Mon Feb 23 2015
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Uber Facing Tough Times


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Credibility is important, whether you are a politician, a care-giver or a company, especially if the company is trying to expand its base to other countries. The hotshot U.S. startup in San Francisco which has been making news for all the right reasons, Uber is facing a tough time to find a foothold in Asia. This hail a cab app found favor and enough financial backing to expand its operations. Looking at the Asian market, where the market is growing and there is potential to change the culture of hailing a taxi, Uber went ahead and launched in several countries only to get a rude shock.

Uber story

Uber has been practically the poster boy of successful start-ups. Launched in 2009 as UberBlack when only luxury cars could be hired, the company has grown at a breakneck speed to now be a serious competitor to the yellow-and-black taxis. A team from Morgan Stanley (MS) in November last year hailed Uber as a trend-setter which will eventually render the car rental and taxis businesses as obsolete.

Hailed by analysts as the next big thing, ride sharing app attracted almost $ 1 billion in investments from top firms like Google (GOOGL), BlackRock (BLK), Fidelity Investments (FNF), Kleiner Perkins (ZZISK) and Menlo Ventures. When Google decided to back the San Francisco-based company, a section of investors saw a greater collaboration between the two companies, whereby Uber’s software and connectivity and Google’s vision of self-driving cars will pose a serious threat to the taxi trade. With all this speculation doing the rounds, analysts singing praises and giants backing the company, it seemed to be a good idea to invest in Uber. A buoyed company brass then decided to enter the Asian markets where this concept was hitherto not known of. Very soon though, the bubble burst.

Taking a hit

At present, Uber service is available in 45 countries and 200 cities globally. The app uses global positioning service (GPS), smart phones and social networks to connect passengers and drivers. But in two Asian countries, where the system is not so common and easily accessed, the process which was a simple task in the west, hit major roadblocks. When the mechanism started failing, the company’s credibility took a hit.

On February 12, Asia’s fourth-biggest economy, Seoul city government revealed its plans to launch a premium taxi service in August to rival Uber. This comes after Uber faced ban threats in India following a security lapse when a driver hired by the company molested a woman passenger. Seoul transport ministry last week spurned Uber’s proposal for a new driver registration, and reiterated its pledge to ban the company. Uber is battling bans in South Korea, India, France and Spain for alleged violations including fare surge during emergencies, using unlicensed drivers and lax safety protocols.

Critics smile as CEO apologises

Many in the industry were openly wary of Uber’s phenomenal growth, citing it as temporary and superficial. They claimed that Uber and the analysts’ projections were too good to be true and soon the company will receive its reality check.

For sure, Uber failed to keep pace with its own growth, and its internal working suffered. As its reputation grew, the company failed to strengthen its pillars. Successive projects backfired and Uber tottered slightly. In December last year, Uber filed to sell $ 1.8 billion of its new Series E preferred stock. The company is now worth at least $ 41 billion. But as the CEO correctly said, first the house needed to be set in order. Uber’s blog from December included CEO Travis Kalanick’s following comment: “This kind of growth has also come with significant growing pains. The events of the recent weeks have shown us that we also need to invest in internal growth and change. Acknowledging mistakes and learning from them are the first steps.”

If his words translate into real-time changes, then Uber for sure will be a company to look out for. For now, you can still stretch your arms and hail a good old cab.


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Tags Asia, India
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