Uber prof­its sup­port spend­ing in China: CEO

The Pak Banker - - COMPANIES/BOSS -

Ride hail­ing app com­pany Uber Tech­nolo­gies Inc [UBER.UL] is gen­er­at­ing more than $1 bil­lion in profit a year in its top 30 cities glob­ally, and partly us­ing that money to bankroll its ex­pan­sion in China, Chief Ex­ec­u­tive Travis Kalan­ick said in an in­ter­view.

The com­pany said in Fe­bru­ary it was los­ing more than $1 bil­lion a year in China's red-hot ride hail­ing mar­ket, where it is battling large lo­cal in­cum­bents to win cus­tomers.

Kalan­ick said China was the com­pany's most in­tense mar­ket, but also a cru­cible for new ideas that it has ex­ported to other mar­kets, and that its in­vest­ment here was sus­tain­able.

"If you took our top 30 cities today, today they're gen­er­at­ing over $1 bil­lion in profit a year, just our top 30 cities. And that profit mul­ti­plies ev­ery year be­cause we're grow­ing," he said on the side­lines of the Boao Fo­rum in the Chi­nese is­land prov­ince of Hainan. Other cities among the 400 where Uber op­er­ates were also prof­itable, he added.

"So that helps us to sus­tain­ably in­vest in our Chi­nese ef­forts... Be­cause of the prof­its we have glob­ally, this is some­thing we can do for the long run," he said late on Thurs­day.

Uber and China's Didi Kuaidi, backed by Chi­nese tech­nol­ogy giants Ten­cent Hold­ings Ltd (0700.HK) and Alibaba Group Hold­ing Ltd (BABA.N), have both spent heav­ily to sub­si­dize fares to gain mar­ket share, bet­ting on China's In­ter­net- linked trans­port mar­ket be­com­ing the world's big­gest.

The strat­egy seems to be work­ing for Uber. The com­pany's mar­ket share in China has grown quickly, ris­ing from about 1 per­cent to 2 per­cent in Jan­uary 2015 to about 30 per­cent now, Kalan­ick said.

China's trans­port min­is­ter said ear­lier this month fare sub­si­dies and the sup­ple­ment­ing of driver wages by ride- hail­ing com­pa­nies were com­pet­i­tively un­fair and un­sus­tain­able in the long-term.

The San Fran­cisco-based com­pany founded in 2009 was start­ing to test new prod­ucts in China first and one ex­am­ple he noted was UberCOM­MUTE, a carpooling app that was first launched in Chengdu last Septem­ber and later ex­panded else­where.

"The key for (us in) China is to move fast," Kalan­ick said.

"If we launch in the U.S. and then it gets copied in China, we'll be be­hind. So we're start­ing to ori­ent some of our in­no­va­tion at China first," he added, high­light­ing the cut­throat com­pe­ti­tion.

The com­pany's Chi­nese busi­ness boosted its val­u­a­tion in Jan­uary to more than $8 bil­lion af­ter rais­ing more than $1 bil­lion in its lat­est fund­ing round.

Kalan­ick said so far Uber had not faced ma­jor reg­u­la­tory chal­lenges in China, pos­si­bly be­cause the gov­ern­ment has been try­ing to drive in­no­va­tion and Uber fits the nar­ra­tive.

Kalan­ick de­clined to say when he thought Uber would turn a profit in the world's most pop­u­lous coun­try, but he seemed to be en­joy­ing the ride re­gard­less.

"I was in China 70 days last year and 100 times a day some­one would say ' Travis, no In­ter­net tech­nol­ogy com­pany has ever suc­ceeded. I don't know if you should be here'," he said.

"As an en­tre­pre­neur, that's the best thing you can hear ... you're al­ways turn­ing it into the pos­i­tive, and try­ing to make the im­pos­si­ble pos­si­ble is what we do. Ad­ven­ture with a pur­pose is what we do."

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