Daily Management Review

Uber/Didi China Deal Brings Threat for India Ride-Hailing Firm Ola


08/09/2016




Uber/Didi China Deal Brings Threat for India Ride-Hailing Firm Ola
Uber’s main rival in one of Asia’s fastest growing ride hailing market – India, Ola has been left more vulnerable to attack in its $12 billion home market following Didi Chuxing's acquisition of Uber's China business last week which has reshaped the landscape in Asia's growing ride-hailing sector.
 
Uber Technologies Inc has made rapid inroads into India with its deeper pockets and Ola executives met with Didi, four months ago, hoping the Chinese firm would invest fresh capital to help it fight Uber.
 
A person with direct knowledge of Ola's plans said that Ola were told that Didi wanted first to sort out its own challenges in China. Billions of dollars in a discount slugfest to win drivers, passengers and market share in China have been raised and spent by Didi and Uber.
 
Ola and Didi are allies in an anti-Uber group that also includes U.S.-based Lyft and Southeast Asia-focused Grab and the Chinese company last year invested about $30 million in Ola, which is also backed by Japan's SoftBank Group. Didi is now worth around $35 billion.
 
"This (Didi/Uber China) deal changes the dynamics of how they (Didi) will invest in India," said the person, who didn't want to be named because the discussions were private. The sources said that it would effectively turn out to be betting against Uber if Didi invests more in Ola.
 
Ola is valued at over $5 billion and which has raised around $1.3 billion in funding, and it's not clear whether Didi would provide equity or debt to Ola. This Indian ride hailing company was aiming to raise another $1 billion this year and could face problems since SoftBank Capital which is Ola's key investor is selling assets to raise cash and reduce debt and hence faces its own financial issues.
 
While Didi said in an email that it will focus in the coming months on "ensuring smooth integration internally", Ola did not respond to an email request for comment. A person with direct knowledge of the matter said that Didi has no immediate overseas investment plans.
 
India is already one of the world's fastest growing taxi markets and here the stakes are high. Ola and Uber have clashed in legal battles over alleged dirty-tricks tactics and pricing and have burned through investors' money.
 
India has previously been called its No. 2 priority overseas market by Uber and the company is now even more focused on India after the Didi deal. Uber plans to double down on resources, staffing and technology deployed in India, sources said .
 
According to Counterpoint Research, as of end-June, compared to about 30 percent market share that is held by Uber, which is catching on fast, half of the India’s taxi market in terms of the number of cars registered on its platform is commanded by Ola.
 
Taking a cue from China where Uber focused on privately-owned cars in big cities, it has previously launched a bike taxi and autos service in India - a sign that it wants to localize transport options in a country where car ownership has historically been low.
 
Ola operates only in its home market while Uber has pushed into cities and markets worldwide. According to Counterpoint, compared to Uber’s 27 cities, Ola is in 102 cities. From auto rickshaws to shuttle buses, as well as taxi rides, Ola offers a wider range of products.
 
Neil Shah, research director at Counterpoint said that the Didi/Uber deal "will put Ola in a corner, and the pressure will rise."
 
"The money Ola has will not last forever and it will require a lot of funding with Uber gaining financial strength," he added.
 
(Source:www.reuters.com) 






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