It’s already clear that Uber is not taking over the world.
It faces similarly tough competition in other big Asian markets, such as India and Indonesia, as well as throughout Europe. The problems Uber faces are different in every country, and so is the competition.
But the American company’s methods are the same everywhere: Arrive with a bang, start a price war (and usually a legal war with regulators), and burn money until competitors retreat.
This creates ridiculous situations like the one in India, where Uber claims to have 50% of the ride-hailing market and its main rival, Ola, claims 75% — and both companies are subsidising both drivers and passengers.
Uber is probably the one exaggerating its market share: The deal with Didi, which gave Uber an 18% economic interest in the Chinese company though it claimed to control more than 30% of the market, suggests that the California startup inflated its success in China.
It’s the norm for Uber to remain the underdog in big markets while it burns through tons of investor cash.
In Indonesia, local company Gojek and Singapore-based Grab have most of the market. In Moscow, Russia’s biggest taxi market, Israel-based Gett and local Yandex Taxi together handle about 47% of the rides, while Uber’s share is no more than 15%.
In Germany, MyTaxi has 40% of the nation’s taxi market, while Uber only offers services in two cities, Berlin and Munich, having abandoned Frankfurt, Hamburg and Dusseldorf last year.
And some countries are intent on keeping Uber out altogether.
Trying to run taxi services throughout the world is a major operational challenge even when regulators are benign.
A month ago, Uber launched in Kiev, Ukraine, where the authorities saw its arrival as a welcome sign of westernisation. In typical style, it offered as many as five free rides to initial clients — but it was impossible to find a car with the Uber app. Disappointed Kievans stopped trying.
The Uber app slid from an overall third place in Apple’s Ukrainian app store in early July to 89th on Monday.
Sure, Uber can probably prosper without dominating every big taxi market in the world. It’s successful — and, it has said, profitable — in the US.
In some markets, being second or third can still be lucrative. Uber is probably right to attempt global dominance, although a subtler approach such as partnerships with, or stakes in, local services might be a better strategy.
The investors that have backed its brash tactics, though, are probably not using their money in the most efficient way.
In China, Uber burned through $2 billion in two years trying to undermine Didi with predatory pricing. Was it smarter to give that money to Uber (and ultimately to consumers in China), or to invest in Didi, which will now have a monopoly on ride-hailing in China and probably see profitability faster than Uber?
Apple did the latter, investing $1bn for an undisclosed stake that was probably about 5%.
It’s not just Apple that decided to back local ride-hailing companies rather than Uber. SoftBank, led by one of the world’s savviest tech investors, Masayoshi Son, is behind India’s Ola as well as Grab.
Daimler, the German carmaker, owns MyTaxi. The logic behind these bets is that the local companies have a better understanding of their countries, as Ola founder Bhavish Aggarwal or MyTaxi’s Nic Mewes argue.
Uber won’t replace cars with boats when a flood hits one of the cities it serves, as Ola did in Chennai. Uber treats local regulators and industry incumbents with disdain, while MyTaxi tried to co-opt the local industry to its cause, which is the German way.
Uber’s only real competitive advantage, apart from a war chest full of other people’s money, is that it works in a lot of places.
That’s ephemeral, though: Eventually, big local services will form even bigger alliances allowing them to pass travellers to each other across borders the way mobile telecommunications operators do.
Investors must examine Uber’s global strategy and decide whether swagger and predatory pricing are the way to go.
No additional markets are available to Uber without further bloodshed - and that’s economically inefficient.