As the number of competitors in the ride-hailing industry dwindles, geographic expansion is emerging as the next proving ground to determine who will be the victor in the ride-hailing market.
The race for control of the industry, which is estimated by Goldman Sachs to grow eightfold to $285 billion by 2030, is escalating with China’s Didi Chuxing already surpassing Uber as the most valuable startup in the world. With a recent valuation of approximately $56 billion, compared to Uber’s $48 billion, Didi is posing a real threat to Uber’s operations and shows no signs of slowing down. Cementing its position as the top ride-hailing service in China, Didi is now turning its attention to another region of the world that is still filled with vast opportunities and not yet dominated by a single taxi alternative: Latin America.
While many ride-hailing and sharing services have already sprung up and faced regulation in cities across Latin America such as Mexico City, Montevideo, and São Paulo, the region still presents an enormous opportunity for the companies that can adapt and move fast enough.
The current opportunities in Latin America
Unlike many other regions of the world, Latin America is still very much reliant on traditional forms of public transportation such as buses, trains, and subway systems. What’s more, larger cities such as São Paulo, Mexico City, and Bogota simply cannot support any more vehicles on the road without an infrastructure overhaul. Large metro areas are already at or above maximum capacity during peak hours, making owning and commuting with a car more of a hassle than a luxury. As a result, many commuters across Latin America are putting less importance on owning a vehicle and opting to use alternative modes of transportation and on-demand services instead.
Beyond the rising demand for alternative transportation options, it’s also worth noting that Latin America is the world’s second-fastest-growing mobile market. In a region of approximately 640 million people, there are more than 200 million smartphone users. By 2020, predictions say that 63% of Latin America’s population will have access to the mobile Internet. Latin American smartphone users have quickly adopted global apps, such as Uber and Facebook. However, tech companies have yet to fully tap into the region’s potential.
The key players
According to a Dalia survey, Latin Americans with smartphones that live in urban areas are the most likely to have used a ride-hailing app or site. Overall, 45% have used an app, with Mexico taking the top position in the region at 58%.
Uber entered Latin America in 2013 and claims to have more than 36 million active users in the region, proving employment for more than a million drivers. The company quickly dominated Mexico, which is now its second-largest market after the U.S. In fact, up until recently Uber claimed a near monopoly on ride-sharing in Mexico with few competitors. Uber also has operations in more than 16 Latin American countries.
99 (formerly 99Taxis)
With an urban population of approximately 180 million, Brazil is the ultimate prize for ride-hailing and taxi companies with several services competing for market share. Most notably, 99 (formerly “99Taxis”) was able to gain momentum early on with exclusive services that extended beyond basic ride-hailing (such as its 99 TOP and 99 POP services) and better tools for its drivers.
With over 200,000 drivers and 14 million users, 99 attracted the attention of investors worldwide, including that of China’s Didi Chuxing. Didi invested $100 million into 99 in January 2018 before acquiring 99 entirely months later for nearly $1 billion to take on Uber in Latin America, shortly after it acquired Uber’s operations in China.
Rocket Internet-backed taxi booking service, Easy Taxi, started in Latin America in 2011, two years after Uber first started in San Francisco. The company provides an easy way to book a taxi and track it in real-time. Today, the company is owned by Maxi Mobility, which acquired the company from Rocket Internet in 2017 for an undisclosed amount. Maxi Mobility also owns Cabify, and operates across many Latin American markets, including Argentina, Mexico, Bolivia, Panama, Brazil, Peru, and Chile, in addition to a handful of markets elsewhere.
To solidify its position in the region, Easy Taxi merged with Colombian taxi-booking app Tappsi in 2015. Tappsi launched in Bogotá in 2012 and was doing quite well in the Colombian market. The merger allowed the companies to pool their resources just as other competitors, such as Uber, began entering the region.
