The UAE has a ringside seat for the fight between two of the most ambitious new companies in the world. At stake is the title of “disruptive innovator” champion, at least in the highly-competitive business of personal car travel.
In the blue corner is Uber, the San Francisco company that in just six years has become the global market leader in private car hire. Uber has almost reached the enviable stage where its brand is synonymous with the industry, like Hoover or Google.
Analysts now talk about the “uberification” of the business that used to be called “taxi hire”.
Uber is now available in about 67 countries and 300 cities worldwide, and has been valued at as much as $50 billion. Its “riders” (passengers) love the digital ease of ordering a car, the reliability of the service and the classier vehicles it uses.
Along the way, it has made some enemies, including journalists who feel they have been strong-armed by the company, as well as virtually any traditional cabbie in the world. But you don’t get to be global market leader by being nice.
In the red corner is the local boy, the UAE contender, Dubai-based Careem, which since 2012 has been supplying private car hire to an increasing number of cities in the Middle East. It now provides “captains” (drivers) in 22 cities from Morocco to Pakistan.
Although both companies point to what makes its own service unique, the basic idea is the same: why wait on a street corner in rush hour for an old and unreliable public hire taxi when you can use an app to order a mid-level limo and wait in comfort for its arrival to be announced via a smartphone message?
They are also quite proud to be called innovators. At first glance, any business that encourages motor car use does not look particularly innovative or disruptive, but both Uber and Careem point to the fact that they make car use more efficient, by cutting waiting time and promoting pooling schemes, which is a step in the right direction.
One notable point of difference was that Careem did not impose the controversial “surge” charge (read just surcharge) that infuriated some Uber riders during busy periods.
However, Careem had to recently bow to the economic realities of the business by imposing something like its own version of the surge.
Careem had previously taken the extra cost of “captains” in peak periods, and the hit to the profit line, on the chin. But maybe that was regarded as just a little too disruptive.
The provision of app-based services seems to be the focal point of innovative investment at the moment, and both companies have identified new sectors to bolt on to their core passenger business.
Uber is providing helicopters for the Formula One in Abu Dhabi this weekend, and grabbed the headlines by helping Beirut to clean up its garbage mountain recently. It expects parcel and courier services, as well as food deliveries, to be the next big things.
Careem has a service for delivery of cash payments for non-credit card holders that looks like it could be a lucrative business.
What has really added spice to the contest is the fact that both have recently geared up with some big financing. Uber had drawn on the San Francisco billions to the tune of $250 million of investment earmarked for the Middle East over the next few years, while Careem has enticed in a third round of investors to stump up $60m to fund expansion in the broader region.
The anchor investor for Careem was Abraaj, the Dubai-based private equity fund that ranks first by size in the region.
Abraaj, which has a reputation for shrewd investment and has increasingly identified urban markets as top priority, becomes the biggest shareholder in Careem.
The global stage appears set: Uber dominates in America and Europe, while facing big competition from Chinese and Indian rivals to the east.
So the main battleground for the innovators will be the Middle East, with both based in the UAE. It will be fascinating to watch. Seconds out.
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