Uber has created a bump in its tracks with Didi Chuxing, the global giant's arch rival in China buying out its operations there. The combined entity is now valued at $35 billion, according to news reports.
The buyout is a jolt in the smooth travel of Uber operating in several countries across the world. It is also in keeping with the rumblings that Uber has managed to create with its caring two hoots for local regulations in some of the countries it has a presence in.
Recently, in France and Germany, for instance, it got into trouble with the government for violation of local transport laws. Uber has met with tough resistance in whichever country it has gone to because of its low fares and their impact on local taxi operators.
With the company being bought out in China, how will this play out in the Indian market?
The Indian market is different from China and there are no comparisons. Not many big international players have been able to hold on to their positions in the Chinese market. Think Amazon, Facebook or even Google.
The Indian environment is open to foreign presence, says Sanchit Gogia, chief analyst and CEO, Greyhound Research. “Though Amazon and other players have not been able to make an impact in the Chinese market, they continue to be big names in India. So in that sense, we should not have inference from the China market. “
The rule of the game is far more restrictive in China where the policy is protectionist with regard to local companies. Thus, an Amazon would not be given any leeway when an Alibaba, a home-grown company has a huge presence in China. “Traditionally, internet players find it hard to break through in China,” says Paula Mariwala, Partner, Seedfund, and Co-Founder, Stanford Angels. “In India, an Amazon and a Flipkart can survive. That is not the case in China,” she says.
However, there could be consolidations, points out Jaspal Singh, Partner and co-founder Valorise Consultants, market research services for transportation companies. He feels that consolidation would be the name of the game for Uber in most of its markets across the globe but with a difference -- Uber could be in the driver's seat, he feels. “Uber is losing money by providing high incentives to drivers and discounts to customers,” he says, adding that it may buyout local companies in other countries where it has an edge and be in a win-win situation. He says that Uber was also pushed by its investors to sell to the dominant player in China. They could not afford to bleed and it made sense to consolidate", says Singh.
Didi Chuxing has invested in Ola Cabs, a key rival for Uber in India. So what would be its strategy in India then? Uber in India declined to comment when approached for this story.
Mariwala sees consolidation in the future for Uber as it would be a better strategy than to get into trouble with the local government. Recently, taxi drivers went on strike in the NCR region as it said taxi aggregators charged lower fares affecting the business of taxi operators.
Uber's target is to be a global leader in mobility and it will swipe aside its ego to grow by consolidating with local players. This will help it to retain its numero uno position in the market, says Singh of Valorise Consultants.
Gogia of Greyhound Research, feels that the likes of Meru may be snapped by Uber to consolidate its position in India.
The Indian market is still growing and has space for more players, say analysts. Uber will be interested in growing itself in this emerging market, they aver. Kaushik Madhavan, director, Automotive and Transportation business unit, Middle East, North Africa and South Asia, Frost & Sullivan says that with the China business operations out of its way, Uber may now increase its investments in India. “Ola is its biggest competitor in India. Didi Chuxing has invested in Ola and will be its support. Ola and Uber will be competitors in India in the short-term.”
The only way Uber can continue to hurt itself would be by not respecting local regulatory frameworks, as it continues to do so as of now. If the Indian government rules in favour of taxi operators and forces Ola and Uber to follow meters instead of Global Positioning System (GPS), then the rules of the game will change overnight.
Updated Date: Aug 01, 2016 17:47:18 IST