bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

helpersCheckIsPostiesArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

moreOnThisArticles

urlAlias

commentCount

authorLocations

authors

corrections

sponsorType

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

socialHeadline

headline

flag

firstTopic

glossary

flattenTypeIds

additionalInfoBoxes

quizIds

images

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

Indrajit Basu

Since a battered Uber sold its business to rival Didi Chuxing in China last week , the ride-hailing sector in India has been abuzz with anticipation of a similar deal in Asia’s other giant market, where ride-hailing companies are reeling from an unending price war.
Industry sources say the fierce price war between the two top players – Ola Cabs and Uber India – has been bleeding the sector in India just as badly as the Didi-Uber rivalry in China, where Uber is estimated to have lost a billion dollars a year.
Read more from This Week in Asia
Last year, Uber said it would invest US$1 billion in India, mainly to battle Bangalore-based Ola, which was founded in 2011 and is valued at US$4.2 billion.
Industry trackers show Ola is the leading player in India with an estimated market share of 40 per cent, while Uber and Meru follow next with about 30 per cent and 15 per cent. Most of the rest largely play on the fringes, operating only in smaller cities.
Here’s what the international media are misreading in Uber’s exit from China
“The predatory pricing followed by two players who dominate the sector has not been helping anyone,” said Siddhartha Pahwa, chief executive of Meru Cabs, a radio cab operator. “It’s only been burning their cash. I think consolidation is also brewing in India because the burn rate is so high.
“Ola and Uber have already spent billions and I am sure they are facing similar pressures [of profitability, like Uber and Didi]. Hence, there is a high probability of an Uber-Didi-like arrangement happening in India leading to the emergence of a monopoly player.”
Arun Kharat, founder of Wings Bookmycab, another traditional radio cab operator, says the price war has reached an unsustainable level and the sector is at the cusp of change. “Bleeding has become the norm and no one is making money,” he says.
For the financial year up to March 15, Ola registered a year-on-year increase in revenue of US$55 million while its losses hit US$110 million.
Uber China on Monday said it was being bought by Didi Chuxing in a deal that would create a new company valued at US$35 billion. San Francisco-based Uber will own 5.9 per cent of the combined company. Baidu and other Didi shareholders such as Alibaba Group, Tencent and Apple will take a 2.3 per cent stake in the new company. Alibaba is the owner of the S outh China Morning Post.
Fewer cash subsidies after Didi-Uber merger, analysts say
With Didi’s US$1 billion investment in its rival, Uber will receive close to a 20 per cent stake in Didi while Uber chief executive Travis Kalanick and Didi Chuxing chairman Cheng Wei will sit on each other’s boards.
The implications of the deal in China spill far beyond its borders. Four ride-hailing companies, namely Didi, Ola, Grab in Southeast Asia, and Lyft in the US last year formed a coalition dubbed the “Anti-Uber Alliance” to create business synergy and share know-how and logistics. Didi has also made strategic investments in its three allies – US$100 million in Lyft, US$350 million in Grab and US$30 million in Ola.
Soon after the Uber-Didi deal, an exultant Grab chief executive Anthony Tan told his staff that it was further proof that localised solutions like Grab solve local problems better than global majors like Uber. “Didi’s success reinforces what we have believed all along. That we live in a very diverse world and there is no one-size-fits-all answer,” he wrote in a memo.

Riding on that confidence, Grab, which operates in 30 Southeast Asian cities, is reportedly planning to raise about US$1 billion in fresh capital from Didi, Japan’s SoftBank Group and other investors, to gather more ammo in its battle with Uber.
On the other hand, the deal in China frees up resources for Uber to deploy elsewhere. Some 150 engineers based in San Francisco who have been working on China are understood to have been asked to begin working for other markets, such as Southeast Asia.
So while there are signs of the race between Uber and regional rivals gaining steam, Uber’s jumping into bed with Didi also puts a question mark over the so-called “Anti-Uber Alliance” and it will be a while before the picture clears on who stands where in this emerging global reconfiguration of the industry.
Hong Kong court extends ban on 13 drivers from entering Uber premises and harassing staff
But industry watchers in India have no doubt that with all the blood that has been spilled, there’s only one way to go: truce. Licensed radio cab operators allege that ride-hailing aggregators such as Ola and Uber, backed by global venture capital, have been recklessly throwing money, driving ride rates to ridiculously low levels. According to industry sources, Ola’s monthly cash burn has reached around US$40 million while Uber’s is around US$30 million.
“Uber ceded to Didi because Didi had a monopoly and Uber felt that burning cash there does not make sense. So it exited China to focus on other markets like India where it could grab a larger market share. My hunch is, Uber may have already lined up a merger with Ola but isn’t announcing it just yet,” Pahwa says.
According to industry estimates, India’s taxi business, with current revenue of about US$3 billion, is growing at over 20 per cent a year, but the organised sector accounts for less than a billion. The total market is expected to grow to US$9 billion by 2020.
“We believe this growth rate will continue for the next 10 years at least, because the level of car ownership – at about 6 per cent compared with 25 per cent globally – is minuscule in India,” says Pahwa. “So a consolidation in the sector would help the market.”


Why Samsung’s recall of Galaxy smartphones threatens its universe

Relax, China’s banks aren’t about to have a meltdown

Longer hours, worse jobs: are Asians turning into working machines?

Why China is caught in India-Pakistan crossfire

This Week in Asia - Business

Does China exit signal the end of the road for Uber in India?

Ride-hailing apps are big business. Photo: Xinhua

An employee walks at the office of ride-hailing service Uber in Gurugram, previously known as Gurgaon, on the outskirts of New Delhi, India, April 19, 2016. REUTERS/Anindito Mukherjee

Here’s what the international media are misreading in Uber’s exit from China

Uber was doomed to exit from a market where it did not have monopolistic control

A private car owner who has registered for 'Didi Express', a service allowing private car owners to accept fares for driving passengers around, drives a passenger in Beijing. 02JUL15 === Photo by Simon Song ===

FILE - In this Dec. 16, 2014, file photo a man leaves the headquarters of Uber in San Francisco. The ride-hailing company said Thursday, April 7, 2016 it will pay at least $10 million to settle a case in which California prosecutors alleged it misled passengers over the quality of its driver background checks. (AP Photo/Eric Risberg, File)

Uber will exit China with a 20 per cent stake in market leader Didi Chuxing. Photo: Xinhua

Fewer cash subsidies after Didi-Uber merger, analysts say

Users will see increase in quality of ride-hailing services as operators compete on services provided

A taxi driver is reflected in a side mirror as he uses the Didi Chuxing car-hailing application in Beijing. Ride-hailing users should expect fewer cash subsidies on their trips rides following Didi’s Uber China buyout. Photo: Reuters

Hong Kong court extends ban on 13 drivers from entering Uber premises and harassing staff

Former Uber driver Ho Pan-kuen claims the company owes him almost HK$20,000. Photo: Nora Tam

This Week in Asia

Economics

Didi Chuxing’s deal with its rival has paved the way for further truces in an industry bleeding cash from price wars
