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Uber Under Pressure in Southeast Asia

Despite their success, there are strong challengers in the region

9May

Uber has replaced the word Taxi in the public vernacular in a startlingly short period of time. Since launching in 2010, the US-based lift-sharing service has grown its network over 160,000 drivers across 58 countries, and now deals with about 12 bookings every second. Obviously, a company of this size that has experienced such fast growth will have made enemies along the way - regulators and traditional taxi services are at the front of this queue. There is also now a growing cabal of competitors operating in different regions, including Lyft in the US, Didi Kuaidi in China), Ola in India, and Grab in South-East Asia

Grab, which launched in 2012, is giving Uber particular cause to be looking over its shoulder. They have grown from a fleet of 30 taxis to overseeing over 111,000 drivers in 22 cities across six countries, and have 11 bookings every second. It has also now hired its first CFO, Linda Hoglund, who arrives from Singapore-based video streaming startup, HOOQ.

The move stands in stark contrast to Uber, which has gone without a CFO since Brent Callinicos vacated the post in March 2015. Grab’s most recent funding round was a $350 million Series E, with investors including Didi Kuaidi. These sums may look paltry next to those taken in by Uber, but in the context of the region, they are huge. Grab’s decision to hire a CFO also seems to indicate that they may be considering an IPO. A CFO is often one of the last major hires a company makes before going public. Under Sarbanes-Oxley, companies are required to have a CEO, a chief accounting officer, and a CFO before they can launch an IPO, and it is sensible that they be in the role for more than a year. Hoglund has 20 years experience at multinational companies, and would be strong choice to oversee such a move. But how likely is it?

Southeast Asia holds some 618 million people - that’s 168 people per square kilometer. There’s also 190 million people in the middle class, which will grow to 400 by 2020, and it is largely a mobile-first region. According to data from Ericsson, smartphone penetration in Malaysia and Singapore - considered by Grab CEO Anthony Tan as proxies for Southeast Asia - are 140% and 152%, respectively.

Unlike other regional Uber-rivals, Grab entered the market as a challenger rather than the first mover. In order to gain the upper hand and exploit the sizable market, it has utilized all the local knowledge available to them and been sympathetic to local customs. For example, Grab understood that many taxi drivers struggled to use smartphones, and they spoke with the drivers to understand how to fix this. The company also liaised with several mobile manufacturers and service providers to help subsidize Internet and smartphones for the drivers. Another example of GrabTaxi’s localization strategies would be how it accepts payment. Uber requires card payment, but such a method is not usually the primary method in Southeast Asia, so GrabTaxi accepts cash.

This local knowledge has also meant that they can get along better with regulators than Uber, whose bulldozer approach has made them a number of enemies. In Vietnam they are the only legal ride-haling app, and in Thailand they were able to launch with the the governor of Phuket’s support, while their competitor was kicked out. This could be the difference moving forward. Uber’s aggression has not made them any friends, and they may find themselves hindered by this as competitors enter the market who have a more amenable outlook. Uber’s apathy towards appointing a CFO seems to represent their contempt for regulations, while the appointment of Hoglund could give Grab a further advantage as they expand within the region, and possibly beyond. 

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