In March, I asked whether Uber is imploding or headed for a tailspin. In June, Travis Kalanick was forced to step down as CEO and was replaced by Dara Khosrowshahi, who relinquished his job as CEO of Expedia.
In July, I pointed out that Uber’s perceived value could tumble by 86% if the European Court of Justice ruled later this year that it is more a transportation company than a technology company.
Khazanah was reported to have an indirect investment in Uber via a private equity fund. Kumpulan Wang Persaraan poured in RM124 million last year, while EPF stayed clear.
Last year, Uber lost US$2.8 billion, and in the first nine months of 2017 it lost about US$3.32 billion.
On Dec 20, the European Court of Justice ruled that Uber is a transportation company, and must, therefore, comply with the region’s tough transportation rules. This will require Uber to use only licensed taxi drivers, as well as meet other strict regulations linked to health and safety, including background checks on drivers on its digital platform.
In Malaysia, the e-hailing service has been regulated since July and requirements spelt out for operators in peninsular Malaysia to obtain a business intermediation licence from the Land Public Transport Commission.
As such, Uber, along with Grab and e-hailing drivers, must comply with regulations set by various authorities, including Socso, which made it mandatory for all taxi and e-hailing drivers to be registered under the Employment Injury Scheme by this year.
Those who fail to do so can be charged in court and, if found guilty, fined up to RM10,000, jailed up to two years or both. But few drivers have done so and it has been eerily quiet from both Socso, taxi and e-hailing operators.
Likewise, since the Dec 20 ruling by the European Court of Justice, disquiet has descended on Uber investors.
In 2009, UberCab was founded by Garrett Camp as a ride-sharing service allowing passengers to share rides in the same car. In 2011, UberX was introduced by Kalanick. Although the service was changed to ride-hailing, Uber continued to call it ride-sharing.
Uber continued to use its own terms and spins in its haste to expand globally and swiftly.
It adopted a business model unheard of until then. While it is common knowledge that businesses cannot rely on paper profit but cash flow, Uber was prepared to suffer mega losses as long as speculative investors kept pumping in money to invest.
It was reported that on average globally, Uber passengers paid only 42% of the fare, with the rest sudsidised by Uber. Small wonder why it could accumulate more than US$10 billion losses from 2011, when it was valued at only RM60 million.
I hope Khosrowshahi, who is the exact opposite of Kalanick, will be given time to turn Uber around completely.
YS Chan is an FMT reader.
The views expressed are those of the author and do not necessarily reflect those of FMT.