Uber's current legal battles could lock it out of nearly half the world's GDP
If you look at a map of the regions in which Uber is fighting operating bans, one thing becomes clear: Uber’s entire business and certainly the veracity of its valuation are at stake.
It’s not hyperbole to say that Uber is in battles in nearly all of its most important global markets. Whether you rank countries by population or GDP (PPP) you end up with a similar list, and you see that Uber’s fighting for its life in many of the top markets.
While Uber is well established in the US, it continues to face serious headwinds, including recent bans in Portland and Nevada, proposals for tougher regulations in a handful other markets (including New York), and lawsuits in California, Nevada, Illinois, and Massachusetts.
But more troubling are Uber's battles outside the country. Its flagship ride-sharing service – known as UberX in the US and People’s Uber in China – has been outright banned in China, while its livery-service continues to operating amid regulatory uncertainty. Furthermore, Uber faces serious competition from Alibaba-backed Kuaidi Dache and Tencent-backed Didi Dachi.
In India, Uber is still recovering from a month-long ban following an alleged rape by one of its Delhi drivers. The company is now facing stricter requirements surrounding registration, background checks, safety, and the environment that could affect both the company’s growth and its notoriously healthy operating margins. Uber also still faces local competition from fellow transportation aggregators Olacabs and TaxiForSure.
Looking beyond these three giant markets, Uber is currently (or has recently been) banned from operating in Germany (No. 5 GDP, No. 16 population), Brazil (No. 7 GDP, No. 5 population), France (No. 8 GDP, No. 20 Population), and Spain (No. 16 GDP, No. 30 population). This is not to mention other bans or legal battles in Canada, The Netherlands, Belgium, Denmark, Norway, Columbia, and Thailand.
It’s a big world out there and plenty of global cities have embraced Uber – the company states that it operates in 250 cities across 50 countries – so why is this a big deal? The answer lies in Uber’s valuation and the growth plan it has laid out for investors, employees, and driver partners. (A valuation and long-term vision that I’ve defended in the past.)
Uber’s business is predicated on global dominance and ubiquity, as is its stated mission of undercutting the costs of car ownership and existing transportation options. Uber believes that it can increase the size of the existing global taxi and limousine market several-fold and also has plans to move beyond transporting people into other on-demand logistics-based businesses. All of this relies in large part on network effects, both tangible and perceived.
It’s not just that Uber is facing battles around the world. It’s the size and value of the markets in which these battles are taking place. If the company finds itself locked out of even a few of the world’s largest markets, the calculus on Uber’s $40 billion (and growing) valuation begins to crumble.
Travis Kalanick and the company he founded have shown a remarkable resiliency and ability to sway the public and regulators to (eventually) act in their favor – even when it’s blatantly flouted laws and generally accepted ethical standards. It’s entirely possible that Uber will soon be operating unencumbered in each of the above key markets. But it doesn’t take much to go wrong for the size and addressability of the company’s global opportunity to shift dramatically.
Excluding the US, where Uber is the most well-established, Uber is currently battling in 14 other countries that represent more than $41 trillion in combined GDP, nearly half of the world's $84.5 trillion total. Even if Uber does resume operations in most or all of these markets, it’s beginning to look like doing so, in many cases, will be a more costly proposition than originally modeled – due in large part to increased costs from regulatory compliance, insurance, and driver screening, among other issues.
It may be relatively early in Uber's life as a company, but it's already facing many must-win battles. In October, Kalanick’s newest mouthpiece, former Obama campaign strategist David Plouffe, described Uber’s as being in a period of “ubermentum.” (Ugh.) Today, it’s seeming more like the company is “uber-struggling” and making “uber-enemies.”