Uber (Reportedly) to Sell SEA Business to Grab
As the business and automotive worlds have been speculating, and if a recent report by CNBC is to be believed, Uber is about to throw in the towel in Southeast Asia, and selling its business in the region to Singapore-based rival, Grab. Neither party has commented, but it seems likely that the deal—in which Uber will get a stake in Grab in return—will go through soon.
Uber made US$7.5 billion in sales in 2017—but lost US$4.5 billion—which means that it’s a viable business that needs some serious restrategising. In other words, Uber needs to get out of markets in which it has been floundering, much like it did when it sold its China operations to Didi Chuxing in 2016 for a stake in the competitor.
The move comes as no surprise as Uber, Didi, Grab and India’s Ola all have the same investor in Japan’s SoftBank. We perhaps could be seeing the same in India where, despite major efforts by Uber, Ola still leads the market by 15%.
So, where did Uber, the founder/spearheader/leader of the ride-hailing phenomenon, go wrong? It seems that, when it comes to the ride-hailing business, blowing through money doesn’t guarantee that you can dominate the world. Uber initially thought it could copy+paste its business model in countries across the world, but met with a slew of localized problems, especially in the less wealthy countries.
Take Malaysia, for instance. There was resistance to adoption due to: cash payment being still a preferred and often the only payment option for the poorer classes; lack of trust towards taxi drivers much less strangers driving private cars; and lower smartphone penetration. Grab understood these and offered cash payment option before offering incentives to users to convert to card payments; emphasized its safety features; and helped drivers to upgrade from their regular mobile phone to a smartphone, and even conducting training to teach them how to use one.
Uber’s new CEO Dara Khosrowshahi seems to recognize the core of the problem. At a conference in San Francisco, he said: “…if your only competitive advantage, or the only reason you can be in a market is because you can spend money, that’s not exactly a reasonable proposition.”
Well, we could be seeing more M&A in the ride-hailing business in the upcoming years. Who knows what that SoftBank is really up to…