AFRICA: Taxify Operates In More African Cities Than Uber.

Ride-hailing company Taxify is taking the fight for market share in Africa with Uber to places where Uber isn’t.

The Estonian company which has grown to become Uber’s biggest rival in Africa is pursuing an expansion strategy that’s focused on not only operating in major cities across Africa, like Uber does.

Taxify has also been expanding to smaller cities and now operates in more African cities than Uber.

In Nigeria, in addition to Lagos and Abuja, the only two cities where Uber currently operates, Taxify has launched operations in Ibadan, Nigeria’s largest city by land size, and Owerri, a bustling commercial center in the southeast.

While neither city matches Lagos or Abuja as urban centers, they have sizable business districts and populations of over 1 million people each.

In Tanzania, while Uber has stuck only to Dar es Salaam, Taxify operates there as well as in Dodoma, the nation’s capital and in Mwanza, a tourism hotbed on the shore on Lake Victoria.

In South Africa, Taxify continues to compete with Uber in Cape Town, Durban, Johannesburg and Port Elizabeth but has also expanded to Polokwane.

It is set to also launch in East London later this month—a move that will see it surpass Uber for the number of African cities operated in. It will also mean Taxify operates more cities in South Africa than anywhere else.

Much of Taxify’s expansion has been bankrolled by its recent $175 million capital raise—a funding round which valued the company at more than $1 billion.

Taxify’s backers include Daimler, the German car giant and Didi Chuxing, the dominant ride-hailing business in China which is also known for backing Uber’s rivals elsewhere.

As it continues to grow and attempt to win over riders, Taxify’s lower commissions on fares are also a tactic to win over drivers.

For its part, Uber, which has now operated in African cities for five years, is also eyeing more expansion with Rwanda, Ivory Coast, Senegal and Mauritius among potential targets.

And showing a willingness to adapt to local markets, it has also introduced lower cost ride-hailing options with rickshaws in Kenya and motorcycles in Uganda.


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USA: Uber CEO Kalanick Resigns

Travis Kalanick, the combative and embattled CEO of ride-hailing giant Uber, has resigned under pressure from investors at a pivotal time for the company.

Uber's board confirmed the move early Wednesday, saying in a statement that Kalanick is taking time to heal from the death of his mother in a boating accident while giving the company room to fully embrace this new chapter in Uber's history. He will remain on the Uber Technologies Inc. board.

The move comes as Uber, the world's largest ride-hailing company, was having trouble morphing from a free-wheeling startup into a mature company that can stanch losses and post consistent profits. After eight years of phenomenal growth by upending the taxi business, Uber had reached a point where the culture that created the company had become a liability that threatened to kill it.

In a statement, the 40-year-old co-founder said his resignation would help Uber go back to building "rather than be distracted with another fight," an apparent reference to efforts on the board to oust him.

It was unclear who would replace Kalanick.

The resignation came after a series of costly missteps under Kalanick that damaged Uber's reputation, including revelations of sexual harassment in its offices, allegations of trade secrets theft and a federal investigation into efforts to mislead local government regulators.

Uber lost an expensive battle for supremacy in China against Didi Chuxing and had to be satisfied with taking a stake in Didi as a consolation prize. Uber posted a $708 million first-quarter loss, unable to turn $3.4 billion in revenue into a profit. The loss narrowed from the $991 million it posted in the previous quarter.

Investors have talked about selling stock in Uber to the public, a move that would imply a transition to an established business. The company was valued at near $70 billion the last time it sought capital.

Kalanick's penchant for conflict undermined the company's prospects, said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen.

Ride-hailing itself remains a topic of intense interest for the tech and auto industries as they compete to see whether Silicon Valley or the automakers will reap the profits from the digitalization of how people get from one place to another.

But "the significance of Uber has declined because the company has not managed to present itself in a stable and socially responsible way," Dudenhoeffer said.

"When you're at war with customers, employees, service suppliers, you can't build up a business model and Kalanick was at war with everyone," said Dudenhoeffer. "There is no business model in being at war. "

On Tuesday, the company embarked on a 180-day program to change its image by allowing riders to give drivers tips through the Uber app, something Kalanick had resisted.

Drivers have said that Kalanick didn't value their labor even though it was the heart of the San Francisco-based company.

Uber's board said in a statement that Kalanick had "always put Uber first."

But under Kalanick, the company developed a reputation for ruthless tactics that have occasionally outraged government regulators, drivers, riders and employees.

The company often flouted city regulations for taxi companies with a culture that encouraged "Principled Confrontation."

The company's hard-charging style has led to legal trouble. The U.S. Justice Department is investigating Uber's past usage of phony software designed to thwart local government regulators who wanted to check on whether Uber was carrying passengers without permission.

A key step toward Kalanick's downfall came in February, when former Uber engineer Susan Fowler posted a personal essay about the year she spent at Uber, writing that she was propositioned by her manager on her first day with an engineering team.

She reported him to human resources, but was told he would get a lecture and no further punishment because he was a high performer,she wrote.

