Uber sticks to China expansion as regulatory curbs loom
Shanghai
UBER Technologies Inc, the world's most valuable startup at more than US$50 billion, said it will push ahead with plans to expand into new Chinese cities, downplaying the potential impact on its operations from proposed regulations on the ride-hailing industry.
The company's China unit is sticking with its plans to be in about 100 new cities in the next year, Liu Zhen, head of strategy, said in an interview in Shanghai last week. Uber China also expects to at least double the number of employees by the end of next year, from about 200 people, said Kate Wang, general manager for Shanghai operations.
"We're prepared even if the regulations are passed as is," Ms Liu said, declining to comment on the feedback they have given to the authorities. "It just means extra work we have to do to comply with the regulations, but I don't think the overall strategy and the products need to go through any major changes." Unlike Uber, Didi Kuaidi, its bigger local competitor, has publicly expressed its concern that the proposed rules will threaten the existing business model for most Internet ride-booking services of matching part-time or freelancers driving their own private vehicles to ferry fares. Investors are closely watching the regulations because they have the potential to slow down the pace of expansion for companies like Uber, which has predicted China will surpass the US this year to become its largest market by number of trips.
The transport ministry proposed last month that cars being used for ride-booking services should be registered for commercial use and enabled with GPS devices, while requiring drivers to pass qualification tests. Operators may also need to obtain licences from local authorities to provide online ride-booking services, and won't be allowed to set prices that are below costs to undermine competition, the draft rules state.
The rules will pose a problem for companies like Uber because it'll need enough cars to ensure timely pickups as it expands into more cities, according to Song Yang, a Hong Kong-based analyst at Barclays plc.
"The uncertainty is quite high, if I'm Uber, I wouldn't be so confident at this moment," Ms Song said. "But because the requirements are so strict, they could be potentially relaxed when the final draft comes out. There's a very strong lobby by Uber and Didi to sway or move the rules to be more favourable." For Uber, a lot is riding on its expansion in China. The company said in September it has raised US$1.2 billion for its standalone Chinese unit. People familiar with the fundraising say the investors include Baidu Inc, a unit of China's Citic Group Corp and China Life Insurance Co. Ms Liu declined to comment on Uber China's fundraising plans.
At least five of Uber's top ten busiest cities are in China. Chief Executive Officer Travis Kalanick said last month that Uber represents 30 to 35 per cent of the ride-hailing market in China, and confirmed that the company plans to spend US$1 billion a year there.
To drive its expansion in China, Uber is looking to hire entrepreneurial staff, including people who've started their own companies, said Ms Wang, the Shanghai-based executive. Almost 100 per cent of its employees in China are locals, which helps them understand the market and come up with products suitable for the cities they work in, she said.
In addition to a referral programme that rewards existing employees equity options for successful recommendations that result in hires, Uber China is reaching out to universities and business schools in the country to mine local talent, Ms Wang said. It is also using social media to advertise openings, she said. BLOOMBERG
