India’s taxi-app war mimics China slugfest

India’s taxi-app war mimics China slugfest

India’s taxi-app war mimics China slugfestOla may be losing $1 billion a year

India is the new big-money problem in ride-hailing. The parent company of homegrown operator Ola has disclosed that it lost more than $700 million in the year to March 2017. That makes the country almost as expensive a place as China was for Uber to burnish global credentials before it sold out to a local rival. With the U.S.-based company committed to India, losses will probably keep piling up.

The latest filings show losses widened significantly, from about $460 million a year earlier, even as revenue increased 70%. If the pain continued at the same pace in the 12 months since, Ola could now be haemorrhaging more than $1 billion. It raised $2 billion of new funding late last year at a $7-billion valuation, according to media reports.

When Uber was being run by founder Travis Kalanick, it was burning through a similar sum in the People’s Republic before handing over its operations to Didi Chuxing in 2016 in exchange for a minority stake in the combined company.

In India, Uber is only 10 percentage points behind Ola in terms of market share, according to Counterpoint Research. That’s a narrower gap than Uber faced in China. This helps explain why under new boss Dara Khosrowshahi, Uber is doubling down on investments in its core markets, including India where it says it has no interest in entering a minority deal with its larger local rival.

That is despite both companies sharing a large common shareholder in Masayoshi Son’s SoftBank.

It also underscores the urgency of the first push overseas, into the Australian market, by Ola boss Bhavish Aggarwal. The move represents an intrusion into one of Uber’s strongholds, which suggests that Mr. Son has limited clout when it comes to preventing costly competition among his many investments across the ride-hailing industry.

‘Aussie profits can help’

Generating profit Down Under would help Ola with its fight back home against Uber, which can use cash from more developed markets to subsidise operations in developing ones.

Yet Didi also announced on Friday it was heading to Australia, so the market may not long be a lucrative one. For now, however, India is the battleground draining resources apace.

(The author is a Reuters Breakingviews columnist. The opinions are her own)

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