Uber's given up on world conquest - and that makes it more dangerous than ever

The ride hailer is selling its south-east Asian business to rival Grab.

by Adam Gale
Last Updated: 26 Mar 2018

Uber’s sale of its south-east Asian business to local rival Grab is a sign that the Travis Kalanick era is well and truly over.

Under the pugnacious entrepreneur, Uber launched loss-making operations in hundreds of cities around the world in a frantic race to conquer as many markets as possible, heavily subsidising drivers and launching a guerrilla PR campaign among convenience-hungry millennials in an attempt to achieve scale.

It didn’t matter how strong the local opposition was or how resolute the regulators. Uber even entered the driverless car space, going head to head in more ways than one with internet giant Google, which also happened to be one of its investors. The goal was nothing less than world domination.

But blind ambition is no strategy. Even Uber’s multi-billion dollar war chests had limits. Without matching objective to capabilities, the ride-hailer was bound to fail. And so it did, up to a point.

First came capitulation in China. The mighty Didi Xuching, formed from two bitter rivals, proved too tough for Uber. After losing $2bn in the country, Kalanick sold Uber’s operations there in 2016, in exchange for a 17.7% stake in Didi.

Then Kalanick fell from grace over reports of Uber’s culture of harassment last year.

Now new boss Dara Khosrowshahi – backed by new investors SoftBank – has retreated from south-east Asia too, in a deal that gives Uber a 27.5% stake in local ride-hailer Grab.

Don’t write Uber off

It would be a mistake to see this as a story of decline and fall. Yes, Kalanick was hubristic and the scope of the business is now smaller than it once was. But if anything, this makes Uber even more formidable.

Former Expedia boss Khosrowshahi recognises that you can be high-growth without pursuing growth at all costs. ‘Winning’ in south-east Asia would require billions of dollars, and even then wouldn’t be guaranteed.

Recognising its limits just means the company’s growing up. By focusing on a smaller – though still huge – number of markets, it has a far better chance of becoming a profitable entity in time for its expected IPO next year, which could raise considerable additional funds to help it consolidate and pursue its autonomous vehicle ambitions.

'[Selling to Grab] will help us double down on our plans for growth as we invest heavily in our products and technology,' said Khosrowshahi.

Regulatory road blocks ahead

The one major barrier the company still faces is its reputation. Plenty of customers #deletedUber over its various scandals, both internal and external.

More problematic still, regulators around the world remain somewhere between ambivalent and downright hostile to the company.

Uber has been banned in Denmark and Korea, and forced out of Spain. It’s appealing the revocation of its licence in London. In France its managers were arrested for running an ‘illegal taxi company’, though the firm still operates there and recently won a court case over its drivers’ employment status.

If Uber is to become the giant we were promised it would become, Khosrowshahi will need to convince the regulators in various countries that the service is legally compliant, fair to its drivers and above all safe.

It’s no easy task, going from middle-finger diplomacy to smiles and sunshine. But if Khosrowshahi is successful, he could go down as the man who rescued Uber from itself. 

Image credit: AlesiaKan/Shutterstock

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