India is our lab - success here will serve the next six billion, says Uber CEO Dara Khosrowshahi
Uber CEO Dara Khosrowshahi is in India, and at the Editor’s Round Table in Delhi, he spoke on the company’s India strategy, competition Ola, and the company’s culture.
Excerpts:
- On India
“When we look at the Indian market, we consider it an incredibly core market for us, now, and in terms of where we are going to be five to 10 years from now. If you can succeed in India with your product, with the Indian consumers, and the demand in terms of price, in terms of quality of service, India can essentially be the laboratory for us for the next 6 billion consumers who are going to have access and exposure to our products.”
The Indian market is an experiment indeed for Uber, even as it has had trouble globally with Founder Travis Kalanick resigning over allegations over the company's senior management being involved in sexual misconduct.
India currently accounts for 10 percent of Uber’s total trips. Yet, the company is a distant second to home-bred Ola, and has a market share of around 40 percent according to analysts. Uber has said India is a big part of its global strategy, and will not shy away from taking on Ola.
- On competition Ola
Dara said he had a lot of respect for home-grown cab hailing company Ola. “They are a very strong global competitor, and I think competition makes us better, and makes Ola better. Competition usually results in better product for driver partners. and also better products for consumers, and I think that competition certainly has played a part in our service. We are pretty confident about our competitive position here,” he says.
- On Uber’s autonomous bet
Uber’s tech team is working on vehicle autonomy, not as an experiment, but for commercial use. “What you will see are Uber autonomous vehicles actually being driven autonomously in our network on a commercial basis. So, it is coming much much sooner than you would expect,” says Dara.
- On scandals and the past
“The most important thing that you can do in order to avoid unfortunate circumstances is a focus on company culture, and one of the first actions that I took, when I took over the company, was to relook the values of the company, and the culture of the company.
“We actually did it in a very interesting way. We went to employees and we asked them ‘what kind of company do you think should Uber be’,” says Dara. And did it work? Dara says Uber has crowdsourced the values of the company, and the passion in its culture that employees had, was extraordinary.
- On investors
“The decisions that we make, strategies that we undertake, strategies that I am driving as the CEO of the company in consult with the board - while Softbank may have an opinion, their’s is not the only opinion in the room, and its my belief that we as a company need to have a balanced profile in terms of growth and investment,” says Dara.
Uber continues to invest in developing markets. “There are markets that we will continue to invest in, they are going to be more profitable, and we actually should (invest), because the size of the market that we are playing in, we need to actively invest in markets like India, markets like Latin America,” says Dara.
Ride-hailing and sharing account for 1 percent of the global transportation industry, which is valued at $5 trillion dollars.
“This requires investment, and if we weren’t investing in these kinds of markets - big markets for big populations, that have a lot of growth ahead of them, we wouldn't be the right proprietors of the company,” says Dara.
- On new business opportunities
Newly-launched Uber Eats has seen success in India, and is one of the fastest growing services for the company.
The one service where Uber is losing cash is the Pool product, but Dara says it is a big opportunity. The Pool product is getting more than one person to share a ride, and this helps decongest traffic and reduce pollution.
“It’s human behaviour that a lot of people don’t necessarily like (cab sharing). There are a lot of people who are antisocial, and so in our Pool product, for example, on a global basis, we lose money. We believe that in the long-term, in order to create demand and supply match, we actually have to invest,” Dara says.
- On margins
Contribution margins on a global basis continue to improve significantly on year-on-year basis. Contribution margin is the number that remains after subtracting variable costs. Dara says there are markets that are quite profitable in terms of contributor margins for the company.
“There are markets that we are investing very aggressively in, and the contributor margin continues to improve over the last two years. But we actually don’t want those margins to improve too quickly, because we want to balance that contribution margin improvement with investment,” says Dara.
The company is going after 30-50 percent growth, and does not want contribution margins to increase because it means it is using cash from operations to steady the business, rather than growing into new markets.