Easy Taxi maintains impressive traction, raising more than $75 million to date. But as the ride-hailing battle in Latin America pushes forward, the company is rumored to be a likely investment or acquisition target for Uber, Didi, or the largest global investor in this space, Softbank.
Cabify is a Spanish company that provides private vehicles for hire via its smartphone app. Although founded in Madrid, Cabify has always positioned itself as a Latin American company, investing heavily across the region. The company was able to gain a strong foothold due to some significant funding raised by its parent company, Maxi Mobility. In January 2018, Maxi Mobility raised another $160 million and said the funding would be used to accelerate both of its companies, Cabify and Easy Taxi, in the 130 cities where they operate throughout Spain, Portugal, and Latin America.
Cabify reported it has over 13 million users and grew its installed-base by 500% between 2016 and 2017, tripling its user base and fulfilling six times more trips in 2017.
Cabify competes directly with Uber, 99, and Easy Taxi in Brazil; however, it reportedly has around 40% market share in Sao Pãolo, one of the largest cities in all of Latin America.
Smaller players to watch
Beat (Formerly Taxibeat)
Beat is a profitable ride-hailing service founded in Athens, Greece that also operates in Peru. Beat is slowly expanding its operations across Latin America, though expansion appears to be limited to Chile for now.
As of January 2017, Beat had around 15,000 drivers and 800,000 customers in Peru.
Toronto-based Nekso bet on the Latin American taxi-hailing market before its home market with a pilot launch in Venezuela in 2016. Nekso was able to gain acceptance from the taxi industries in Venezuela, Dominican Republic, Ecuador, and Panama with its slightly different approach to ride-hailing.
The company connects a network of 550+ licensed taxi companies with thousands of drivers and allows users to flag down a cab off the street and without using in-app requests. Nekso also uses artificial intelligence technology to offer drivers real-time updates on weather, events, and traffic data to predict areas of a city which may need more drivers. The company claims taxi drivers can spend up to two-thirds of their day looking for or waiting for riders and that Nekso technology helps drivers increase their daily rides by more than 25% percent.
At the end of 2017, Nekso boasted around 150,000 users and facilitated approximately 400,000 rides per month. Now, the company plans to make its debut in Canada as well as expand to more countries in South America, including Argentina, Colombia, Chile, and Peru.
Didi, 99, and the next phase
99’s new owner, Didi, which dominates the Asian market and was able to defeat Uber in China, has big plans for international expansion. Its acquisition of 99 reveals the potential it sees in Latin America but also adds to the complicated web of global ride-hailing services.
After Didi shut down and acquired Uber’s assets in China, it also bought a stake in Uber for $1 billion. Uber, Didi, and 99 are all backed by Softbank. However, everywhere outside of China, Didi and Uber are competing with each other. Didi’s full plans for 99 are not yet obvious, but the company has already set up an office in Mexico and begun poaching staff from Uber in Mexico.
With an infusion of capital, Latin America’s ride-hailing industry is multiplying. That said, companies that want to compete in the region will need to use an aggressive and strategic approach that can withstand the uniqueness of commuters and transportation options in the region. It’s only a matter of time until we see if these companies continue ramping up their operations for geographic domination, or if we see more and more partner up to advance their technologies and address other looming threats – such as bike sharing, scooter sharing, and even autonomous vehicles.
Two of the founders of 99, who sold their company to Didi, have already launched a dockless bike sharing startup called Yellow in Brazil and raised $9 million to grow its operations. No other scooter company has taken the plunge into Latin America yet besides Grin Scooters in Mexico City, but other larger cities such as Buenos Aires, Bogota, Santiago, and Lima would be ideal markets if the companies can figure out pricing as well as security and safety issues first.
Didi’s activity in Brazil and Mexico is sure to trigger a new wave of competition between existing ride-hailing players and create an even more tangled web of alliances and acquisitions. Whether or not these companies can adapt and move fast enough to rise to the top, and deal with the other looming alternative modes of transportation, remains to be seen.