Black car startup Uber has recently received a US$250 million investment from Google, revving up its resources while ramping up its street cred in the startup community. The transport startup has also launched in Asian cities like Singapore, Taiwan and South Korea. With its job site announcing openings for its Manila-based office in the Philippines, Uber seems to be making stops at viable locations in the region. But how will the local transport system and startup ecosystem react?
As an avid motorist and one-time automotive journalist, transport startups are a favorite niche of mine. For instance, I really like how Waze gives me time estimates when driving to my destination (Google Maps does not take traffic into account in my city). I also like the concept of Tripid.PH, which offers ride sharing for both proximity-based networks as well as the general public. I find taxi-hailing apps interesting, although I have yet to actually hail a cab from my smartphone because I drive almost everywhere (it’s a necessity when you live in the suburbs). But an idea shared by Tripid founder with me earlier is that technology is not the only way to solve transport-related issues in any given locale.
Now Uber is a different kind of animal from these startups. Similar to a taxi-hailing app, an Uber user can use his or her smartphone to reserve a car — usually a premium car from marques like BMW, Mercedes-Benz, Lincoln, and the like — but the similarities stop there.
With Uber, all transactions take place on the network, and there is no exchange of money between passenger and driver. Also, fares also get a premium on top of traditional taxi services. After all, you’re being chauffeured on a black limo so you arrive in style.
e27 readers actually got to check out Uber at Echelon 2013, with the startup offering free credits for travel to and from our conference venue. If you have ever experienced having a tough time looking for a cab in Singapore in the pouring rain, then Uber would be a godsend.
Of course, during times of peak demand, the company implements surge pricing, which means you pay a higher rate when it’s harder to find a ride. This surge pricing actually got flak when Uber jacked up prices during the Toronto flooding and when Hurricane Sandy hit New York.
We recently found out through the Startup Philippines Facebook group that Uber is actively looking to fill up its staffing complement in the Philippines. The Silicon Valley-based startup is looking for a general manager, operations manager and community manager, all of whom will be responsible for formulating the company’s strategy in the Philippines and actually executing it.
As of the moment, Uber is likely to launch in major cities, like in Metro Manila. Will the startup succeed here? At this point, I can say that Uber will need to address the market differently, compared to its other target cities. Here’s why:
First, there’s the payment issue. The Philippines has a low credit card penetration rate (about 11 percent as of recent statistics). Most people would prefer to pay in cash. Other options might also be viable, though, like carrier billing (or debiting prepaid mobile credits), PayPal or credit cards. Still cash is king here, and it may not be as simple as debiting a credit card account after a ride.
Secondly, Uber’s market are folks who would want the premium service of having a chauffeured black car. Rather than hail a dingy, basic taxi cab, there’s prestige in being picked up by a limo. But because this premium market comes at a price, I’m not exactly sure if a user would be willing to pay the equivalent of two or three taxi rides just to arrive in style.
If you’re willing to spend this much — say, US$ 100 or more for a 45-minute ride — then you’re likely to be able to afford a car anyway. Plus, rental cars in Manila can come as cheap as $80 per 8-hours. An added point: upper-income earners in Metro Manila are likely to own their own cars. With down-payments starting at about US$1,000 and with monthly car payments starting at US$200, it might be more sensible to own your own ride.
Third, of course, are the regulatory issues that Uber would have to address. In the US, taxi companies, state governments and driver unions went up in arms against Uber, which they considered to be cannibalizing their revenues. The company has had to seek special licensing from some jurisdictions because it’s not exactly a regular taxi company, but it offers for-hire vehicles.
Will it be the same case in the Philippines? Will Philippine transport authorities require Uber cars to install those ugly, unsightly taxi meters and lights just so they can operate as public utility vehicles? Or will these be like the tourism-department accredited rental vehicles that are simply marked with yellow and black plates?
Again, the argument here is that Uber would be treated as a premium service in Manila. If I were to attend a black-tie gala or A-list party (assuming I ever get invited!), then getting there on a BMW Series-7 or a Mercedes-Benz S Class would definitely be a big plus compared to driving over in my compact Toyota.
In my earlier interview with Easy Taxi managing director for Asia Pacific Mario Berta, he shared that Uber actually addresses a different market compared to taxi-hailing apps. Even if Uber were to directly compete, having competition is actually a good thing in an emerging market, especially if it educates users regarding their choices and options. Will Uber then become helpful in making Filipinos more tech-savvy commuters?
What could Uber’s strategy be?