Following Uber’s withdrawal from China and selling of its operations to competitor Didi Chuxing in 2016, the company also sells its business to its biggest rival in Southeast Asia, Grab.
Uber invested $700 million in Southeast Asia during its five-year operations in the region, but the company failed to dominate the ride-hailing market. Uber has been operating in 101 Asian cities as of 2018, but it will be exiting 51 of these cities.
Grab is going to take over Uber’s ride-sharing business as well Uber Eats and in return, Uber will receive a 27.5% stake in Grab.
As a result of this deal, Grab will lead the market across South East Asia. Grab is valued at $6 billion and was able to raise $2.5 billion from Didi Chuxing, SoftBank, and others in a deal.
Today, it is operating in eight countries in Southeast Asia with 2.3 million drivers.
Uber Faced Challenges in Southeast Asia
Uber wasn’t the first company to enter the ride-sharing market in Southeast Asia. Grab entered the ride-sharing market in 2012, starting with Malaysia. Uber started in 2013.
Unlike Uber, Grab was able to understand their users very well and address their specific needs. For example, Grab accepted cash payments while Uber only started accepting cash two years from the start of its operations. This discouraged those who don’t have a credit card and those who are new to the ride-sharing service from trying Uber.
Aside from Grab, Uber also had other strong competitors. In Indonesia, it competed with Go-Jek, a bike-taxi tech company that recently received funds worth $1.2 billion from companies like Google, Tencent, and JD.com. Myanmar has local operators, Hello Cabs and Oway Ride.
In the Philippines, Uber paid a P190 million (roughly $3.65 million) fine imposed by the country Land Transportation Franchising and Regulatory Board (LFTRB) after it failed to follow its orders to stop accepting new drivers.
In 2017, Uber’s losses went up by 61 percent. They lost $4.5 billion in 2017 and $2.8 billion in 2016, CNBC reports.
Why Is Uber Selling to Grab?
As to why Uber is selling their business to Grab, here’s what Dara Khosrowshahi, CEO of Uber has to say as reported by Techcrunch:
“This deal is a testament to Uber’s exceptional growth across Southeast Asia over the last five years. It will help us double down on our plans for growth as we invest heavily in our products and technology to create the best customer experience on the planet. We’re excited to take this step with Anthony and his entire team at Grab, and look forward to Grab’s future in Southeast Asia.”
This deal gives Uber the opportunity to address financial losses and clean up their reputation. Softbank, Uber’s biggest investor with a $9.3 billion investment, also encourages the company to focus on US and European markets instead of expanding globally.
What This Means for Ride-Hailing App Users
With Uber selling its business to Grab, the latter is going to dominate the industry and even monopolize it in the Philippines and Malaysia in particular. Grab will have 80 percent of the ride-sharing market, says Arsenio Balicasan, chairman of the Philippine Competition Commission. Grab monopolizing the industry might mean higher fares and less options for commuters, Balicasan said.
As a result of this perceived threat and disadvantage to the commuters, both the Philippines and Malaysia put Grab on anti-competition watch. Malaysia’s competition commission will look out for “unfair practices” and “sudden fare increases.”