Uber’s Faces Tough Challenge in Its Latin American Strongholds

The latest financial results from the United States based ride hailing company Uber shows that Latin America turned out to be its biggest weak spot as the company noted just 2 per cent growth in the region, its worst for any region, and even as the company continued to lose money. Latin America has traditionally been a safe haven for Uber.

This was attributed to the rapid growth in Latin America of the Chinese ride-hailing behemoth Didi Chuxing.

Japan’s tech based investment giant SoftBank is invested in both Uber and Didi which shows how the Japanese conglomerate’s investments sometimes clash, particularly in Latin America, because the company has singled out the region of investing billions of dollars in the blossoming tech sector there.

The clash of the two companies is most pronounced in Mexico as the arrival of Didi has resulted in the first serious competition being faced by Uber. In the Mexican market, Didi has already annexed about 30 per cent of the market share in those cities where it is operational since it entered the market last year, according to reports. However market shares keep changing and Didi itself is either more or less than the 30 per cent mark in some cities.

Colombia’s Rappi, which SoftBank pumped $1 billion into earlier this year, is also posing some serious threat to Uber’s food delivery service – Uber Eats.

After the acquisition of the Brazilian ride-hailing company 99 last year, Didi has also significantly increased its presence in the Brazilian market, where it operates under the 99 brand.

James Cordwell, a London-based analyst with Atlantic Equities, says that for investors, one of the crucial tests of Didi is to create international operations from scratch in Mexico, as well as the ability of Uber to face up to the competition there.

“What happens in Mexico has global significance,” he said.

It sees “tremendous opportunity for growth” in Latin America, Didi said in a statement.  “Currently, less than three in 10 Mexicans use ride-hailing, and barely one in 10 are using food delivery,” Didi said. “We’re really excited about where we are at after just 18 months here.”

There were no comments available from Uber and SoftBank.

Moreover, the manner in which SoftBank manages its competing investments in Latin America is also looked into by investors. The Japanese investment firm is still grappling to come to terms with the impact of its investment in the US based shared workspace provider WeWork that had to pull out of its announced initial public offering in September.

The largest network for Didi outside of China under its brand is in Mexico where the company is operating in 32 cities. The toll its growth has taken on Uber is plain.

Cordwell said that even though Uber’s performance of the first three quarters of the year was hit by a weakening of the Brazilian real and economic weakness even as the company singled out Latin America as its worst performing region in the same time period.

“Uber would like to win in Latin America itself, but if it does lose share to Didi at least there’s some offset,” Cordwell said.

(Adapted from Reuters.com)

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