Uber investors saw at least $2 billion wiped off their balance sheet over the last two years from their so-far failed China venture, according to a Bloomberg report. Reuters reported this week that the ride hailing service plans to leave Macau September 9 after over 300 drivers there had been fined MOP10 million (US$1.25 million) in the brief time since Uber began Macau operations in October 2015.
Earlier this month Harvard Business Review delved into some of the reasons Uber decided to offload its operations to former rival Didi after both services became legal there on July 28. The speculation was that it was government interference rather than market forces that caused the departure. In the Uber China, Didi Chuxing deal, Uber Ceo Travis Kalanick would get a seat on the Didi board and a 20% share in the company. Didi’s Cheng Wei would get a seat on Uber‘s board as well and run Uber’s Chinese operations as a separate brand.
However, others chalk it up to competition and the subsidies Uber paid it’s drivers to remain competitive after slashing rates for riders during a price war fought in a market that has ten times the number of taxis, and their main competitor had ten times as many drivers on call. In an open letter on August 1, Uber CEO and co-founder Kalanik said, “We’ve grown super fast and are now doing more than 150 million trips a month. This is no small feat given that most U.S technology companies struggle to crack the code there. That’s why I’m so proud of what our amazing China team has accomplished,” in the letter announcing the merger.
On Friday, Uber head of finance, Gautam Gupta told investors in a conference call that losses were mounting across the board at end 1H, even though the company turned a profit in the U.S. in Q1. According to the Bloomberg report citing people close to the matter, Uber lost roughly half a billion dollars in the first quarter of 2016 before interest, taxes, depreciation and amortization. Losses in the second quarter continued to grow with about $100 million lost in the U.S. alone and a total shortfall of about $750 million. Taken together the company’s losses in the first half of the year reach some $1.27 billion. Taken together with China’s portions of Uber’s $2 billion losses in 2015, the number is reported to be just over $2b lost in the last two years on the China market, including Macau.
After August no more losses in China are expected to appear on the company’s balance sheet.
Not everyone is as happy as Didi to see Uber leave the burgeoning market. On Thursday the South China Morning Post reported that hundreds of Uber supporters plan to protest on Sept. 4 in opposition of what they perceive as a government crackdown on the operator. Reportedly, by 5pm on Thursday a social media page for Uber had amassed 11,500 “likes” and more than 400 people had added their signatures.
Macau legislator Au Kam-san’s official Facebook account featured a letter attributed to Uber regional general manager for Asia Mike Brown stating, “We we write to you today [August 22] to advise you of our intention to suspend our service in Macau. The reason for this is the unwillingness of the government to develop a common sense path to progressive … ridesharing regulations. The penalties imposed on driver-partners have become far too costly, to the extent it is no longer viable to operate.”