Uber to end services after April 8
SINGAPORE: Uber’s services will be available in South-East Asia until April 8 after the ridehailing firm has agreed to sell its South-East Asian business to bigger regional rival Grab.
Passengers can only use the Grab app (available on iOS and Android) to book their rides after that.
The deal, which was announced yesterday, marked the US company’s second retreat from an Asian market.
It is the industry’s first big consolidation in South-East Asia, home to about 640 million people, and puts pressure on Indonesia’s Go-Jek, which is backed by Alphabet Inc’s Google and China’s Tencent Holdings Ltd.
A shake-up in Asia’s fiercely competitive ride-hailing industry became likely earlier this year when Japan-based SoftBank Group Corp’s Vision Fund made a multi-billion dollar investment in Uber. SoftBank also invested in Grab.
As part of the transaction, Uber will take a 27.5% stake in Singapore-based Grab and Uber CEO Dara Khosrowshahi will join Grab’s board.
“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.
For Grab, the deal is a boon for its meal-delivery service, which will now merge with Uber Eats. A more robust food service will give Grab an advantage over GoJek, according to a person close to Grab.
“It was really a very independent decision by both companies,” Grab President Ming Maa told Reuters, adding that SoftBank CEO Masayoshi Son was “highly supportive”.
In addition to its stakes in Uber and Grab, SoftBank is also one of the main investors in several other big ride-hailing firms including China’s Didi Chuxing and India’s Ola.
Ride-hailing companies throughout Asia have relied heavily on discounts and promotions, driving down profit margins and increasing pressure for consolidation.
Uber, which is preparing for a potential initial public offering in 2019, lost US$4.5bil (RM17.57bil) last year and is facing fierce competition at home and in Asia, as well as a regulatory crackdown in Europe.
Uber invested US$700mil (RM2.73 bil) in its South-East Asia business, less than the US$2bil (RM7.80bil) it burned through in China before ceding its operations there to Didi.
Uber anticipated making more deals with rivals, but said it had no plans to do another sale in which it consolidates its operations in exchange for a minority stake in a rival.
“It is fair to ask whether consolidation is now the strategy of the day, given this is the third deal of its kind ... The answer is no,” Khosrowshahi said in a note to employees that was shared with Reuters.
“One of the potential dangers of our global strategy is that we take on too many battles across too many fronts and with too many competitors.”
A source familiar with Uber’s strategy said the company was going to step up its battle with Ola in India, another competitive and costly market where rivals have heavily subsidised rides in an effort to gain market share. Uber has close to 60% of the market there, by some estimates.
Uber’s two previous retreats, from China and Russia, happened under former CEO Travis Kalanick. The deal with Grab is the first operations sale by Khosrowshahi, who started in September.
Rajeev Misra, chief executive of SoftBank’s Vision Fund, had urged the company to focus less on Asia and redirect more resources to profitable markets such as Latin America, according to a person familiar with the matter.
He saw opportunities for mergers and joint ventures between SoftBank-backed ridehailing companies, particularly for collaborating on R&D, but the investor would never get actively involved with management decisions, the person said.
Uber includes the United States, Australia, New Zealand and Latin America among its core markets – regions where it has more than 50% market share and is profitable or sees a path to profitability.
Meanwhile existing Uber users, can still view their past trips and ratings in the app. The account remains active and can be used when in any country outside South-East Asia where Uber operates.
The data which the users shared with Uber (excluding payment information) will be transferred to Grab, but it won’t be visible in the Grab app. Transitioning Uber users are still required to register their account with Grab before they can start using the services.
Grab assures that there won’t be any changes to the fares.
“For services that are on dynamic fares such as GrabCar and JustGrab, fares will continue to be calculated based on a base distance, with a dynamic surcharge that will be applied based on factors including demand and supply in that particular point in time, traffic conditions and estimated time taken for the journey.
“This is a fair calculation for drivers as they navigate varying road conditions throughout the day. This means fares are lower in low demand periods – and vice versa – which helps match drivers to passengers efficiently throughout the day,” it states.
Passengers who choose GrabTaxi (Metered) and GrabTaxi (Executive) options will continue to pay by metered fares that are set by the taxi companies.
There won’t be any changes to the existing Grab drivers as the benefits and incentives structure remains the same. However, the existing Uber drivers are recommended to sign up if they wish to join the Grab platform.
The driver’s Uber account information, which includes the past history and ratings, will be transferred to Grab upon notice. Grab says that it will be contacting and helping Uber drivers through the “onboarding” process with Grab so that all drivers can continue to drive as usual after Uber’s service in South-East Asia ends in April.
Uber will pay its drivers for the fares and corresponding incentives from the completed rides they picked up using the Uber Partner app. Drivers can contact Uber support within the “Help” section of their Uber app or on help.Uber.com.
As for U ber Eats, by May, users will be invited to try GrabFood – Uber Eats and Grab’s new food delivery app. Users will be required to sign up with a fresh account and profile on the new app, while their Uber Eats order history will remain in the old app.
All the restaurants on Uber Eats will be available on GrabFood, with the same prices, and Grab promises to add more restaurants to the list. You can find more information on GrabFood here.