energy in India,” said Anil Sharma, analyst at IHS Automotive Worldwide.

Reasons are many. India houses a sixth of the world’s population, but has one of lowest penetration of owned cars — 30 vehicles per 1,000 people. Add to that low-income households, an aspiring middle-class and the fastest-growing internet economy, Uber has its perfect customer base in India.

But for now, it is pumping in millions to acquire customers and incentivise drivers, very similar to what it did in China.

On Monday, Travis Kalanick, Uber’s founder and CEO wrote in his blog post that Uber and Didi are investing billions of dollars in China, but have not become profitable, which is not a sustainable business model.

In India, too, the situation is not different. Kalanick announced plans to invest $1 billion in the country during his visit earlier in the year. Ola, its $5-billion Indian rival, has raised $1.18 billion in seven rounds from 19 investors, Didi being of them. SoftBank is an investor in both Uber and Ola.

Cab aggregators spend ₹200250 to earn a revenue of ₹100. Once the deal is done in China, Didi and SoftBank might strike an agreement in India.

“It might not happen in the next few months, but can’t be ruled out in the long run,” said an executive at a Netherlands-based consultancy firm.

Both firms have started offering incentives on every ride. At present, both Ola and Uber offer incentives if a driver completes a certain number of rides every day. More the number of rides, higher is the incentive. Both of them lease cars, and offer discounts to riders.

If Uber and Ola come together, they can monopolise the taxi market. “There is a high probability that a similar arrangement will lead to a clear monopoly,” said Siddhartha Pahwa, chief executive officer of Meru Cabs.

Kalanick mentioned in a Facebook post that Uber China will hold 20% in the merged entity, and indicated an Uber-Didi global partnership, which India may be a part of.

“I have no doubt that Uber China and Didi Chuxing will be stronger together… I’m so excited about our future, both in China and the rest of the world,” he wrote.