Taking an Uber or a Grab? Soon enough you might not have to choose. Over the long weekend, CNBC reported that Uber was in fact, looking to sell its business in Southeast Asia to arch rival Grab. The article stated that no deal had been reached as of yet.
Local newspaper The Straits Times however, quoted representatives of the firm saying the news is “speculative”. The move however, would make strategic sense as it would help SoftBank, which has 15% stake in Uber, to have more control over the global ride-sharing market. Currently, SoftBank also owns shares in Uber’s local Asia market competitors Grab, China’s Didi and India’s Ola. Meanwhile, Uber also recently sold its business to Didi for 20% ownership in China.
Nick Foley, APAC president of Landor said that the move is not surprising and it was only “a matter of time until Uber or Grab gave into the other”. He added that the challenge with both Grab and Uber is that they’re vacuous brands and they stand for very little.
As we’re seeing with current events, one brand can easily substitute for the other.
“The business models each have adopted are simply unsustainable. Uber [in Singapore] lacks direction and only recently announced an alliance with Comfort Cabs,” he added.
The deal, mentioned by Foley, sees ComfortDelGro acquiring 51% of Lion City Rentals (LCR), Uber’s wholly-owned car rental subsidiary in Singapore. The deal is valued at about SG$642 million, with a cash consideration of SG$295 million.
According to Brooks Entwistle, chief business officer of Uber’s business in Asia Pacific, the move will not affect the branding of both companies and will see the Uber and ComfortDelGro brands and mobile applications continuing to operate independently. Uber will retain a 49% ownership stake in LCR and upon completion of the transaction, LCR will be able to benefit from ComfortDelGro’s fleet management and operations. It will also create a path for ComfortDelGro’s taxi drivers to receive ride requests on the Uber driver app.
Meanwhile, Dinesh Sandhu, managing director of DIA brands added that Grab is presumably the dominant force in Southeast Asian ride-hailing. As such, going up against Grab will only require significant amounts of investment in the near future which may not be in line with the near term global Uber strategy that can be seen through divestment in Russia and China, in exchange for significant stakes in the market leaders there.
“Heavy discounting while benefiting the consumer in Southeast Asian markets has presumably taken a toll on Uber revenues,” he said. He added that the big question is how this arrangement would operate in the legal environment and stack up against anti-competition laws in these markets as both Uber and Grab have existing tie ups with local taxi operators.
Luke Lim, CEO of A.S. Louken added that the move was a clear one given Uber was losing ground in Southeast Asia.
“If you can’t beat them, join them. Grab will gain the leadership position in SEA, and that’s good for brand awareness,” said Lim. Consumers however, he added, might be left with one major player and that will narrow down the choices for services providers, and lead to monopoly and the consumer eventually losing out.