That caught the board's attention and brought outside investigations that led to the firing of 20 people including some managers. Former Attorney General Eric Holder conducted one of the probes, finding that the male-dominated Uber didn't have the most basic policies to protect workers from harassment.

Holder's report suggested procedures that most companies have had for years such as using performance reviews to hold leaders accountable.

Also, Kalanick lost his temper in an argument with an Uber driver who was complaining about pay. The profanity-laced confrontation was caught on a video that surfaced in February.

Afterward, Kalanick said he needed management help and had to grow up. The company began searching for a chief operating officer.

In March, board member Arianna Huffington expressed confidence that Kalanick would evolve into a better leader. But Huffington, a founder of Huffington Post, suggested time might be running out.

He's a "scrappy entrepreneur," she said during the call, but one who needed to bring "changes in himself and in the way he leads."

During the past year, several senior managers left the company, including the president and chief financial officer.

Outside experts said the only way to change Uber's culture was for Kalanick to step aside. But Uber's ownership and voting structure made it difficult to oust him.

Kalanick took an indefinite leave of absence earlier this month, in part to deal with a personal tragedy.

In May, his mother was killed and his father hurt in a boating accident on a California lake.

BRAZIL: Uber Brazil Rival 99 Gets $100M From SoftBank

A Latin American competitor to Uber —99—has raised $100 million from SoftBank of Japan to fuel growth, the Brazilian startup’s chief executive says.

SoftBank will become a minority shareholder in the privately held 99, as the ride-hailing service Didi Chuxing of China did when it backed the startup in January.

SoftBank is also a major investor in Didi Chuxing.

For SoftBank, the investment is a rare deal in Brazil and comes in the middle of political upheaval.

The country’s president faces corruption accusations, and his future is in doubt. That political uncertainty is expected to further delay the economic recovery here, needed after two years of severe recession.

Yet neither the recent volatility nor the past uncertainty appears to have scared away SoftBank. It was not a major concern of the company, said Peter Fernandez, 99’s chief executive.

The political and macroeconomic situation did not affect our discussion, he said. That does not affect the fundamentals of our business, because at the end of the day, there are 200 million people who still need transportation.

Fernandez joined 99, based in Sao Paulo, in January 2016, initially brought on board as chief product officer by one of the company’s founders Paulo Veras. He was made chief executive in October.

Fernandez said that 99 planned to use the new capital to expand its peer to peer ride offering, called 99POP, which it started in the fourth quarter of last year.

The company, founded in 2012, initially focused on working with taxi drivers and was first called 99Taxis, providing an alternative to Uber.

It continues to grow in that area, but it is now putting more effort into the POP service.

The goal is to dominate Brazil and dominate peer-to-peer, the chief executive said.

He noted that in Sao Paulo, 50% of the company’s rides are peer-to-peer.

The company says it has more than 200,000 drivers and more than 14 million registered users.

Fernandez, though, understands that the sector is capital intensive.

We’re going to need to raise a lot more capital. This is just one step in a very long path ahead of us, he said.

New regulations approved by the Brazilian government this week could mean that Uber and companies that provide similar services would be unable to operate in the country.

Earlier this week, the majority of lawmakers approved the main text of a bill, which makes ride-hailing services such as Uber, Cabify and several local equivalents - a public interest activity.

The regulations turn cars providing services through the transportation apps, into taxis, with the same regulations applied including specific permits from city authorities, taxi license plates and meters, making it nearly impossible for such private firms to operate.

According to the bill, drivers working through apps like Uber will also be required to pay taxes on their earnings and carry insurance for passengers.

The new bill complicates things even more for the transportation apps - these companies had been previously allowed to coexist with taxis in cities such as Sao Paulo, home to the largest South American market for Uber and its equivalents.

Back in 2015, Sao Paulo mayor at the time, Fernando Haddad, created a new class of transportation service to accommodate the new mobility alternatives.

The discussion then evolved into a situation where companies could operate based on a online credit purchase scheme and effectively buy the right to have cars working under their apps and pay taxes to operate.

The scheme pioneered in Sao Paulo not only proposed to provide the Mayor's office with information on rides and set caps for the number of vehicles that can work under each tool, but also has been generating enough cash over the past year to build a hospital with 200 beds in the city.

Brazilian taxi unions and many politicians have accused companies such as Uber of unfair competition and local taxi drivers are expected to put considerable pressure on legislators to make the bill, which still needs to be cleared by the Senate, into law.

Uber said in a statement that the bill represents a backward law that does not seek to regulate its service but to turn it into a taxi operator and forbid its urban mobility model.

The company added it expects the debate around technology to continue in the Senate to ensure that the voice of millions of people in Brazil who wish to have their right of choice is heard.

Why Did Uber Give Up China Market?

Last September some of the world’s foremost technology industry leaders met in Seattle with Xi Jinping, president of China. In a group photograph, 30 CEOs with a combined market capitalization of $2.5 trillion smiled for the camera alongside the Chinese leader. They included Microsoft CEO Satya Nadella, Facebook CEO Mark Zuckerberg, and leaders of some of the most prominent “sharing economy” companies: Airbnb CEO Brian Chesky and Didi Chuxing CEO Cheng Wei, the head of China’s leading taxi and private car hailing app.

