NEW DELHI: Didi Chuxing's acquisition of
Uber's China business last week reshapes the landscape in Asia's growing
ride-hailing sector, and leaves India's Ola more vulnerable to attack
by Uber in its $12 billion home market.
Four months ago,
Ola executives met with Didi hoping the Chinese firm would invest fresh
capital to help it fight Uber Technologies Inc which, with its deeper
pockets, has made rapid inroads into India.
They were
told Didi wanted first to sort out its own challenges in China, said a
person with direct knowledge of Ola's plans. Didi and Uber have raised
and spent billions of dollars in a discount slugfest to win drivers,
passengers and market share in China.
Didi, now worth
around $35bn, last year invested about $30 million in Ola, which is also
backed by Japan's SoftBank Group, and the two are allies in an
anti-Uber group that also includes US-based Lyft and Southeast
Asia-focused Grab.
“This (Didi/Uber China) deal changes
the dynamics of how they (Didi) will invest in India,” said the person,
who didn't want to be named because the discussions were private. If
Didi invests more in Ola, it's effectively betting against Uber, its new
partner in China, the person said.
It's not clear
whether Didi would provide equity or debt to Ola, which has raised
around $1.3bn in funding and is valued at over $5bn. SoftBank Capital,
Ola's key investor, faces its own financial issues and is selling assets
to raise cash and reduce debt, which may pose another fundraising
challenge for Ola, which was aiming to raise another $1bn this year.
Ola
did not respond to an email request for comment. Didi said in an email
that it will focus in the coming months on “ensuring smooth integration
internally.” It did not comment on its meeting with Ola. Didi has no
immediate overseas investment plans, said a person with direct knowledge
of the matter.
The stakes are high in India, already
one of the world's fastest growing taxi markets. Ola and Uber have
burned through investors' money and clashed in legal battles over
alleged dirty-tricks tactics and pricing.
After the Didi
deal, Uber is even more focused on India, which it has previously
called its No. 2 priority overseas market, doubling down on resources,
staffing and technology deployed there, said two people familiar with
Uber's plans, one of whom is based in the United States.
Mission India
Ola, founded by two graduates from India's premier
technology institute, commands half of the country's taxi market as of
end-June in terms of the number of cars registered on its platform,
according to Counterpoint Research, with Uber on around 30 per cent
market share, and catching fast.
Uber has previously
launched a bike taxi and autos service in India - a sign that it wants
to localise transport options and a lesson from China where it focused
on privately-owned cars in big cities, where car ownership has
historically been low.
Uber declined to comment for this article.
In
February, Uber opened an engineering centre in Bengaluru and has,
according to LinkedIn, brought in ex-Google executive Apurva Dalal to
lead its India product build. It has also hired more than three dozen
engineers in India in six months and plans to add dozens more by the end
of the year, said one of the people familiar with Uber's plans.
Two
executives heading Uber's mapping efforts, Brian McClendon and Manik
Gupta, visited India in June to work on making the Uber app more
localised and boosting the mapping capabilities, the other, US-based,
individual said.
While Uber has pushed into cities and markets worldwide, Ola operates only in its home market.
Ola
is in 102 cities versus Uber's 27, according to Counterpoint, and
offers a wider range of products - from auto rickshaws to shuttle buses,
as well as taxi rides.
The Didi/Uber deal “will put Ola
in a corner, and the pressure will rise,” said Neil Shah, research
director at Counterpoint. “The money Ola has will not last forever and
it will require a lot of funding with Uber gaining financial strength.”
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