SUMMARY
After Selling Its Chinese Arm To Didi Chuxing And Merging With Yandex.Taxi In Russia, Uber Is Now Banking On India
Despite controversies and setbacks, global cab aggregator Uber remains focussed on bolstering its presence in India. As stated by Uber’s VP Product Daniel Graf, the company will continue investing in its Indian arm, strengthening its engineering team and developing country-specific innovation in the months and years to come.
According to Graf, India is one of the company’s biggest and most significant markets globally. Uber is currently working to capitalise on the country’s growing Internet economy to gain a sizeable share of the cab aggregator market.
During a recent media interaction, Graf stated, “What’s key for us is that we have a long-term sustainable business here. In many of our markets, we are actually profitable and we know that the fundamentals of our business are very healthy. In some of our markets where we are still in hyper-growth mode, we put in extra investments to get to a place where we’re in a sustainable phase. In India, we are investing. We are investing in technology, with promotions, etc.”
India currently plays a pivotal role in the cab aggregator’s global expansion plans, especially since Uber sold its Chinese arm to local rival Didi Chuxing in August 2016. In July this year, the Dara Khosrowshahi-led company announced a $3.7 Bn merger deal with Yandex.Taxi in Russia.
Speaking about Uber’s future plans in India, the former VP of Consumer Product at Twitter added, “For us markets like India, Brazil, Indonesia, the Philippines, etc. are massively growing markets and very important for the company. We’re putting in a lot of engineering resources in India—we have 150 engineers here in Bangalore and in Hyderabad. The commitment to India as a technology centre is super important. We’re developing global solutions here in India in Hyderabad and Bengaluru, we’re going to continue to invest and grow these teams. No question about it.”
The development comes days after the cab aggregator was dragged into yet another controversy. According to reports that surfaced earlier this week, the global ride-sharing giant underwent a massive breach in October 2016, wherein data of more than 57 Mn drivers and customers were accessed illegally. Instead of reporting the infringement to authorities, Uber chose to keep the hack under wraps for over a year, going so far as to pay $100K to the attackers for their silence.
Following the release of Uber’s statement on Tuesday, New York Attorney General Eric Schneiderman ordered a fresh investigation into the cyberattack. Meanwhile, the ride-hailing giant has also been sued by a customer on charges of negligence. Daniel Graf, however, remains steadfast in his belief that Uber has put most of its recent controversies and struggles behind it.
Admitting that the setbacks have impacted the cab aggregator negatively, distracting it from its immediate goals, Daniel Graf said, “If I would say (the recent controversies) haven’t impacted us, that wouldn’t be true. Of course, it impacts us. What I can say is that with Dara on board, with all the changes in place, we’ve changed in many ways. For example, the way we interact with driver partners, that’s a big change this year. When I look at what has happened, I would say it’s a new chapter, it’s moving forward and it’s learning from the past. Yes, mistakes have been made. Mistakes have been addressed and I think, not just from a business point of view, but also from a culture point of view, from a team point of view, we are a better set-up than ever before.”
Uber: A Look At Its Tainted Past And Its Focus On India
Founded in August 2008 by Travis Kalanick and Garrett Camp, the San Francisco-headquartered company is currently in the process of raising a staggering $10 Bn from Softbank and a clutch of other investors. The Japanese investment giant has already finalised a $1 Bn investment in Uber. As part of the agreement, Softbank and other investors would be buying additional $9 Bn in shares from existing backers.
Although valued at more than $70 Bn, its journey over the last nine years has been nothing short of dramatic. In February this year, former Uber engineer, Susan Fowler, disclosed sexual harassment and sexism claims in a blog post about her year at Uber. The same month, Waymo, a self-driving car company spun off from Google, sued Uber alleging that Anthony Levandowski – a former top manager for Google’s self-driving car project – stole pivotal technology from Google before leaving to run Uber’s self-driving car division.
Following all these allegations, Travis Kalanick stepped down as CEO under investor pressure on June 20, amidst pressure from other shareholders. Since then, Kalanick has also been sued by early investor Benchmark Capital as well as Irving Firemen’s Relief and Retirement Fund, accusing him of fraud, breach of contract and breach of fiduciary duty.
