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Uber focuses on filling Japan's ride-hailing void

CEO ready to work 'in harmony' with cab companies and regulators

Uber CEO Dara Khosrowshahi speaks to the Nikkei Asian Review in Tokyo on Feb. 20. (Photo by Ken Kobayashi)

TOKYO -- Uber Technologies is discussing partnerships with taxi operators in Japan, seeking to crack one of the few Asian markets where ride-hailing has gained little traction. 

"Discussions are rich and taxi companies are open to and want to be a part of the Uber ecosystem," CEO Dara Khosrowshahi told the Nikkei Asian Review in Tokyo, saying the talks are "just beginning."

The Nikkei reported on Monday that the U.S. company is negotiating to add taxi operator Daiichi Koutsu Sangyo's vehicles to its network. 

"The Japanese taxi industry is [high] quality but it suffers from low utilization rates," Khosrowshahi said. The run-up to the 2020 Tokyo Olympics, however, presents a prime opportunity to change that, given the ongoing surge in overseas tourists.

"Uber brings an unmatched global audience to the taxi companies," the CEO said, adding that Uber's app provides a convenient way around language barriers.

Japanese regulations that prohibit ride-hailing services from using private cars have been a big obstacle. So far, Uber has been working with licensed car-hire companies, in addition to operating food delivery service UberEats.

"The Japanese taxi industry is [high] quality but it suffers from low utilization rates," Uber CEO Dara Khosrowshahi said.

Khosrowshahi said Uber can significantly increase the productivity of taxis in Japan, especially if the country decides to liberalize rates and introduce dynamic pricing, where fares would change in response to real-time supply and demand. Still, he is willing to take things slowly.

"We are here in the spirit of partnership," he said. "It starts with education, but ultimately both sides need to be comfortable [with] the technology," Khosrowshahi said. During his two-day stay in Japan, he is expected to meet with high-level government officials as well as SoftBank CEO Masayoshi Son.

Uber has a history of aggressive global expansion, which has often put the company in conflict with regulators and taxi companies. Khosrowshahi, who took over as CEO last year after investors pushed out founder Travis Kalanick over a series of operational and sexual harassment scandals, is striving to paint Uber as a "friendlier" partner.

"The company is under a new leadership," he stressed, adding that his job is to ensure Uber grows "in harmony" with local markets, governments and regulations.

Uber has a powerful backer in SoftBank, which in January closed a $7.7 billion deal for 15% of the ride-hailing company. The Japanese technology giant is also the top shareholder in rival Singaporean ride-hailing service Grab, and has invested in Chinese peer Didi Chuxing and other similar services around the globe. 

Nikkei has determined that Uber is looking to reduce its Southeast Asian operations by partnering with Grab.

Khosrowshahi would neither confirm nor deny those reports, but said his company is open to options. "Our plan now is ... to grow and invest [in Southeast Asia]. But we have always been flexible and we will always be opportunistic about ways to improve our service and to improve our value to shareholders."

Khosrowshahi also said Uber is exploring partnerships with automakers in Japan and elsewhere, with a focus on self-driving vehicles. The company has inked an agreement with Sweden-based Volvo Car to obtain as many as 24,000 autonomous vehicles between 2019 and 2021. Plans to provide German carmaker Daimler with a ride-hailing platform are also in motion.

Khosrowshahi, a former investment bank analyst, was poached from online travel agency Expedia last year after 12 years as its CEO. During his tenure there, he oversaw aggressive acquisitions and sevenfold growth in the company's market capitalization. The Iranian-born businessman, who moved to the U.S. as a refugee in 1978, has been a vocal critic of President Donald Trump's immigration policies.

Now, Khosrowshahi is tasked with revamping Uber's corporate culture and regaining trust from shareholders and customers. Streamlining operations to reach profitability and preparing for a public listing are also priorities.

Uber's net loss for the October-December period narrowed from the preceding quarter. But its full-year net loss for 2017 expanded to $4.5 billion from $2.8 billion in 2016, even though its top line increased 15% to $7.5 billion.

Even with its new approach, the company could still have a tough time breaking through in Japan. Taxi companies' own ride-booking apps have been catching on. And Japan Taxi, a Tokyo company that recently bagged investments from Toyota Motor, is employing a scorched-earth strategy of cutting booking fees to as little as 60 yen (56 cents). That is well below most other apps, which usually charge more than $1. 

These factors might limit Uber's leverage in negotiations.

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