Uber has sold out to its South East Asia rivals Grab in a bid to cut its losses before potentially floating on the stock market next year. Shortly after spending $700m on the South – East Asia arm of its business, with analysts warning of much higher prices.
Mr. Khosrowshahi speaks
In an internal email announcing the merger to members of staff and released on Uber’s blog, Dara Khosrowshahi, chief executive, stated that their aggressive overseas strategy hadn’t gone completely to plan. Stating that they perhaps take on too many competitors in foreign countries and blaming their global strategy for the problems that they have been facing
“[The deal will] help us double down on our plans for growth as we invest heavily in our products and technology.” But in November, he felt that Asia was not going to be “profitable any time soon.”
Past financial woes
But this isn’t the first time that Uber has pulled out of international operations. 2016 saw Uber retreat from China after investing $2bn in its China business, and sold out to Russian firm Yandex previously after a loss of $4.5bn (£3.2bn). Following a harassment scandal, Uber also saw a change in upper management as their chief executive was replaced.
The value of the deal has not been made public, but it is known that Mr. Khosrowshahi is to get 27.5% control of Singapore based Grab, relinquishing both its ride-share and food delivery business to rival Grab and GrabFood.
It is thought that Mr. Khosrowshahi will also take a place on Grab’s board of directors in what is being pushed as a merger rather than a sellout, a face saving partnership.
Uber will now be focusing largely in the US, Latin America, India and Great Britain, once the sanctions following the London Transport Ban has been lifted. But Uber’s recent financial problems have given US based rival Lyft a chance to gain control of market shares placing them as a serious contender for the most lucrative area for the self-drive business model.
Although many believe that a consolidation was inevitable as Japan’s Soft Bank Group invested a large sum in Uber last year. The Bank has also invested in many of Uber’s direct competitors which include Grab, China’s Didi Chuxing (whom Uber sold out to in 2016) and the Indian company Orla and may have instigated mergers in order to improve revenue within South East Asia.
What does the future hold for Uber?
But what does this mean for Uber’s presence in Asia as a whole as of now, it will only operate in Japan, South Korea and India, all of which have their own rival companies.
Transport analyst Corrine Png from the Singapore research business Crucial Perspective feels that Uber may well pull out of India in exchange for an equity stake in their biggest Indian rival Ola (another of the Japanese Soft Bank Group backed ride-share businesses), even though Uber currently retains close to 60% of the market within the country.
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