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Uber’s retreat from Southeast Asia makes India, the Middle East and Latin America the next battlegrounds

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Uber is whittling down the international markets it operates in so it can focus on core regions it feels like it can win.

Uber’s path to global dominance was once perceived to be a certainty as it rapidly expanded into new cities around the world, placing special importance on major markets like China, India and Southeast Asia.

Uber’s mission was to bring reliable transportation for everyone, to everywhere. But after it sold its businesses in Russia, China and Southeast Asia to local competitors, “everywhere” has shrunk to the U.S., Europe, parts of Latin America, India and the Middle East.

The international selloffs told us two key things: Subsidies — bonus payments to drivers to retain and attract more vehicles — cut into its business, making it too expensive to compete against its homegrown competitors in China and Russia. Second, the strategies that helped the company maintain its dominance on its home turf would not always work against well-funded players in foreign markets.

Uber’s latest retreat, selling its Southeast Asia business to Grab, was a stark example of this same phenomenon.

In the wake of Didi’s acquisition of UberChina, local regional players like Grab thought Uber’s withdrawal from China would create more competition as it would free Uber up to invest more in their region.

“With the deal in China, we expect Uber to turn more attention and divert resources to our region,” Grab CEO Anthony Tan wrote in an email to employees in the wake of the merger.

But recent comments from Uber CEO Dara Khosrowshahi indicated the company’s $ 700 million investment in Southeast Asia since it launched five years ago was not panning out in the way Uber hoped it would.

“The economics of that market are not what we want them to be,” Khosrowshahi said at the New York Times Dealbook conference. “I think it’s over-capitalized at this point. We’re going in, and we’re leaning forward. But I’m not optimistic that market is going to be profitable any time soon.”

In addition to capital, Grab has long touted its hyperlocal advantage over Uber. Even in the face of growing concern that Uber would double down on its efforts in the region, Tan continued to believe that advantage would be what helped the company become the dominate player.

“But we have seen that when the local champion stays true to their beliefs and strengths, they can prevail,” Tan wrote in his email to employees after Uber exited China.

While the Grab deal was in part an admission that the company couldn’t compete with its homegrown rival, it was also a sort of call to arms in markets like India, Latin America and the Middle East.

So what does Uber have to do?

Each region requires a different strategy. Through its three international exits, the company has learned it’s not enough to throw cash at a market and hope that the strategy that helped it grow in the U.S. will work elsewhere. The primary thing Uber has to do is to become more attuned to the local nuances of the market.

India

In the case of India, Uber’s chief competitor is Ola, which saw Uber’s exit from China as a reassuring sign, a source close to the company told Recode at the time. Given the similarities in the complexities of the Chinese and Indian markets, Uber’s loss in China, the source said, meant Uber would have an equally difficult time gaining traction in India.

Indeed, India is a vast market that accounts for 10 percent of Uber’s trips with 10 million rides a week, so ceding ground there will be undoubtedly damaging to the company.

“India is a key component of our growth plan,” Khosrowshahi told the Economic Times during a recent trip to India. “If you look at the market, it’s one of our healthiest markets in terms of growth rates.”

But the ride-hail company has a tough battle ahead as it fights it out with a competitor that is in more than 100 cities, has its own digital wallet called OlaMoney and offers unique services like Prime Play — a service that comes with an in-car entertainment platform for longer trips.

During a recent trip to India, Khosrowshahi admitted that the company needs to better serve the local needs of its consumers and drivers.

“As a global company, we’re constantly building out systems and technologies that are global in nature, but in a country like India we have to be able to be relevant locally as well,” Khosrowshahi said during a recent trip there.

The company recently matched Ola’s own motorcycle-hailing and auto-rickshaw-hailing products. This, however, will be the second time Uber is attempting to launch an auto-rickshaw service after shuttering a similar pilot in 2015 — so doing it right is no small feat.

Uber has to also contend with a decreasing albeit still relatively high proportion of India’s consumers who haven’t adopted credit cards or don’t have bank accounts, making it more difficult to tap into digital services like ride-hail. To solve that issue, Ola built out a payments platform that can be refilled with cash. Grab has done the same.

The company is also still facing backlash from some drivers complaining of low fares. Uber embarked on a campaign to win back its drivers in the U.S., and the expectation is it will do the same for its international markets.

Latin America

In Latin America, the company has seen incredible success as the region quickly became its fastest growing. But Didi’s recent entrance into the market through an acquisition of Brazilian player 99 and its early recruitment efforts in Mexico gives reason for concern for Uber.

Uber is also still navigating regulatory hurdles in Brazil, the world’s fifth-largest market by population that only recently came out of its longest-ever recession. That means the market is still incredibly price sensitive. Parts of Latin America, like in India, also still rely heavily on cash payments.

So Uber has to focus on launching cost-effective services that still provide a level of convenience for consumers and is profitable for Uber.

Middle East

Didi is also an investor in Careem, Uber’s main rival in the Middle East and Pakistan. The startup was founded in 2013, but it has attracted more than $ 550 million in funding from players like Rakuten, Daimler and Coatue Management. Here, too, Uber has to navigate both cultural and economic realities that are often vastly different from that of the U.S.

