Cairo – Decypha: In a typical “David versus Goliath” scenario, Careem –a UAE-based ride-hailing startup—is competing with Uber –a similar firm that is the world’s most valuable startup—as to which one GCC users will prefer. Also in the mix is strict government regulations that ultimately support taxis and local startups that adhere to government regulations governing taxis, their drivers and public transport in general.
Uber and Careem are facilitators. Their respective mobile-phone apps allow clients to request a ride from almost anywhere to almost any destination, 24/7, while knowing the fare range upfront. At the other end, the driver is almost always a layman who owns a nice or new car and wants to make more money on the side by registering in either company; adhering to that company’s standards rather than government regulations. The major appeal is that drivers can work at any time, for as long as they want and where they want without dealing with the government.
Uber pioneered this model in 2009. It proved successful with the company able to raise $70.7 billion between 2009 and 2016 in equity and debt funding, according to a Financial Times data compilation in 2016. Investors include Microsoft, Goldman Sachs, Google Ventures and China’s biggest conglomerate Tata via its Tata Opportunities Fund. In MENA, Uber is serving 11 cities while globally it covers 570 cities.
Careem is the first Arab company to adopt this model. Founded in 2012, it raised $500 million to date in funding from investors including Japanese e-commerce Rakuten, state-owned Saudi Telecom Co. (STC) and Kingdom Holding Company (KHC). It was valued at $1 billion in 2016. “We have a lot of investors that have joined us along the way and at some point they need to be able to get some returns from their investment. So the natural end game is to go public,” said Magnus Olsson, co-founder of Careem to Arabian Business by the end of January 2017. Currently, Careem serves 53 cities in MENA.
Both companies are privately owned, and are therefore under no obligation to disclose the size of their fleets or number of trips in each city.
UAE: Dubai
Dubai was the first GCC city that Uber entered, in 2013. It is also the place where it’s most varied services are offered. There is UberChopper, where users order helicopters to move within the UAE. The service is currently is being trialed. “There [is] huge potential for helicopter services here, especially when cities are becoming congested,” said Ali Ahmed Alnaqbi, the founding chairman of East and North Africa Business Aviation Association (MEBAA) to Arabian Business in November 2016. Also being trialed is UberX, a more affordable version of Uber’s main service (uberSELECT). The company is also in talks with Dubai Roads and Transport Authority (RTA) to roll out an even cheaper hailing service using registered taxis. Under the agreement, Uber will deploy around 14,000 registered taxis plus their own fleet.
Other services that Uber offers in Dubai is UberEATS, a food-delivery service allowing clients to order from 200 existing restaurants starting 2016. In 2017, the company added carpooling and paying in cash as well as credit card, respectively. These services are in addition to uberBLACK (The high-end service) and uberXL (For large groups).
Careem is sticking to a more conventional business models. It agreed with RTA, in February 2017, to include 10,000 RTA taxis to its app. Careem will not offer any of its SMS, email or credit card services to clients who order these taxis. “The activation of the online taxi booking service via Careem app will boost the Dubai integrated transport platform project, which is currently being undertaken by RTA," said Adel Shakri, director of Transportation Systems, RTA’s Public Transport Agency as reported by Arabian Business at the time.
In addition to the standard and high-end service as well as RTA rides, Careem offers Ameera service, a female-only service, and Careem Kids, where the car is fitted with one or more child seats. Careem is even trialing a barber-delivery service for three months starting mid-June. More innovative services such as school transport and intercity transport are not a priority, according to Mudassir Sheikha, a Careem co-owner talking to Arabian Business in January 2017. There are a total of eight ride-hailing options that Careem provides in the Dubai.
Local competitors include the Booking & Dispatch Center and RTA’s own taxis who are not members of Careem’s network. To protect registered taxis, the law stipulates that ride-hailing services that use non-approved taxis must be at least 30% higher than authorized taxes.
UAE: Abu Dhabi
Careem and Uber have been facing problems in Abu Dhabi. The authorities arrested 50 Uber and Careem drivers and impounded 70 cars because they were lowering the fares for some trips below the 30% limit in August 2016. "They are bringing customers to limousine companies, which we encourage, but they don’t have the freedom to set prices where they are in competition with the taxis,” said Mohamed Al Qamzi, general manager of TransAD, the emirate’s taxi regulator. In protest, both companies halted operates the following day.
However, by February 2017, Careem was back in business after complying with TransAD, according to a Careem statement at the time. They currently offer Limo and Minivan options. Uber has deprioritized the issue. "Once we get a bit more clarity on what works with uberX [in Dubai], we need to spend more time in Abu Dhabi – on the ground working with Trans AD – to help bring solutions forward," said Christopher Free, the general manager at Uber UAE to The National in June 2017.
