Uber Gives Up in Southeast Asia, Sells its Services to Rival Grab
【Summary】Uber’s attempt at global expansion has taken another hit. The company announced that it is selling its ride-hailing services there to rival Grab.
BANGKOK — Uber's attempt at global expansion has taken another hit. The company announced that it is selling its ride-hailing services in Southeast Asia to rival Grab.
Under the agreement, which was first reported by Bloomberg, Grab will acquire all of Uber's operations in a region of 620 million people, including Uber's food delivery service, UberEats. As part of the deal, the U.S. ride-hailing giant will get a 27.5 percent stake in Grab and its chief executive officer, Dara Khosrowshahi will join the board of the Singapore-based company. The deal was made over the weekend.
"Today's acquisition marks the beginning of a new era. The combined business is the leader in platform and cost efficiency in the region," Grab CEO Anthony Tan said in a statement.
The deal also helps SoftBank Group Corp., who now becomes the largest shareholder in both companies. The firm is pushing to reduce competition in a Southeast Asian ride-hailing market forecast to reach $20.1 billion by 2025.
Uber and Grab, India's Ola, and China's Didi Chuxing are all backed by SoftBank. The four companies provide about 45 million rides a day, according to SoftBank presentation material in February.
For Uber, pulling out of running its own business in Southeast Asia cuts back on losses ahead of a planned initial public offering in 2019. Uber has been losing nearly $1 billion per quarter. Uber sold its business in China to Didi in 2016 after a battle in which both burned through cash to court drivers and riders with rich subsidies.
In July of 2017, Uber agreed to merge its operations in Russia into a joint venture, 59.3 percent owned by Russian internet search company Yandex and 36.6 percent by Uber.
Uber and Grab offices in Signapore
Uber CEO Dara Khosrowshahi has been pushing to bolster the financials of a company that's burned through $10.7 billion since its founding nine years ago. One path towards profitability is expanding to markets where there is high-demand for ride-hailing services. Despite giving up in Southeast Asia, Khosrowshahi signaled during a trip through Asia last month that he's committed to other key markets including Japan and India.
Uber also subsidizes rides and drivers in many markets to compete with rivals in its push gain market share. In 2015, Uber passengers were paying only 41% of the actual cost of their trips, according to an analysis by transportation industry consultant Hubert Horan, based on financial statements from Uber.
Grab started out as a taxi-hailing app in Kuala Lumpur in 2012, and quickly became the region's dominant ride-hailing service in past years with $4 billion raised from investors. It was most recently valued at $6 billion, according to CB Insights. Grab has more than 86 million mobile app downloads. The company offers a wide range of ride-hailing services in 191 cities across Singapore, Indonesia, the Philippines, Malaysia, Thailand, Vietnam, Myanmar and Cambodia.
The deal "will help us double down on our plans for growth as we invest heavily in our products and technology," Khosrowshahi said in the statement.
Originally from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry in Silicon Valley. Eric has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology. Outside of work, Eric likes to travel to new places, play guitar, and explore the outdoors.
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