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Could Uber’s Growth Be Slowed By Local Alternatives In Africa?

Now that we have established that Uber is big and we are talking $62.5b/21tr Naira big according to latest figures. Key statistics include;

  • That it was founded in March 2009 by Travis Kalanick (current CEO) and Garrett Camp
  • As of March this year, Uber was in 66 countries including China and 449 cities worldwide with Abuja (Nigeria) as its 400th city
  • It is headquartered in San Francisco, California
  • It has about 6,700 employees

According to many reports, Uber is now bigger in market value than popular car manufacturer Ford although that’s still been disputed by certain analysts. In any case, for Uber to be compared to an all time success such as Ford, that tells you something about the company.

In seven years of operation,  the Uber has spread like wild fire from  its base in the United States to other continents even penetrating territories that were considered difficult for such business like Saudi Arabia. This expansion though hasn’t been all smooth in many countries where their business model is still considered illegal like France and the United Kingdom where they had to settle with unions and authorities. But this hasn’t affected their business severely as they keep tapping into new markets especially in Africa and Asia. Investors world over believe the Uber business model is here to stay and this is evident in the rise of local rivals in many countries where they operate. These local rivals aim to cut into the some of Uber’s business by providing local and “familiar” alternatives. This didn’t stop Saudi Arabia from investing $3.5b/ 1.1tr Naira of the sovereign wealth fund into Uber which is known for cash infusions from investors and this may be the reason why they are not in a hurry to go public just yet. Just yesterday, the Wall Street Journal reported that Uber is going o raise another $2b/680b Naira in loans to bolster its share of the entire ride-sharing service globally. With this latest round of funding, the company would have raised about $15b/5.1tr Naira so far. You can argue that the company is no longer a startup and is here to stay but I’ll like us to focus on some of the rivals Uber has and some of the challenges it may encounter on the African continent but first let’s look at what they are doing in China and India which are the two largest Asian markets where Uber has continued to expand.

Apple invests in Uber rival in China

Uber has announced plans to expand into one hundred more cities in China at a time when it was operation in about 20 cities in China even though recent figures put the number of cities Uber China operates in at 45. This was announced around September last year but since then a lot has changed in the ride sharing market in China with a very familiar face investing heavily in Uber’s Chinese rival Didi for short or  Didi Chuxing. didi-uberApple invested $1b/340b Naira last month to better understand the Chinese market where it aims to sell more of its own services  since it entered into the biggest market in the world. The move can be viewed on two fronts with the first being to increase its presence  in the Chinese market to prepare the market for more Apple services. The second could simply be a way of saying Apple  has confidence in the Chinese market in spite of a slowing demand of Apple’s product led mostly by the Chinese market.  The Apple investment was the single largest investment the company had and when you add this to other rounds of funding, the company is now valued at $25b/8.5tr Naira. “Didi virtually owns China’s taxi-hailing market with a 99 percent market share, according to its own numbers, and an 87 percent market share when it comes to hailing private cars. It operates in over 400 cities across the country versus UberChina’s 45 cities” according to CNBC. Uber has a lot of ground to cover in China even as Didi offers just more than ride services. It offers bus and chauffeur bookings as well just like in July 2014 when Uber partnered with Blade to offer “UberCHOPPER” helicopter rides from New York City to the Hamptons . This is a clear example of a country that has developed a local and probably more familiar service and is seeking to reduce Uber’s influence although one might argue that it’s Uber who’s trying to capture some of the market. But how about the second largest market after China?

Indian rival to Uber

In India the story is similar only this time unlike China, Uber has a higher market share. Since Ola acquired TaxiForSure in India last year, it raised its market share to about 50% of the Indian market.

olacabs

Both Ola and Uber have pledged to invest over $2b/680b Naira into the Indian internet taxi sharing market that is currently valued at over $9b/3tr Naira and growing. From Ola suing Uber for violating a Supreme Court order for app based taxi companies to switch from diesel to compressed natural gas (CNG) in the Delhi area to Uber suing Ola for creating over 90,000 fake Uber accounts, the race is certainly on for India’s ride sharing market. While Ola continues to say it has a higher market share of probably 70%, Uber says they are now neck and neck with analyst believing  one is just as popular as the other in India. As of September 2015, OlaCabs (Ola) was valued at $5b/1.7tr Naira. The struggle for dominance continues even today in the Indian market unlike in China where one is clearly trying to catch up to the other.

