Published on : Mar 26, 2018
The wave of consolidation in the Asia ride-sharing industry has begun to stir strategic deals and the impact is increasingly global. Riding on the wave, renowned ride-hailing firms are making exit from the emerging markets, as they chart new paths of driving growth. In another major retreat of its kind, a U.S.-based ridesharing and transportation network company, Uber Technologies Inc., after days of speculation, has finally announced on March 26, 2018 that it has sold its Southeast Asia business to its larger rival Grab. The Singapore-based company offering ride-hailing and logistics services through its app has been valued at around $6Bn, according to an estimate. It has agreed to buy all of the Uber’s ride sharing operations spanning eight countries in the region. Grab will also garner a hold over Uber Eats, its online food order and delivery platform based in California. In addition, it intends to expand the service across Southeast Asia. On the other hand, Uber will hold a 27.5% stake in Grab, with its CEO joining the latter’s board.
Common Investor for Uber and Grab-Locked in Subsidy War-made Deal Likely
Uber and Grab have been locked in subsidy war for quite some time, which not only marred their profits but did not go down well for their consumers as well. The deal was only likely as SoftBank Group has invested multi-billion dollars in Uber earlier this year. Of note, the Japan-based conglomerate also invested in Grab, who called the deal of merger of sorts and fueling its ambition to hold a dominant share of the ridesharing market in Southeast Asia. The Singapore-based technology company is ebullient that the acquisition will confer significant clout to its ride-hailing and transportation services across the region barring Indonesia. However, the deal will put forth a tough competition to its local rival Go-Jek.
Declining Profitability in Southeast Asia Fueled Consolidation
In recent months, the profitability took a major beating in Asia as the consumers are increasingly price-sensitive. This has put unceasing pressure on consolidation. The exit from the Southeast Asia is, notably, third of its kind in the overall global market triggered by concerns of rivals. The deal is going to raise the ante higher in the ride-sharing market characterized by regional players such as Didi Chuxing and Ola holding a position of strength in China and India respectively.
Amidst regulatory hurdles it has been facing in Europe and declining profit across Asia, Uber plans to introduce an initial public offering next year.