Finance

March 28, 2016

Uber launches in Abuja as CEO says other market’s profits supporting China spending

Ride hailing App Company, Uber Technologies has launched its services in Abuja city as it embarks on aggressive expansion across Nigerian cities.

This comes as Uber’s global CEO, Travis Kalanick told reporters in an interview last week that the company which is generating more than $1 billion in profit a year in its top 30 cities globally, is partly using that money to bankroll its expansion in China.

The company said in February it was losing more than $1 billion a year in China’s red-hot ride hailing market, where it is battling large local incumbents to win customers.

Kalanick said China was the company’s most intense market, but also a crucible for new ideas that it has exported to other markets, and that its investment here was sustainable.

“If you took our top 30 cities today, today they’re generating over $1 billion in profit a year, just our top 30 cities. And that profit multiplies every year because we’re growing,” he said. Other cities among the 400 where Uber operates were also profitable, he added.

“So that helps us to sustainably invest in our Chinese efforts… Because of the profits we have globally, this is something we can do for the long run,” he said.

Recall that Uber and China’s Didi Kuaidi, backed by Chinese technology giants Tencent Holdings Ltd and Alibaba Group Holding Ltd, have both spent heavily to subsidize fares to gain market share, betting on China’s Internet-linked transport market becoming the world’s biggest.

The strategy seems to be working for Uber. The company’s market share in China, according to recent reports, has grown quickly, rising from about 1 percent to 2 percent in January 2015 to about 30 percent now, Kalanick said.

However, China’s transport minister said earlier this month fare subsidies and the supplementing of driver wages by ride-hailing companies were competitively unfair and unsustainable in the long-term.