First Uber lost China, then Russia, and now it looks as if Southeast Asia may go the same way.
I am sure that Brazil and India are taking feverish notes.
SoftBank and Didi are investing $2 billion investment in Grab, the Singapore-based ride-hailing company that offers its services in six countries including Malaysia, Singapore, Indonesia, Thailand, Vietnam and Philippines. The total round is expected to be around $2.5 billion with a post money valuation of $6 billion. Grab is present on 50 million devices with 1.1 million drivers and fulfilling 3 million rides per day.
Grab has two advantages over Uber:
1. Dominance. According to Grab, it already has 91% market share in taxi hailing and 71% in private vehicle hailing in the markets it serves.
This is crucial as RFM’s rule for online marketplaces states that to become to go-to place to buy or sell a product or service, the marketplace has to have 60% market share or be double the size of its nearest rival.
Assuming these figures are accurate (there was a lot of dispute in China), then Grab has already become to the go-to marketplace, although the opportunity is very lowly penetrated. I suspect this is why it needs such a large fundraising, as this position has to be maintained while ride-hailing becomes much more prevalent in the region.
2. GrabPay. One of the problems with ride-hailing in emerging markets is the fact that credit card penetration is very low. A large part of the ride-hailing experience is the ease and simplicity of payment, and GrabPay is way to bring this experience to those with no credit cards. GrabPay credits can be purchased at ATMs, stores and banks (in a similar way to mobile phone airtime popups) which can then be used to pay for Grab services.
This will remove one of the major hurdles to uptake of the service, as this issue has made life difficult for other offerings like EasyTaxi, which operates in Latin America and the Middle East.
Uber’s rivals overseas are making the most of its turmoil at home – while management attention is focused in the US, I suspect not much is going on overseas. This gives its rivals more time to establish themselves, and none of them appear to be wasting any time.
The net result is that Uber’s dreams of colonizing the world appear to be slipping away. I suspect that it will remain dominant at home and some key Western markets (like the UK), but it will have to do much more than just ride-hailing in those markets to justify a $65 billion valuation.
This is why autonomy may end up being so important – if Uber can capture a large piece of the gigantic $2.7 trillion transportation market in the US by operating a fleet of autonomous vehicles, then it could conceivably be worth 10x that figure.
However, Uber has a very long way to go before it gets to that point, as its autonomous offering ranks dead last by RFM’s reckoning, and the car makers could well be fighting in this market for their very existence.
I would not be surprised to hear of secondary transactions in Uber stock at well below $65 billion and I can’t see much that’s going to push it up anytime soon. One to avoid for now.
This article was originally published at RadioFreeMobile