Uber Steps on the Gas in Asia Expansion

Photographer: Sanjit Das/Bloomberg

Taxis in the New Market area of Kolkata, West Bengal, India, on Nov. 1, 2013. Close

Taxis in the New Market area of Kolkata, West Bengal, India, on Nov. 1, 2013.

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Photographer: Sanjit Das/Bloomberg

Taxis in the New Market area of Kolkata, West Bengal, India, on Nov. 1, 2013.

While Uber's Allen Penn prepared to move last year from Chicago to Singapore to run the car-booking provider's Asia operations, a colleague e-mailed him a link to a world map that showed a circle covering the Asia region. The caption read, "There are more people living inside this circle than outside of it."

Uber is now driving fast into that market. While the company has gained momentum in Europe and blanketed many of the largest U.S. cities with black cars, taxis and hybrids, the app is relatively unknown in Asia. Early last year, it operated in only one city on the continent. Today, it's in a dozen Asian cities. Last week, Uber kicked off service in Hyderabad, an Indian city with about 7 million people, and the week before that, it began to operate in Kuala Lumpur, Malaysia.

Population size is one of the first criteria Uber looks at when determining where to go next, according to Penn. Because the company starts off in each market with black cars instead of taxis, it also needs a concentration of rich people.

In addition, Penn examines heat maps showing where people are opening the app around the world, which includes cities where Uber doesn't operate yet. The data includes travelers accustomed to using the service at home and tech enthusiasts who download the app after reading about it in the news. “People are voting with the app for Uber to come there,” Penn said.

The findings all point to a major opportunity in Asia, said Ryan Graves, Uber's head of global operations.

"Holy cow, the potential is just mind-blowing,” Graves said in an interview. "We want to make sure that Uber is available to as many people in the world as possible. When we start to look at density, when we look at the size of these markets, the metrics draw us to Asia."

Uber is especially optimistic about India, the world's second-most-populous country with 1.2 billion residents. With service already under way in Bangalore and New Delhi, Hyderabad became Uber's third city in the country. Penn declined to discuss Uber's plans for future markets, but the company is hiring in Mumbai and Chennai, two Indian cities with a combined population of 17 million.

One big drawback in targeting emerging markets, of which there are many in Asia, is the low penetration rate of smartphones. Uber can be used via text message, but it's not a service the company is investing much in, said Graves. Uber has been pouring more resources into development of its app for Android, which represents a fast-growing segment of low-end smartphones sold around the world.

"We definitely want everyone to be able to use the product," Graves said. "The speed at which smartphone adoption is happening, it almost won't be an issue in 18 months."

There's also the challenge of expanding a service in a global market where one size doesn't fit all.

"When cities are separated by tremendous language and cultural barriers, you're building a new business in each market," Penn said by phone from Hyderabad. "Every market is different, and that's why we’ve got to have local people who understand that market."

Uber is also looking to hire for future operations in Bangkok, Beijing and Hong Kong. More developed cities like these come with their own challenges. In the U.S., Uber helped pioneer the concept of hailing a ride using a smartphone app, but several competitors have gained traction elsewhere.

"There are copycats of Uber that are rolling out in places all over the world," Penn said. "For any city that we're not in, we think that we can offer something."

Uber doesn't operate in Vietnam, but smartphone users there can book a cab using PingTaxi. In China, where Uber has launched in three cities, there are several options. Uber is well-funded following its $258 million round last year, but its Chinese rivals aren't broke. Yongche announced a $60 million round last month, and Didi Taxi raised $100 million from Tencent Holdings and other investors.

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