Saudi Arabia
Both Uber and Careem are operating in Saudi Arabia where the majority of their clients are women, because they are not allowed to drive in the Kingdom. As such both companies offer a female-only service. Careem is currently working with the Saudi government to subsidize rides for low-income Saudi women who most likely can’t afford the monthly $800 average budget of taking the service every day to and from work, which is around 20% of the average monthly household.
Both companies are working with the government to prioritize the hiring of Saudi nationals, not expats. “[The Saudis] implemented these new rules that allow any citizen with a spotless driving license and their own car to work with Careem,” said Olsson to Arabian Business in January. “A year ago we had almost no Saudi captains and today 60% of them are Saudi. Many are students or work in low-paid jobs and want to make more money.” By the end of 2017, Careem wants to employ 70,000 Saudis, according to Abdulla Elyas, a co-founder of Careem, talking to Reuters in January 2017. All eight ride-hailing options are available in Ryadh. Uber is currently employing 40,000 Saudi, according to Travis Kalanick, then CEO of Uber, speaking to Arabian Business in February. It is offering uberX, uberXL, uberVIP and uberBlack.
The Saudi government has offered a lot of facilitations to both companies, seeing their potential to create around 200,000 jobs by 2019, as reported by Reuters in January 2017. This is a huge figure given that Saudi’s Vision 2030 is looking to create 450,000 jobs outside the government sector by 2020. The only limitation the Saudi government has placed on ride-hailing services using unauthorized taxi is that they can’t pick up or drop off clients at the airport.
Saudi investors also see potential in investing in both companies. Careem got funds from STC ($100 million) and private sector Al Tayyar Travel Group ($10 million) in 2016. KHC is a 7.11% shareholder, paying over $62 million for the stake in June 2017. Meanwhile, Saudi’s sovereign wealth fund invested $3.5 billion in Uber in June 2016.
Qatar
For Careem and Uber, ride-hailing in Qatar is a tight-margin business. Further tightening it is the government launching its own service; Mowasalat; offering the same services as both. However, it is cheaper than both because it uses certified state taxis to offer the service, according to Chairman and CEO Jassim Saif Ahmed Al Sulaiti to Arabian Business in January.
In response, Uber launched uberGo, which is 25% cheaper than the already-cheap uberX service. uberGo uses older and smaller cars and offers drivers lower returns. It offers the option to pay in cash or credit card. This service wasn’t popular. In mid-February, hundreds of uberGo drivers went on strike protesting the lower returns, especially that fuel prices have increased by 30% since the oil price collapse mid-2014. Careem offers Go, Economy and Economy Plus options.
Minor Operations
In Bahrain, both Uber and Careem only operate in the capital. Uber was the first company to operate in the country in June 2015 offering uberX. Careem followed in May 2016 with trips to Saudi Arabia and Go+.
In Kuwait, between February and May, the only ride hailing service that was operational was the local G8 Grand Limo. However, by May Careem was operational once again but only using authorized taxis. Uber was never operational in Kuwait.
Oman’s government is banning both Careem and Uber because they violate Oman’s law regulating taxis. Instead, two local private firms; Mwasalat and Marhaba; are operating the state-owned taxi fleet. Both companies have apps to order the service on-demand, according to Ahmed Al Futaisi, the Omani Minister of Transport and Communications talking to Times of Oman in May. The service is mainly targeting tourists and expats, according to a release from the Ministry at the time.
Who is Winning?
One indicator showing which company has the upper hand is their social media activity. Based on this, Careem is the preferred services in the GCC, according to a 2017 report by the US-based Crimson Hexagon titled Middle East Consumer Trends.
The report shows that Uber’s social media activity has increased by 827% during 2016 versus Careem’s 108% increase. Yet, Uber’s negative conversations are only 4% lower than positive comments. Careem sees 25% more positive comments than negative, noted Alexendra Maia, the author of the report upon its release. She explained that people seek social media whenever they want to complain, which is why measuring the gap between positive and negative reviews is more important than the total number of comment. The report covered GCC, Jordan, Egypt and Lebanon.
Interestingly, both companies are yet to turn a profit. Uber saw a global net loss of $2.6 billion in 2016 and Careem admitted it without disclosing a figure. Yet both companies are confident of the future. Sheikha projects that Careem will turn a profit for the first time by the end of 2017 or in 2018.
Innovation and speed will be the key to dominance. “If we can get you a car, can we get you lunch? Can we get your groceries? Can we send you healthcare? Those are interesting questions,” said Jambu Palaniappan, then Uber head of Middle East operation, in 2015 to Arabian Business. “There is a bit of a race because, in this type of industry, the scale you have in a particular city makes a difference,” said Olsson to Arabian Business in January.
By Tamer Hafez
