Daily Management Review

Uber’s Second Defeat In Asia After China, To Sell Southeast Asia Business To Rival


03/26/2018




Uber’s Second Defeat In Asia After China, To Sell Southeast Asia Business To Rival
In what is the second failure for the ride hailing company Uber in an Asian market and its decision to move away from the market, the U.S. firm agreed to sell its Southeast Asian business to the larger regional rival Grab. The two companies made this announcement on Monday
 
With a market comprising of 640 million people, this incident is the first consolidation in the ride hailing market in Southeast Asia and this is slated to put more pressure on Indonesian ride hailing firm Go-Jek. The Indonesia company has the support of Google and Tencent of China
 
A multibillion dollar investment was made earlier in the year by Japan’s Softbank in Uber through its Vision Fund which was indicative of the fierce competition in the ride hailing industry in Asia. SoftBank is also an investor in Grab.
 
“It was really a very independent decision by both companies,” Grab president Ming Maa told the media. He added that the SoftBank CEO Masayoshi Son was “highly supportive”.
 
Uber CEO Dara Khosrowshahi will join Grab’s board with the U.S firm taking up a 27.5% share in Grab under the conditions of the deal.
 
“It will help us double down on our plans for growth as we invest heavily in our products and technology,” Khosrowshahi said in a statement.
 
The deal would also allow the merger of Uber-Eats and the meal delivery business of Grab. Compared to rival Go-Jek, Grab will have an advantage in the meal delivery business following the merger. 
 
Indonesia is Southeast Asia’s largest economy and Go-Jek enjoys a dominant position the market the fir has already diversified from ride hailing into businesses such as digital payments, food delivery and on-demand cleaning and body massage.
 
“Go-Jek is such a different app, with different behaviours, it is something I can’t see Grab competing with well in Indonesia for a long time, like at least a year,” said Vinnie Lauria, a founding partner at Southeast Asia’s Golden Gate Ventures.
 
Profits have been driven down for ride-hailing firms in Asia as they have tended to depend more on discounts and promotions. This has prompted consolidation in the industry.
 
In addition to regulatory issues in Europe and competition in its home market of the U.S. and in Asia, Uber had reported a loss of $4.5 billion in 2017 even as the company reportedly plans to issue an IPO sometime in 2019. 
 
In China, the company had expended $2 billion in its rivalry with Didi and was ultimately forced to move out of the market. In comparison, the company has invested about $700 million in its business in Southeast Asia.
 
(Source:www.livemint.com)






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