Uber is slowly quitting developing markets in Asia - here's why India is probably next

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Uber IndiaAdnan Abidi/Reuters

  • Uber is slowly curtailing its operations in Asia.
  • It has reportedly agreed to sell its Southeast Asia business to local rival Grab in exchange for a stake in the business.
  • Uber's chief executive Dara Khosrowshahi said operating in developing markets was a drag on profitability.
  • India is probably next on Uber's quit list - it's losing out to its biggest rival Ola, and the two share a major investor.


Uber is slowly backing out of developing markets in Asia. 

It has already merged its Chinese business with Didi Chuxing, a ride-sharing giant which has funded several of Uber's competitors. 

A Friday report from CNBC suggested Uber would pursue a similar deal for its Southeast Asia business, selling off its operations to local giant Grab in exchange for a stake. Uber hasn't confirmed that deal.

Just one day before the rumours around Uber's Southeast Asia business surfaced, Uber's new chief executive Dara Khosrowshahi spoke publicly about how expanding to emerging markets costs a huge amount of money.

He said:

"Where we are now as of Q4 is the developed markets, the contribution from the developed markets, essentially pays for the overhead of the business, alright ... [The] amount that we are investing in developing markets, that's a significant negative but that is an optional investment for us."

In other words, Uber isn't currently profitable as a business because it's spending so much money trying to establish itself in places like India.

It's worth noting that Khosrowshahi went on to say: "By the way, we think it should be on, it's going to be on for a while, right?"

But given the firm has given up China and the entire region of Southeast Asia to the competition, what's next?

Local rival Ola is clearly winning in India

Ola CEO Bhavish AggarwalShailesh Andrade/ReutersBhavish Aggarwal, chief executive of Uber's main rival in India, Ola

Uber's main competition in India is a local rival called Ola, founded by Bhavish Aggarwal and Ankit Bhati.

When I visited India to see my family in October 2017, I saw firsthand how ridesharing had taken over the country.

This is no mean feat given that driving in India is a daily dance with death.

Ridesharing somewhere like the major city of Kolkata is a very different experience from trying to summon an Uber in London or San Francisco. You're generally waiting around a long time for the car to turn up. Heavy traffic, illogical road systems, and Indian sensibilities about timekeeping all mean you won't be going anywhere in a rush.

I found that home player Ola was dominant in Kolkata. None of my relatives there ever used Uber.

What little nationwide data there is suggests Ola is winning.

Ola said this month it handles about a billion rides annually across India. Uber has only ratcheted up 500 million rides in the four years it's been in India, according to a company blog from August.

And according to Quartz, citing December data from data consultancy Kalagato, Ola has higher smartphone reach in India than Uber. Business Insider has asked Kalagato for more up-to-date data.

"Uber had a good start in India," said Kathik Hosanagar, a professor at Wharton University and specialist in the digital economy. "They managed to grab significant market share from Ola  - Ola and Uber [had] roughly 50% market share each last summer. They customised their product to meet needs in India, ranging from features added to enhance passenger safety to accepting cash payments.

"That said, they are also realizing that Ola is a nimble competitor. Ola has been experimenting constantly with things like the ability to hail Autorickshaws."

With Uber's many problems with regulators around the world, and its board-level politics, it's unlikely that India has been "front and centre," he added.

"As Uber's new leadership tries to trim down some fat and focus on its key markets in US and Europe, I suspect that it will exit some markets."

Uber's newest investor also backed Ola

Japanese telecoms giant Softbank owns a 15% chunk of Uber, as of January. It is now the firm's biggest shareholder.

But it has also bought substantial shares in some of Uber's biggest competitors around the world, including Ola. Along with Tencent, Softbank funnelled $2 billion (£1.4 billion) into Ola in 2017.

It's possible Softbank could encourage the firms to duke it out in India and see who wins, but there are signs it wants Uber to focus on profitability. 

Board director Rajeev Misra said Uber would be more profitable faster if it focused on US, Europe, Australia, and Latin America. Asia is noticeably missing from that list.

As Hosanagar put it: "The primary determinant of how things play out in the long-term in India will be Softbank, which is a key investor in both companies.

"Softbank may well determine whether the two companies eventually merge or if Uber will leave India to Ola like it left China to Didi. In the long-term, it seems unlikely that Ola and Uber will continue to be locked in an intense battle for marketshare when they have a major investor in common."

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