Recently, for example, Saudi Arabia introduced value-added tax, which forced Uber to raise its prices.

Like in Latin America and Southeast Asia, the company’s strategy in the Middle East and North Africa has to be further customized around the local nuances of each country within the region. In other words, what works in Saudi Arabia may not work in Egypt.

Didi’s investments in regions around the world present a definite challenge to Uber. Ironically, with the Grab deal, Uber’s international strategy appears to look more like Didi’s as the company becomes pickier about which markets to enter.

That doesn’t mean the company isn’t open to making deals in those regions going forward. But, Uber is confident those deals will lean more in the company’s favor and doesn’t expect to pull its operations out of anymore major markets, according to sources familiar with the company’s thinking.

The company only attained a minority stake in the resulting merged entities that came out of its deals with Didi, Grab and Yandex. Uber doesn’t expect that to happen in the event that it strikes some form of an acquisition deal in places like India and the Middle East.

Ola and Uber also share an investor in SoftBank — a connection that may be a boon to any future deals in the way it was for Grab.

SoftBank, which recently acquired a 15 percent stake of Uber, publicly encouraged the company to focus on its core markets such as the U.S. and Europe. The firm holds a board seat in both companies, allowing merger talks between Grab and Uber to begin soon after SoftBank closed its funding deal with Uber.

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Photos: Jeff Bezos, Tim Cook and Ivanka Trump are hanging out this week at an exclusive mogul retreat

You want pics? We got pics.

The who’s who of the tech and media worlds have descended upon Sun Valley, Idaho, this week for the annual invite-only gathering hosted by the investment bank Allen & Co.

Many of the usual suspects were in attendance, including Apple CEO Tim Cook and Amazon CEO Jeff Bezos. But there were a few new notable attendees this year, namely Jared Kushner and Ivanka Trump. The timing is interesting given Kushner is dealing with the recent revelation that he and other members of President Donald Trump’s campaign team met with a lawyer tied to Russia.

Below are some other photos of this year’s attendees.

 Drew Angerer / Getty
Ivanka Trump and Jared Kushner
 Drew Angerer / Getty
Jared Kushner and Satya Nadella

President Trump’s daughter Ivanka is seen chatting with husband and White House Senior Advisor Jared Kushner. Above, Kushner is seen talking with Microsoft CEO Satya Nadella.

 Drew Angerer / Getty
Amazon CEO Jeff Bezos

A very determined and buff-looking Jeff Bezos was in attendance this year just a month after he bought Whole Foods for almost $ 14 billion. Amazon has been wreaking havoc on virtually every industry it has gotten into, and even industries it is just starting to explore, like tech support.

 Drew Angerer / Getty
Tom Brokaw (L) and former DreamWorks CEO Jeffrey Katzenberg

TV journalist Tom Brokaw walks with former DreamWorks CEO and Disney Chairman Jeffrey Katzenberg. Katzenberg was in Cannes last month pitching advertisers and media partners on an idea he is calling “New TV” — high quality, but short TV-like shows filmed and produced specifically for your phone.

 Drew Angerer / Getty
Diane von Furstenberg and Barry Diller

Fashion designer Diane von Furstenberg walked with her husband, IAC’s Chairman Barry Diller. On Wednesday, Diller called Donald Trump’s presidency a “joke” in an interview with CNBC from Sun Valley. “Hopefully it will be over relatively soon,” he added.

 Drew Angerer / Getty
Tim Cook, Jeff Bewkes and Eddy Cue

Here’s Apple CEO Tim Cook (presumably) telling a hilarious joke to Time Warner CEO Jeff Bewkes (center) and Apple Senior Vice President Eddy Cue. Both Bewkes and Cue have been interviewed on Recode stages in 2017. Here’s Bewkes’s interview at Code Conference in May, and Cue’s from Code Media in February.

 Drew Angerer / Getty
Anthony Noto

Twitter COO Anthony Noto finally got a little relief from his day job on Tuesday when Twitter hired a new CFO. Noto, originally hired to be Twitter’s CFO three years ago, had been doing both jobs since November.

 Drew Angerer / Getty
Omid Kordestani

Another Twitter sighting in Sun Valley: Chairman, and former Google executive, Omid Kordestani.

 Drew Angerer / Getty Images
Sheryl Sandberg

Here’s Facebook COO Sheryl Sandberg staying hydrated.

 Drew Angerer / Getty
Rupert Murdoch and Lachlan Murdoch

21st Century Fox Chairman Rupert Murdoch and his son Lachlan Murdoch, co-chairman of News Corp.

 Drew Angerer / Getty
Nick Woodman

GoPro CEO Nick Woodman is straight chillin’.


Recode – All

Apple execs Tim Cook and Eddy Cue rub elbows with media elite at Sun Valley retreat

Article Image

Apple CEO Tim Cook and SVP of Internet Software and Services Eddy Cue were spotted at the annual Allen & Co retreat in Sun Valley, Idaho, this week, where they will hobnob with industry leaders, political elites and more.
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