Uber agrees to sell its entire Southeast Asian business to Grab, its regional rival. This was an announcement from them today, March 26, marking the firm’s second retreat from the continent.
The transaction entails that Uber will have a 27.5% stake in Grab, with CEO Dara Khosrowshahi joining the board of the Indonesia-based company. On the other hand, Grab gets to expand its meal delivery service by merging with Uber Eats. This will help Grab top its rival Go-Jek.
Ride-hailing industry in Asia is dependent on discounts and promotions, leading to profit decline and facing pressure on consolidation. In such shaky close scenarios, Uber lost $4.5 billion in 2017 under fierce competition at home as well as in Asia and suffered a regulatory crackdown in Europe. Its investment of $700 million in the Southeast and about $2 billion in China but losing to Didi there, are two of the American ride-hailing company’s recent-most major financial setbacks amid all turmoil.
Having said that, Uber is a company serving many markets, including the United States, Australia, New Zealand, and Latin America being its chief markets. Putting these regions together gets Uber consistently profitable, owning more than 50% market share.
Now, both Uber and Grab have their stakes shared with SoftBank, who happen to be investors in other ride-hailing big names like Didi Chuxing and Ola. Rajeev Misra, CEO of Vision Fund of SoftBank, advised Uber to shift focus from Asia to Latin America and other regions, redirecting more resources there.
According to a person familiar with the deal, Rajeev saw an opening to merge or go for a joint venture among ride-hailing firms that SoftBank are backing. This would be basically for research and development, and SoftBank would not remain in the decision-making process.
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. 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. – Dara Khosrowshahi, CEO, Uber
Another source says that Uber plans to boost its battle with Ola in India, another competitive market. The American firm owns about 60% of the market share, which should back them up in the coming market showdown!
Stay with us for the next update from Uber as it surfaces.