Info-tech

Uber's taxi U-turn sets better South-East Asia path

Reuters SINGAPORE | Updated on January 09, 2018

Uber's entire business has been predicated on flooring it right at the establishment. Co-founder Travis Kalanick once said his company was in a campaign where “the incumbent is an asshole called taxi.” New boss Dara Khosrowshahi just pulled a U-turn in Singapore by striking a deal with ComfortDelGro, the powerful local cab operator.

It has been a rough ride for Uber in South-East Asia. As with the rest of the continent, cutthroat competition against deep-pocketed peers caused the company to burn through billions. China's $500 billion Tencent, for example, backs Indonesia's Go Jek. Softbank, which is in the process of trying to plow another $10 billion into Uber, also has helped finance rivals. There have been regulatory problems in Singapore, too, where Uber was accused of knowingly renting out faulty vehicles. It said it swiftly fixed the problem.

That backdrop makes it sensible for the company to embrace the competition. Similar deals signed in Malaysia and Myanmar should help Uber get bigger. In the Lion City, it is surrendering 51 per cent of a 14,000-car rental subsidiary in exchange for more drivers on its system.

ComfortDelGro, meanwhile, is buying some needed growth. It boasts the largest fleet in Singapore, with more than 15,500 cabs. Taxi revenue, however, fell over 11 per cent in the third quarter of this year. Having its cars pop up on the Uber app should improve their efficiency and the top line.

Uber is a long way from securing its place in the region, though. After it first disclosed talks with ComfortDelGro, Grab secured $700 million in debt financing to expand its own rental fleet and a partnership with Singapore's public transport titan, SMRT.

A China-like retreat eventually could be tempting. There, Uber sold its business to Didi Chuxing to cut whopping losses, but kept a stake to capture at least some of the potential upside.

For the time being, there is room to expand, especially considering the youthful market in cities like Manila or Jakarta, where traffic is bad and parking worse. Further consolidation also is bound to occur. Changing its mentality in Singapore, though, suggests Uber came to realise taxis may not be the contemptible foes it once thought.

cONTEXT NEWS

- Singapore's top taxi operator ComfortDelGro said on December 8 it would buy a 51 per cent stake in Lion City Holdings, an Uber subsidiary with a fleet of about 14,000 vehicles.

- ComfortDelGro said the deal was valued at S$642 million, including S$295 million in cash, making it the company's largest deal to date.

- Uber has struck similar deals with taxi firms elsewhere in Asia, including Malaysia, Myanmar and Taiwan.

Published on December 11, 2017

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