Uber’s Attempt to Upturn the Auto Loan Industry Overturned?


Uber’s blitzkrieg on Singapore’s taxi industry has ground down to a more moderate pace in recent months. The initial assault that saw the veritable Comfort Delgro’s cab business reeling onto its back foot as it lost significant ground has given way to an armistice. Since it’s inception in early 2013, Uber and its archrival, Grab, have gobbled up market share while Comfort Delgro’s active taxi fleet plummeted 8.5% between 2015 ,when its fleet was at its largest, and July 2017.


 Featured Image: Arabian Business


Uber Expands With Affordable Auto Loans


 Image: SG Carmart


Uber’s meteoric rise began two years after arriving at Singapore’s shores, when it set up Lion City Rentals in early 2015. The plan was to grow its fleet exponentially but the problem was how to do it, especially since car prices in the island state are by all official accounts, amongst the highest in the world. Through its own rental arm and with other leasing affiliates, Uber sought to make access to a vehicle as easy as possible and grow its fleet at the same time. It even set up an online rental marketplace to facilitate the process and also exploited loopholes to work around vehicle financing limits imposed by the authorities, as current rules exclude private hire car purchases registered under a business entity. Additionally, Uber Singapore’s General Manager, Mr Tseng announced that Uber had “negotiated deals with insurance partners which can offer premiums at as low as $1,300 (per year) for a comprehensive insurance package which covers personal and private-hire use”. Those not yet ready to dive head long into car ownership could still count on attractive leasing offers from Uber that came with very flexible terms. With affordable loan packages, leasing offers and commercial insurance plans barely higher than for private vehicles, many jumped on the bandwagon.


These combined effect of these initiatives have resulted in breaking the longtime duopoly of Comfort and Trans-Cab in the taxi industry. By flooding the market with a plentiful supply of private hire cars and attracting the defection of taxi drivers with more favourable driving conditions and lower vehicle rentals, Uber has been growing at the expense of its traditional taxi rivals. By all accounts, it has adopted an almost antagonistic, all-out policy of expansion and growth at all costs; drawing the ire of taxi drivers and tempting government regulators with every bold move. Although, in Singapore, Uber still operates with a fair degree of freedom and enjoys an almost tacit Government support, unlike other countries like Philippines, Taiwan, Hong Kong, South Korea, and Japan which have handicapped or outright banned Uber’s operations.


 Image: Business Insider


Uber is perhaps one of this decade’s greatest technological disrupter with ambitious aims to shake up the taxi industry establishment, with a relentless aim to corner the market and push the incumbents into a corner.  However, its silver bullet roadmap to achieving domination by disrupting the auto-loan industry has not been able to make its mark. Admittedly, it was a tactic that reaped significant gains since 2015 but, the initial momentum gained has hit a brick wall. After having causing both the taxi industry and auto loan industry to bend over backward, Uber was brought to heel when the first set of regulations to tame the ride sharing company kicked in. Since the first of July, private hire drivers have been required to register a company, pass medical and vocational tests before being granted a license to drive.


Exhausting the Cheap Auto Loan Option


Since then, Uber has been forced to do an about face in its business tactics as promoting generous auto loans and lease packages is no longer sufficient to fuel its ambitious growth trajectory. The company’s latest moves only highlight that Uber cannot ride on deep pockets and simple solutions alone in this highly competitive marketplace.


In 2015, Uber brazenly advertised vehicle financing packages of up to 80% on the purchase of new cars and 70% on used ones, which flew in the face of Singapore’s Land Transport Authority’s (LTA) goal of fostering a car-lite society. Since regulations kicked in, Uber has taken a step back from its usual controversial and confrontational form, and has embraced working with Comfort Cabs and in close cooperation with local governments instead of taking them head on. Its aims now, are to incorporate excess taxi capacity in terms of vehicles and drivers, thereby drawing on this existing pool of resources, instead of creating the supply by attracting potential drivers.


Till today, Uber has not turned a profit since it started operations. So far, investors have poured in more than US$11 billion to keep the company going. What seemed like an altruistic effort to upend the auto loan industry they way it did the taxi industry was never the goal. The name of the game was always about the piece of the pie – The fight for market presence and domination.


 Image: Business Insider


In its frenetic grasp for control of the industry, Uber overstepped the boundaries of sound decision. The first was to knowingly rent out defective Honda Vezels which it purchased at a bargain price through Lion City Rentals. It took the further step to keep the faulty cars with the drivers instead of initiating a recall to save an estimated US$1 million in costs. App user security and privacy have emerged as controversial issues, when it was found that Uber tracked users even after a ride had been completed. To ratchet up the creep factor, it was further uncovered that psychological inducements and subtle motivations have been employed in the app to keep drivers working for longer than they otherwise would. Although not illegal, these actions have not been transparent and underscores the lengths that Uber would go to fulfill the paramount objective of maintaining an abundant supply of available drivers.


Even Uber’s auto loan scheme itself has attracted questions as to who really benefits most. High commission deductions, and frequent fare promotions have trapped some into working just to pay off their lease rentals or auto loan premiums, leading some to conclude that easy financing serves Uber’s objectives more than it does the driver.


With many of Uber’s business initiatives coming off as serving several agendas, the company looks less like the champion of free choice and a free economy and more like 1984’s big brother. With its latest moves at conforming, and legitimising its operations by working with the very companies it set out to disrupt, it is difficult to predict what direction the company will take. However, it is too early to surmise that the company is slowly unravelling. Still one of the world’s most valuable startup and having attracted the most amount of investor financing in history, Uber is in for a tough game and it remains to see who prevails in the end.

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