Uber piles up risks with aggressive expansion

PARIS/SINGAPORE • Uber's aggressive global expansion is looking costlier and riskier than ever as the company struggles with regulatory and competitive obstacles in major markets.

Just last week, the company faced a police raid on its European headquarters in the Netherlands, a criminal trial of two top executives in France, a ban on its services in Rio de Janeiro and proposed new regulations in London and Toronto that could cripple its services in those cities.

In Australia, Uber is popular but mostly illegal, with several court challenges looming.

Singapore's Ministry of Transport said last Friday that it will study third-party ride-booking apps and, where justified, level the playing field between private-hire drivers using these apps and taxi drivers.

In China and other Asian countries, Uber faces increasingly powerful competitors and idiosyncratic local transportation markets.

Taken together, the firm's recent troubles raise the question of whether its headlong drive for global market share, underwritten by more than US$7 billion (S$10 billion) in venture capital investment, is a prudent strategy.

It has moved far more quickly in its global expansion than any company in memory - it is now in 60 countries after being founded in 2009 - and the cost and complexity of so many legal wars and subsidising millions of rides in countries such as China could tax even a company as wealthy as Uber.

"Uber is adopting the shock-and- awe strategy," said finance professor Aswath Damodaran at New York University's Stern School of Business. "I think it's a very high- risk strategy."

In the US, Uber has manoeuvred to generate consumer enthusiasm for its service and then bring pressure on local politicians to develop rules that allow it to operate.

It is using a similar playbook overseas: Reports of the pending regulations in London brought an e-mail blast to Uber customers that the city was about to destroy "the Uber you know and love".

Uber's troubles in Europe, where heavy regulation is a way of life and workers are primed to fight for their rights, are not a big surprise. Uber Pop is now banned in France, Germany, Italy and Spain, and the company is appealing against pending bans in the Netherlands and Belgium.

The mega-cities of Asia present a whole different set of challenges.

In Indonesia, Uber's main rival are "ojeks" - motorbikes that ferry commuters from the main roads to their homes, and sometimes farther. In cities such as Jakarta, with some of the worst traffic jams in the world, only motorbikes can get people where there want to go in a hurry - and they're cheaper.

In Singapore, by contrast, the Government strictly controls the number of cars on the road - and so Uber's problem there is not too many cars but too few. So it has set up a subsidiary in Singapore that buys used cars and rents them to people who use them to drive for Uber.

The big prize is China, where Uber has set up a separate unit. Uber is offering huge subsidies for Chinese riders and drivers as it competes head-on with local firms.

Company spokesmen stress that Uber is playing a long-term game and view individual regulatory setbacks as inevitable - and temporary - phenomena.

Mr Bill Gurley of Benchmark Capital, a key investor in Uber who sits on the company's board, said in an e-mail that he has no doubts about the strategy.

"Because of money that is earmarked for foreign clones of successful US companies, if you don't move quickly, the clones will pop up fast. So it's a fact of life. I would not have advised going slower."


A version of this article appeared in the print edition of The Straits Times on October 06, 2015, with the headline 'Uber piles up risks with aggressive expansion'. Subscribe