Author(s): Raghu Gopal
Uber has a presence in more than 600 cities worldwide. But in a handful of countries, the ride-hailing company has ended up on a more conciliatory path and has exited the business in favour of local companies. For example, in 2016, Uber realised it was outmatched in China, after spending billions of dollars in subsidies for passengers, as it tried to gain a foothold against Didi Chuxing, the incumbent car-booking company. After a protracted fight, Uber sold its Chinese subsidiary company to Didi Chuxing for a 17.5 percent stake in that business, valued at close to $8 billion.
Last Thursday, in a rare departure for the company known for its keen approach, Uber announced a partnership with Yandex, the Russian search engine giant and operator of the ride-sharing service Yandex.Taxi. The two companies will combine their transport businesses in Russia and several other neighbouring countries including Armenia, Azerbaijan, Belarus, Georgia and Kazakhstan.
Yandex.Taxi, founded in 2011, operates in more than 127 cities spread over six countries in the region. The company, often referred to as the "Google of Russia", owns and operates a significant mapping database and is able to heavily market its services to potential customers through its online real estate.
As part of the deal, Uber will retain a 36.6 percent stake in the new company, Yandex will hold a 59.3 percent stake, and 4.1 percent will be held by employees of the venture.
The move reflects the intense competition Uber has sometimes faced in its ambitious international expansion. It will end an expensive battle between the two companies that has dragged on for the past three years, since Uber arrived in Russia. The company faces fierce rivalry from the likes of Fasten/Rutaxi, Maxim and Gett, the Israeli start-up backed by German car-maker Volkswagen. The deal will also enable Uber to become more sustainable by helping it cut losses as part of a global push toward profitability.
A new level of reality is setting in on such on-demand companies. At some point, they will need to lift themselves into sustainable business models. Consolidation is one way forward.