Uber rival in Kenya

Uber launched its service in Nairobi, Kenya, on January 21, 2015. Nairobi was Uber’s first city in Kenya and in the entire East African region. Uber operates in Kenya’s to biggest cities; Nairobi and Mombasa and unlike China and India, it is the major app based taxi scheme in the country and has enjoyed this monopoly since then. But if you’re familiar with the technology appreciation levels of Kenya, you’ll discover that the country may be number four after countries like South Africa, Egypt and Nigeria but its technology (indigenous and foreign) sector is growing fast. In face of scarce resources as can be found in several African nations. Of the thirty start ups (mostly tech)  selected to pitch their ideas at the Demo Africa event this September, eight of those start ups came from Kenya alone, the same as Nigeria and five more than South Africa. Bear in mind that the Kenyan population is about 47 million people compared to about 51 million in South Africa and over 180 million in Nigeria. M-Pesa is a clear example of this story and with new technologies like the water dispensing ATMs, Kenya is poised to lead in this tech boom era that’s about to happen on the continent. Uber has siezed the moment to dominate in the country but now it looks like a challenge is coming and it’s a big one. The company behind the widely successful M-Pesa is launching its own taxi sharing app. Safaricom (40% owned by the British Vodafone)  is the largest telecom company in Kenya by  subscriber base and has announced plans to launch Littlecabs. With about 20 million subscribers on its network, it plans to launch this app by building on this number to mount a real challenge to Uber. Now M-Pesa is a mobile money payment that has been called successful by big names like Bloomberg and is a service many entrepreneurs want to replicate across Africa. Speaking to Reuters, Safaricom CEO Bob Collymore said the app could come as early as three weeks time. He further said “It is effectively a rival for Uber,” ….. “It is a local competitor which will be cheaper and better for the local community.” The success model in the M-Pesa could be a factor here because let’s face it, the confidence level in Safaricom is already high. It’s now up to Uber to now compete with a telecom giant in the taxi hailing business. “Safaricom will help develop the application, offer the network connectivity, put Wi-Fi in vehicles that will be signed up on Littlecabs, and use its mobile-phone based financial service M-Pesa to process payments” said the Safaricom CEO. Safaricom though faces some serious competition from a company that offer flexible and affordable payment methods which is now popular in the country as well. Nigeria and Ghana besides South Africa are two other places where the service is now popular but with little competition.

Uber rival in Nigeria

In Lagos, Uber celebrated its one year of operations in Lagos with announcements to collaborate with Access Bank to make acquisition of cars by drivers even easier. They also planned to increase the Lagos fleet to 3,000 by the end of 2016. In March, 2016, Abuja  became the 400th city where Uber has its presence so  far. Like Kenya, Easy Taxi started with a bang in Nigeria but slowly faded with Uber entering the Nigerian market. oga taxiOga Taxi is the main competitor to Uber in the Nigerian market and currently operates in Lagos. Their business model is similar to that of Uber where drivers can sign up to be Oga Taxi driver and make money monthly that many graduates who work white-collar jobs don’t earn. Lagosians are paying attention to the app which has invested in adverts.

The challenge for most of the Uber competitors would be funding. With massive capitals at its disposal, Uber has what it takes to compete just about anywhere barring local laws that prohibit its business style.

Protecting smaller local businesses vs. Free market

In this era of globalisation, the debate is on how to protect small and growing businesses in ways that don’t make authorities look overly protectionist.  Understanding this business space is important for any business willing to compete with Uber  especially in Africa. Knowing that it would grow into international markets for example, Uber hired a seasoned political campaigner who worked with current US President Obama on his  successful 2008 election to help study markets and advise on political implications of its activities at home and abroad. Therefore with many court actions against Uber especially in Europe by unions especially, they have managed to continued to dominate the European markets. Perhaps Easy Taxi which easily should be Uber’s main competitor on the continent would have done better.

Uber is the biggest of all the app based taxi ordering schemes in the world but this hasn’t  gone unchallenged in some of the biggest cities of the world. Besides having a reliable app, benefits for drivers and good PR have all fuelled Uber’s rise from a luxury car hire company to a service everyone can use.  Uber’s momentum may be in contest around the world but there’s no evidence of a slowing demand for their services yet in many African countries. More evident of this is the fact that they keep rolling out plans to expand aggressively into the African market by leveraging on their success in other parts of the world. Maybe Littlecabs and Oga Taxi would eventually cut into their growth but for now that remains to be seen largely because they are both now services that require time to build a loyal customer base.

The Uber story can be replicated in other sectors of the African economy like petroleum. I did a piece on this last month and you can click here to read the article.

To read more about Uber’s market share across major market, please check out this September 2015 article from Forbes. It may not be up to date with respect to the most recent figures I have used in this article but it gives  you a good idea though of how big Uber is globally

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