A Win-win For Uber?

The merger between China’s Didi Chuxing and rival Uber creating a $35-billion behemoth in the cab-hailing service space has taken everyone by surprise.

Prima facie, the American cab aggregator in China appears to have been forced to give in to the local biggie for lack of scaling up options there. But when looked at closely, it’s not such a bad deal for Uber. First, it is a transaction that benefits both parties as it makes it easier for Didi to retain its market share and paves the way for Uber for a so-called exit from a country where it was struggling.

Second, with China off its plate, Uber now can focus on other markets. Needless to say, this will have an impact on the Indian online transportation space where home-grown startups like Ola operate.

Currently, it is being speculated that as part of the merger deal, Didi and Uber may have signed a non-compete agreement for the international market — outside China — where Didi will not finance any competition or for that matter compete with Uber. If that’s true, then it’s unlikely that the Chinese taxi firm will increase its focus on India.

It is also pertinent to note that Didi already has exposure in the Indian market and holds a stake in single digit in Ola. However, it needs to be seen if in the future it will ever increase its stake in Ola. As part of the current transaction, Didi will be investing a whopping $1 billion in Uber.

So far, in the Indian market while Uber and Ola are neck and neck in competition, the former still enjoys a larger market share and a wider presence. Now, taking the current scenario into account, there may be two possibilities going forward. Either, Uber will increase its focus on India and take on Ola in a big way, or it will go in for a merger with the Indian entity, like it has with Didi in China.

While it will be interesting to see how things play out in India, the development also throws up key questions. Even as startups seem to be in focus these days, is the Indian government doing enough to protect them?

One has to just look at how China supports its local entrepreneurs. Take any foreign company operating there. Whether it is Amazon, Facebook, Google, Apple or Uber, the state has given ample support to its local players to see off competition from their international rivals. But in India, homegrown e-commerce ventures such as Flipkart and Snapdeal have been losing market share to Amazon. Unless and until the government protects the burgeoning startup ecosystem, it will be difficult for local players to survive. Is the government listening?