When we look back on the “2016 year that was” in a few months time, we will pinpoint this week as a pivot moment for the taxi app industry. Because, while on Monday it did not appear to be the case, the acquisition of Uber China by Didi Chuxing appears to have had a ripple effect across the entire region.
Here’s a quick rundown:
- Uber sells its China property to Didi Chuxing. The result is a US$35 billion dollar company owned by Didi.
- Grab CEO Anthony Tan says Uber will lose in Southeast Asia in a ‘leaked’ email.
- Grab is set to raise some serious cash. The Wall Street Journal reported this week the number could be as high as US$1 billion.
- Go-jek announced it has raised US$550 million from an international conglomerate of investors.
It is impossible to be involved in the startup scene and not generate some sort of opinion on the week’s events. So, instead of spouting off myself, I spoke with investors, notable startup CEOs and journalists to hear what they had to say.
While everyone had their various opinions and predictions, it was built around one general thesis:
The current situation in Southeast Asia is untenable over the long-term. Over, the next weeks and months, Mike Brown, (the Asia Regional Manager of Uber), Anthony Tan (Grab Co-founder and CEO) and Nadiem Makarim (Go-jek Founder and CEO) all have to make extremely important decisions that almost certainly will impact the fate of their companies.
The result, as most commonly described to me, is when all the dust is settled, only two companies will remain (and a couple people thought only one would be left standing). The opinion about whether it would be via an M&A or through ‘death by attrition’ varied from individual to individual.
In this context, the odd man out seems to be Go-jek.
Uber and Didi obviously have reason to get along outside of China and the investment into Grab by Didi fueled speculation of a future merger. In another scenario, if Grab and Uber signed a truce it would be nearly impossible for anyone to compete with that coalition.
“Neither Grab nor Go-Jek claim to be profitable yet. Ultimately, until the ink is dry and money is in the bank, all the talk and rumour around fundraising could just be sabre-rattling by Grab. As for Go-Jek securing US$550 million, it signals more troubles than hope, as it still only operates in a single country and still faces a crunch in cash-flow,” said Benjamin Cher, a reporter for Digital News Asia.
I will reveal my hand and posit that I believe Go-jek is in a fairly strong position thanks to its on-demand platform. Its food delivery, logistics, movie ticketing, massage and beauty platforms are legitimately popular in Indonesia. Uber and Grab do not have the same traction outside of their taxi and ride-sharing services.
As for the other three — Grab, Uber and Didi — Bobby Liu, the Founder of Hub.IT, broke down the potential scenarios in an article for e27 (and may have coined the term ‘Duber’).
The conclusion was, should Didi turn its eye towards Southeast Asia, it is unlikely to play nice, despite the millions it has invested into Grab. Merger anyone?
However, as of now, Didi essentially has a monopoly over the Chinese ride-hailing industry which may damage the quality of service.
The battle between Didi and Uber that Southeast Asia has watched from the sidelines is over, and now the fog of war seems to be building in our backyard.
Like the phoenix, the death of one situation was not just the end of an era, but equally the birth of a unique juncture for the ride-hailing industry in Southeast Asia.