Kalanick exit may hit Uber growth in India, help Ola
The resignation of Uber Technologies Inc. CEO Travis Kalanick, who was a big backer of the company’s money-losing India business, may cause uncertainty in the shortterm at Uber India and boost Ola’s chances of retaining its market leadership, analysts said.
The change at the top could force Uber to cut its aggressive spending aimed at gaining market share, analysts said. To cut losses, if Uber reduces spending both on driver incentives and keeping prices low for riders in markets including India, this will hit growth and benefit rivals.
“The new CEO may not be as aggressive as Kalanick. A company with founder as a CEO will have more aggressive growth than a professional CEO, who is likely to be more cautious. In the long-term things will stabilise, but in the short and medium term, Uber may take a hit. Also, investors may rethink investing further immediately and would wait and watch,” said Jaspal Singh, partner, Valoriser Consultants, a research firm focused on transportation.
Kalanick’s resignation, prompted by investor pressure, came after a wide-ranging probe into Uber’s practices on issues such as sexual harassment at the company and the professionalism and ethics of its leaders. Uber’s board hired two law firms, Perkins Coie and Covington & Burling, to conduct the investigation after reports emerged earlier this year about several instances of sexual harassment and inappropriate behaviour by members of the management team.
Still, Kalanick’s resignation came as a shock, not least to Uber employees.
On Wednesday morning, junior employees and executives at Uber India were caught off guard by the news about Kalanick’s resignation, two company executives said. Only later in the day did they hear officially from the company when Kalanick wrote an email to employees, according to the two executives.
“We all got to know about Travis’s exit this morning around the time the story broke in the media. Right now everybody is stunned and still coming to terms with the news, but it’s business as usual otherwise,” said an Uber executive, requested anonymity.
An Uber India spokeswoman declined to comment on the impact of Kalanick’s exit on the company’s India business.
Since its launch in India in 2013, Uber has been spending aggressively on discounts, driver incentives and raising supply. Uber was expected to increase spending in India to beat Ola after it sold its China business to local rival Didi Chuxing last year.
In a September interview, Uber India president Amit Jain said that Uber’s completed trips had risen from 165,000 a week in January 2015 to 5.5 million at the end of August 2016.
Both Uber and Ola claim market leadership in India; analysts say the two are running neck and neck with each other.
Ola,runbyBhavishAggarwal, has mopped up about $350 million in fresh funding over the past six months led by existing investor SoftBank. Analysts believe Ola’s chances of keeping its position as market leader have improved after Kalanick’s resignation; in turn, so have its chances of attracting more cash.
“When top management changes, two things happen. One, immediate funding may get slower. Second, international level changes in policies may not happen for some time. Instead, there will be local decisions in countries in line with the risk appetite of the company. When a company is in a stabilising mode, the competition tries to win the war. Given that there is uncertainty with the biggest competitor, rivals can benefit and there is a possibility that if they are raising funds, they might get an edge,” said Sreedhar Prasad, partner, e-commerce and startups for KPMG in India.