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Ola’s UK ride poses a new threat to Uber
[MUMBAI] Bhavish Aggarwal is driving straight into Uber's lane. Ola's co-founder and chief executive is leading India's top ride-hailing firm into Britain, just months after speeding into Australia. It's the second intrusion into one of Uber's global strongholds. With both backed by Japanese tech-to-telecoms group SoftBank, it raises the pressure on Masayoshi Son to stop his minority investments drag racing.
The Bengaluru-based outfit appears to be executing Uber's strategy in reverse, moving from emerging to developed markets in search for profit, as the cost of competing at home rises. The privately owned operator lost $700 million in the year to March 2017. If the pain continued at the same pace into this year, Ola might now have haemorrhaged closer to $1 billion even before its UK jaunt. That's not far off the amount Uber was burning through in China before folding its operations into local rival Didi Chuxing in 2016.
The Indian company, valued last year at US$7 billion according to media reports, poses a real threat. Since February, when it moved into the rich Australian market with a large Indian diaspora, Ola has picked up 40,000 drivers by offering lower rates of commission than Uber. That's half the US giant's own 80,000-strong network, local newspapers say. And the opportunity has attracted others too, including Estonia's Taxify and Didi.
Ola will adopt a similarly aggressive strategy as it launches in the UK next month, first in Wales, then in Greater Manchester. Customers are likely to be won over with introductory offers. The company is also in talks for a licence in London, according to a person familiar with the situation, where Uber has just regained permission to operate, albeit on more costly and onerous terms than before.
The overseas drive will increase costs for Uber in key markets, and reduce any profits. That suggests that SoftBank should work on increasing influence over the two rivals. It would make sense for Son to engineer a merger of the pair, although neither side appears ready to cede control. As long as the road race continues, Ola's slipstreaming poses a serious threat to its larger rival.