But it’s hardly humiliating – Uber will emerge with a 20% stake in the new US$35b Chinese taxi monopoly, in what amounts to a major carve-up by existing Chinese on-line giants Alibaba, Tencent and Baidu. This is a monster prize, and even Apple is in, having agreed a few months ago, somewhat presciently, to pump US$1b into the merged entity.
It’s highly likely that all the players mentioned above will go up this morning. After all, it’s the end of a subsidy war (to drivers and passengers) that has cost more than US$6b to date in accumulated losses by those players, and it could have gone on a lot longer.
It’s just another salutary lesson in just how valuable the benefits of scale have become.
Think about it. There is no other time in history that Uber (or Didi, or Airbnb – I could go on) could become so large, so quickly. These companies can only work if mapping technology is well-advanced, and that can only happen if the mobile broadband networks are available to run the maps. Billing must be secure which means that mobile phones, with their rich media smarts must be ubiquitous. Put all that together, throw in global capital mobility and a big gob of losses and a behemoth is born.
Why does this matter? Because Uber and the parties to which it gave in will now carve up all of ride hailing and the taxi industry in China. This will free up Uber’s balance sheet to really go after the taxi industry globally – and most likely float soon, too, now that its losses in China, estimated to be at least US$2b, have stopped. Competitors such as Lyft and Cabcharge need to focus, because the deal means that Uber will find it that much easier to become the dominant player wherever it chooses to compete.
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