When Rob Khazzam, International Launcher at Uber took the stage at How to Web Conference 2014, the question on everybody’s lips was “when?” Uber, one of the most, if not the most disruptive tech company at this time, launched its services in Czech Republic, Hungary and Bulgaria at the end of last year. But their highly anticipated entrance on the Romanian market may not be that simple…
Much of the talks of the How to Web Conference’s Transportation 2.0 panel revolved around the global versus local taxi app services and the future of transportation, with Mihai Rotaru, CEO of Clever Taxi opposing Rob Khazzam and Christoph Auer-Welsbach, Programme Manager at Cognicity as an industry analyst.
Mihai strongly argued that Uber does not fit the needs of the Romanian market, but Rob replied that his company thinks globally, but acts and adapts locally (you can watch the full panel discussion below).
No doubt that Uber is first of all a tech company backed by an impressive amount of funding. Last summer they raised $1.4 billion in Series D funding and another $1.2 billion at the end of last year, with an additional $600 million at its disposal from strategic investors and hedge funds.
The beginning of this year found the company closing on another $1.6 Billion in convertible debt from Goldman Sachs investment bank, which makes the total amount of funding to reach almost $5 billion since its launch in 2010.
As Rob Khazzam told at How to Web Conference, the company is now focusing on rapid expansion. Since our talk at the event, Uber expanded in Bulgaria, a market quite similar with the local one, and they did it quite aggressively. Or at least so it seemed…
Hristo Chernev, CEO of TaxiMe, the Bulgarian leading taxi app service competing locally with Uber shares Mihai Rotaru’s idea that Uber’s business model does not fit the realities of CEE markets.
“They are doing a good thing by further raising the awareness of our type of service but I don’t know whether their model is well matching the Bulgarian or Romanian markets. The prices here are quite low and it is hard to run a taxi service at any lower price. Uber’s tariffs are around the same as any other’s taxi company but structured differently. They don’t have a price advantage although they make a huge PR effort to appear much cheaper – but they’re not”, says Hristo.
The manager adds that TaxiMe has now a 31 seconds average booking time and an average of 4 minutes time of arrival for taxi drivers that use his app and that this record is hard to beat even by Uber which, argues Hristo, has an up to 25 minutes time of arrival on peak hours and way much fewer cars on service.
Uber’s business model around the world is to compete with taxi services that have premium prices and limited number of vehicles, which they are surpassing with cheaper service and more cars. Or, due to the low pricing and quite abundant taxis operating in Sofia and Bucharest, Uber is set to run on losses.
“They can have neither a better time of arrival nor a cheaper price. In Bulgaria they are now clearly subsidizing their drivers but they can operate at a larger scale here only if they will subsidize even harder.”
Clever Express service to launch in Bucharest
TaxiMe’s business model is more similar to Uber (and Romanian Star Taxi app) than its Clever Taxi counterpart, which chose to work with taxi companies in order to install its app on drivers’ cars.
Mihai Rotaru, the company CEO, believes that building a stack of services on top of its app is the answer to Uber’s expansion on the long run – and his opinion is shared by Hristo Chernev too.
“We have right now two new products on validation and pilot tests running in two cities but I can’t disclose more. What I can tell you is that our Clever Express service (private hire with superior cars) is soon to be launched in Bucharest with a long waiting list of clients we already wish to thank”, says Mihai.
He maintains his opinion that Uber does not fit the Romanian market. Unlike Sofia, Bucharest has a limited number of taxis licensed yearly and Uber’s entrance will be even harder.
“I still believe that Romania is an atypical market and the availability and price aspects can’t be addressed. Quality wise, yes, there’s room to improve, but on another segment of the market where we are present as well and we couldn’t find enough interest or opportunity”, explains Clever Taxi’s CEO.
In spite of Uber’s competition in the CEE, Mihai still thinks of expansion instead of just reacting to a global player’s moves. “Much more interesting for us is to find our ways to come up with value propositions for clients on those markets where Uber is already operating”, he says. “I hope we will have the answer really soon.”
On the long run Uber is on the CEE markets to stay, even if it seems to (somewhat) refocus now on the Asian markets where it faces a stronger than expected competition.
The company is known for strong operational skills, aggressive PR, and often not so orthodox service running. Uber was already banned to operate in several cities around the world and created headaches to local authorities and competition as well.
“Uber’s operation in Bulgaria right now is at least at the edge of the law, if not illegal, from the labor market perspective. There were no official complaints until now but some taxi companies begin to raise the issue”, argues Hristo Chernev.
However, as long as the service maintains its rapid expansion pace, the investors will back it up. And on its more mature markets Uber is building a stack of services on its app too. It has recently revealed “Uber Pool” In San Francisco, a service which allows riders to share rides and, thus, reduce their costs. It is testing Uber Cargo in Hong Kong, a service that allows customers to transport goods locally by cargo vans.
Furthermore, Uber has developed a division within the company called “Uber Everything”, dedicated to working on expanding this type of services and even partnerships, reports The New York Times.
Given its huge amount of financial resources, its valuation already bigger than the whole global taxi market and still growing rapidly, its PR and lobbying power, Uber is set to become a major global player. It remains to be seen if the disruptive taxi service will set foothold on smaller CEE countries or these markets are just testing ground for bigger emerging ones like SE Asia and South America.
The answer for whether Uber will enter the Romanian market or not is expected “in a few months time” according to Uber officials.
UPDATE: Uber launched its uberX ridesharing service as a pilot project in Bucharest on February 25th.