This did not bode well for Uber’s future in China. On Monday Uber said that it is selling its operation in China to a rival Chinese ride-sharing company whose CEO was in that foreshadowing photo. Cheng Wei will get a seat on Uber’s board as part of the deal. Kalanick gets the same on Didi Chuxing’s board, and Uber gets around a 20% share of the Chinese company, which will run Uber’s Chinese operation as a separate brand.

Much of the U.S. news coverage has centered on Uber capitulating to competition and getting schooled by its Chinese archfoe. It is true that Kalanick consistently called China the most important market for Uber. He joked to a Chinese publication that he was spending so much time in China that he should apply for Chinese citizenship. Uber truly wanted to succeed in its fastest-growing market, one where taxi drivers outnumber their U.S. counterparts tenfold. The company’s losses were mounting in a bid to win market share.

Still, I believe Uber is leaving China not because of interference from its rivals but because of interference from the state.

When Uber entered the Chinese market, it soon learned it had to change its core product. At first, customers had to validate credit card information before opening an account. This presented a major obstacle for many potential Chinese users. Uber China recognized this disadvantage in its business approach and, just in time for the formal launch in February 2014, added the option of payment through Alipay.

After that, Uber continued to use Google Maps to locate and match customers with drivers. But Google Maps coverage in China was extremely limited and notoriously inaccurate. So Uber China entered into a strategic partnership with Baidu in December 2014. Baidu, an economically powerful and politically connected company, was now in Uber’s inner circle of investors. Uber China also installed servers on Chinese soil to prevent its operations from getting disrupted while passing over China’s notorious firewall.

Yet even after making its core product more attractive to Chinese customers, Uber had to spend hugely to attract drivers and riders. New users were attracted to the platform by large discounts on their first trip, often equivalent to the full cost of the ride. Similarly, drivers were encouraged to join the service. In Chengdu, Uber drivers numbered 42,000, nearly the same as the number of Uber drivers in London, Paris, and San Francisco combined. But the company’s capital investment had an unintended consequence: It gave rise to a rampant economy of drivers faking trips for personal profit.

It was costly, but it still worked. Despite intense competition from two Chinese taxi-hailing services (that later merged to take on Uber more directly), Uber was succeeding because it could drive in a gray zone of Chinese markets.

After all, Uber’s aggressive push into China was made possible by the fact that the space was largely unregulated. The company founded local entity after local entity in China to compete in different urban markets. That’s a proven strategy; China is not one market for almost anything.

Different cities in China can have very different regulatory environments. Many successful private companies in China have realized they can succeed in areas where the government is not yet present or where it has not yet set regulations. Basically, you can succeed in any form of business that is not yet illegal. Ride sharing was one such business.

The losses Uber was taking to win market share were unsustainable. But the same goes for its erstwhile chief rival. Didi Chuxing had become the dominant Chinese player in the space. But neither company could afford the high level of subsidies (and resulting costs from driver corruption) needed to win new drivers and riders and new markets.

In the end, it wasn’t competition that spelled Uber’s demise in China; it was impending national regulations. Uber was negotiating with Didi Chuxing as a new regulatory scheme was being written. The nationalization of industry regulation was bad news for a startup that depended on local variance and gray zones.

These national regulations are now a reality. To be sure, the headline reads well in the Xinhua news release on July 28, 2016: “China Grants Legal Status to Ride-Hailing Services.” But legal status in China can come with handcuffs. The country’s first nationwide regulation of the industry was truly bad news for Uber and, if followed to the letter, bad news for the entire industry.

Under the new regulations, the data collected by Uber would come under the purview of the government. There would be no more subsidies. Market prices would prevail, the regulations state, “except when municipal government officials believe it is necessary to implement government-guided pricing.” According to Xinhua, ride-hailing companies would be urged to merge with taxi companies. (Many of those also happen to be owned by the local governments.) Uber would have to get both provincial and national regulatory approval for its activities anywhere in China. Online and offline services would be regulated separately.

Moreover, foreign companies like Uber would be subject to even more regulation than their competitors. Even though Uber had been registered in the form of local companies, its national platform would now be handled differently. And despite this standardization of the industry, local governments would be allowed to issue “ride-hailing service driver’s licenses” and to determine who is eligible to be a driver and what kinds of cars can be driven.

This national regulation was an impending disaster for Uber. In retrospect, perhaps the company could have remained in charge and made money had it kept to its initial “niche” market for wealthy Chinese people and expats. But by going for the mass market to reach higher valuation and to fuel its larger platform strategy, Uber brought on extra challenges. Central government regulations were almost inevitable.

There is an English saying that a picture is worth a thousand words. You could certainly apply that to the fateful photograph of Xi Jinping and the top technology CEOs — the one where Kalanick is out of the picture.

There’s also a saying in China: “The nail that sticks up is the nail that gets hammered down.”

Here is the takeaway. Where the Chinese state steps in is where entrepreneurship goes to die. In selling its China business to Didi Chuxing, Uber is getting out of its China operations at the right time and at a reasonable price.