In September, a ban was planned on its operations in London. When the news originally surfaced that the transport authority for London would not be renewing Uber’s license to operate in the city, the company’s newly-crowned CEO Dara Khosrowshahi had said in an open letter, “On behalf of everyone at Uber globally, I apologize for the mistakes we’ve made.” Uber has since filed an appeal with Transport for London about reversing the ban and is hoping to commence operations in the city soon.
Over the past few years, Uber has started focussing its efforts on capturing the Indian market, which is currently populated by home-bred giants like Ola and traditional taxi associations. Last year, for instance, the cab aggregator promised to infuse a substantial portion of the $3.5 Bn it raised from the Public Investment Fund of Saudi Arabia into Uber India.
In July this year, the company poured $7.99 Mn (INR 51.64 Cr) into Uber India as per filings with the Registrar of Companies. This infusion occurred in May 2017 as per company filings with the MCA. The amount was transferred from the company’s subsidiaries in Netherlands, including Uber Holdings International BV, Uber International BV, Besitz Holding BV, and Mieten BV.
Since June 2016, the company’s presence in India has grown 2.5x in terms of the number of trips as well as total merchandise volume, as claimed by Uber India head Amit Jain in an interview with Livemint. The company has launched a number of value-added services, including UberPASS, which enabled cab riders to avail discounted fares and a variety of exclusive benefits in selected metro cities.
The company has also forayed into digital payments and announced the integration of Unified Payment Interface (UPI) in July this year. Another segment that the cab aggregator is aggressively trying to gain a foothold in is online restaurant search and food delivery. To that end, it launched UberEATS back in June.
As per its RoC filings, at the end of 2016, Uber’s net revenue reached $6.5 Bn and losses touched $2.8 Bn. In case of India, total revenue reported in FY15 was only $3 Mn (INR 18.7 Cr) higher than losses incurred.
The Burgeoning Rivalry Between Ola And Uber
Incidentally, Uber’s biggest competitor Ola recently raised a $1.1 Bn investment in a round led by Tencent Holdings Limited and Softbank Group. At the time, Ola had revealed that it was in advanced talks with other investors to close an additional $1 Bn as part of the same financing round, taking the total fundraise to over US$2 Bn. Till date, Ola has raised funding of $3.9 Bn in 11 rounds from about 20 investors.The funding round of $350 Mn raised in February 2017 took its valuation to about $3.5 Bn.
Early this week, one of the homegrown cab aggregator’s early backers, Tiger Global Management, was reportedly holding discussions with Softbank to sell around 7.5% stake in Ola worth $300 Mn. The report surfaced after Tiger Global Partner Lee Fixel stepped down from the board of the cab aggregator. If the deal between SoftBank and Tiger Global goes through, the former might become the largest shareholder in the ride-sharing startup.
What does this have to do with Uber, you must be wondering. Long before speculations of Softbank’s funding in Uber surfaced, SoftBank Vision Fund CEO Rajeev Misra had indicated the Japanese conglomerate’s intentions towards making peace between rivals Ola and Uber. In a media interaction in September, Misra had stated, “We own more than 30% in Ola and we would own much less stake in Uber. We have owned the stake in Ola since 2014 and it does send conflicting signals. But we are hoping that we make peace between them at some point.”
Irrespective of whether a merger between the two is on the cards, Uber will have to focus its attention on acquiring a stronghold in emerging cab aggregator markets, like India. Daniel Graf added, “Remember in the old days, when you requested a ride, you didn’t know the price upfront. At the end of the ride, sometimes you were positively surprised and sometimes you were negatively surprised. We don’t want those surprises. You want something to work reliably and be affordable. We introduced globally ‘Upfront Pricing’, which takes real-time, real-world conditions into account. Our model for upfront pricing is good, but we have room to improve there. We are trying to get it as accurate as possible. If two people sign up on Uber at the same time, and they are taking the same ride at the same time, we want both to see the same fare. There’s no reason for them to have different fares.”
