What Uber can teach us about India?

By now nearly everyone has heard of the car delivery service Uber and its competitor Lyft.  Maureen and I have begun to use the services of both companies and are amazed how advanced technology has made this service possible.  We are also a little sad that we didn’t think of it before them!

For those who are unfamiliar with the car sharing service, you are able to order a ride through an app on your smart phone for significantly less money than if you had hired a taxi or car service.  The best part is you do not need to pre-schedule the ride in advance (but now you can do that also).

Uber Technologies Inc. which started in 2009 is an American online transportation network company  headquartered in San Francisco, CA . The company operates the Uber app, which allows consumers with smartphones to submit a trip request, which the software program then automatically sends to the Uber driver nearest to the consumer, alerting the driver to the location of the customer.

Uber drivers use their own personal cars. The Uber app automatically calculates the fare and transfers the payment to the driver. As of August 2016, the service was available in over 66 countries and 545 cities worldwide.

The hysterical comedian Sebastian Maniscalco in his recent routine referred to these services as

Hitchhiking with your iPhone

Uber Technologies Inc. has grown from a San Francisco startup to be worth an estimated $70 billion today.  Its reach is now global and one of the 66 countries that it is fighting to get a foothold in is one of the emerging markets – India.  A recent article discussing the company’s struggle to grow in India highlighted the vast potential not just for Uber, but for all large publicly traded companies.

While there is a competitor in India known as ANI Technologies Pvt., Uber is hoping to use its large cash reserve and cutting edge technology to outwit its rival.  A look into the challenges, gives us a glance of the potential for one of the emerging markets economies.

The challenge for Uber is developing enough drivers which is a challenge in a country where less than 5% of the households own their own cars and a few potential drivers understand English or how to use an app.  The use of driverless technology will unlikely be implemented in these emerging countries for quite a while.

So how is Uber dealing with this challenge?  It uses its lending arm to offer drivers leases on vehicles at affordable rates.  This has created the ability for drivers to share one car and develop a capitalistic model of sharing proceeds.

Uber is hoping to increase the number of drivers currently on their platform of 400,000 drivers to 1.4 million drivers over the next two years.  In order to do this, the company will be investing hundreds of millions of dollars.  Even with these current challenges, India is second only to the United States in the number of trips Uber completes yearly and makes up 12% of its rides globally.

The new Indian drivers get the ability to access the new technology that we take for granted, such as smart phones, UTube, Google Maps and other smart phone apps.  This opens up an entirely new world for them and their families which allows them to both develop more earning power and more purchasing power which will be used to purchase other goods and services provided by the largest companies in the world.

This one growth story highlights why publicly traded companies around the world continue to have their profits increase and the stock prices will reflect this growth over time.

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About Dan Crimmins

Dan Crimmins, co-founder of Crimmins Wealth Management, is a financial coach and fee only financial planner. Have a financial question? ASK DAN

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