hyperdrive

Uber to Renew Push to Expand in Japan With Taxi Partnerships

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  • Ride-hailing giant has less than 1 percent local market
  • Local rivals are also rolling out new taxi-hailing services

Uber's New CEO Faces Some Big Challenges

Uber Technologies Inc. wants to forge partnerships with taxi companies in Japan because its go-it-alone approach in the country wasn’t working, Chief Executive Officer Dara Khosrowshahi said in Tokyo on Tuesday.

Japan’s taxi market can become more efficient, even though its services are already of a high quality, he said at an event with former U.S. ambassador to Japan John Roos. While Khosrowshahi didn’t announce any specific deals, he made clear that Uber would make a renewed push to expand in Japan.

It’s the clearest sign yet the ride-hailing giant will redouble efforts to take a piece of Japan’s $16 billion taxi market. Amid heavy operating losses in the U.S. and a retreat from international markets — Uber has ceded China, Russia and is said to be considering a sale of its Southeast Asian business — Japan has the potential to offer a rare bright spot for a company headed for a public listing next year.

“It’s clear to me that we need to come in with partnership in mind, and in particular a partnership with the taxi industry here, which actually has a very, very strong product,” said Khosrowshahi, who is making his first trip to Asia as Uber’s CEO. “But that product hasn’t kept up with technological change.”

While Uber has clashed with taxi rivals and regulators around the world, it has played by the rules in the archipelago, relegating its business to car hires and a ride-sharing program for the elderly in a small rural town. The company’s main success in Japan has been food-delivery service UberEATS, which Khosrowshahi said made him realize the country’s potential.

Read more about Uber’s struggles in Japan.

“I saw Japan as an incredible opportunity, and when I asked the team why wasn’t our Japan business larger, I started learning the history of our approach to Japan, and it was an approach that frankly didn’t work,” Khosrowshahi said. He was speaking with Roos, a co-founding partner at Geodesic Capital, an Uber investor.

Uber still faces an uphill battle in Japan. Local rivals such as Nihon Kotsu Co., Tokyo’s largest cab company, have already released popular taxi-hailing apps. Uber’s Chinese rival Didi Chuxing last year began partnership talks with taxi operator Daiichi Koutsu Sangyo Co., with the discussions facilitated by Uber shareholder SoftBank Group Corp., a person familiar with the matter told Bloomberg in October. Uber is also said to be in talks for a venture with Daiichi Koutsu.

And on Tuesday, just an hour before Khosrowshahi spoke, Sony Corp. unveiled an alliance with six taxi operators in Japan, which have a combined fleet of more than 10,000 cabs in the greater Tokyo area. Sony is aiming to develop a ride-hailing app powered by artificial intelligence and also provide a payment services.

Read about the "Taxi Prince" fighting Uber in Japan

Uber’s CEO said Japan’s taxi utilization rate is 30 percent, while Uber’s is more than 50 percent. By combining Uber’s brand, technology, along with demand from tourists and partnerships with the taxi industry, he said the result would be a “win-win” for Uber and the taxi industry.

Khosrowshahi’s enthusiasm echoes comments from Uber’s Asia head Brooks Entwistle, who told Bloomberg this year that Japan will be a major focus for the company in 2018. That’s a turnaround from previous boss Travis Kalanick who largely left the country in the hands of a country manager. But Uber saw four listless years in Japan, achieving less than 1 percent of monthly rides in Tokyo, the world’s largest single cab market.

Asked about SoftBank, which in January became Uber’s biggest investor, Khosrowshahi said the Japanese telecoms and investment company is “simply the smartest money in the transportation space.”

“They have invested in many other ride-hailing and ride-sharing companies around the world, which has allowed them to be incredibly smart about what it takes to succeed,” he said. “We’re very early in our relationship, but we’re already having very good dialog, both about the Japanese market and the ecosystem that SoftBank has created.”

Khosrowshahi said he wasn’t bothered by SoftBank’s announcement this month that it’s partnering with Didi to target ride-hailing in Japan. “If you’re going to do business with SoftBank, you have to get used to that they do business with your competition,” he said. “And that’s OK.”

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