Reinventing the Wheel: Uber Diplomacy

Uber’s premise is simple: “Tap the app, get a ride.” In just a few years, Uber Technologies Inc. went from mobile app to global phenomenon— completely reimagining what urban transportation can achieve in the twenty first century.

With humble beginnings, Uber was once known as UberCab— a ride-hailing mobile app launched in 2009 by entrepreneurs Garrett Camp and Travis Kalanick in San Francisco. Since its launch, Uber has become one of the most valuable and ‘disruptive’ startup companies of all time, currently operating in 508 cities worldwide and valued at over $70 billion. In July 2016, Uber announced that it had reached another major milestone— successfully logging 2 billion rides worldwide.

For many, Uber and the ‘U’ decals adorned by its fleet replace outdated taxi cabs and inflexible bus routes with a more elegant, on-demand car service. For others, Uber represents a newfound source of empowerment, disrupting not only traditional transportation services but also local employment opportunities and global economic prospects. As of June 2015, Uber employed over one million drivers around the world. This innovative vision falls within a broader context of the ‘peer-to-peer’ (P2P) dynamics of the emerging ‘sharing economy’, with fellow startups like Lyft, Kickstarter, and Airbnb all seeking to capitalize on the collaborative potential of globalization in the digital age.

Image courtesy of Pedro Caramuru, © 2016, some rights reserved.

Image courtesy of Pedro Caramuru, © 2016, some rights reserved.

And yet, this rapid global takeover does not come without consequences. As Uber operations continue to expand, the company has become increasingly entangled in political and legal controversies worldwide. Can Uber’s foreign policy playbook keep up with its global ambitions?

Thou Shalt Not Uber

Riders and drivers around the world have welcomed the ‘disruption’ of Uber and similar P2P platforms. But with innovation comes resistance—and Uber has its fair share of enemies. Critics have raised questions about everything from the safety and reliability of Uber to challenging the outright legality of its ride-hailing services. Exploring the issue in a recent publication, Eva Grant and Simran Khosla clarify that: ‘Uber doesn’t function as a normal taxi service, instead occupying the strange business space between chauffeur service and tech company. Uber often foregoes taxi licenses for many of its drivers, causing legal hiccups when the company enters new, heavily regulated markets.’

This has resulted in a fragmented and often contradictory effort to ‘regulate’ Uber around the world — where Uber may be flourishing in one city and strictly illegal in the next. Cities have struggled to find the optimal balance between innovation and regulation, while at the same time satisfying the demands of taxi drivers, labor unions, and consumers. There are hundreds of lawsuits and ongoing disputes implicating Uber around the world. Taxi unions and local city councils have been among the staunchest of critics, fiercely lobbying against Uber and imposing widespread service bans on the basis of unfair competition and regulatory concerns. At present, there are full bans on Uber operations in cities spanning from Barcelona to Buffalo. More ironically, Uber was banned in San Francisco—home to the global headquarters of Uber—until recent legislation was passed in California to lift the ban and impose new regulatory standards. The majority of Uber contestations have resulted in ‘partial bans’ or ‘suspended operations’ where Uber is banned but continues to operate. This is the case in cities like Cape Town and New Delhi.

In other cities, however, there have been widespread anti-Uber protests and violent attacks against Uber drivers. During July 2015, a crowd of local taxi drivers in Mexico City blocked off the streets and destroyed Uber vehicles parked outside the Mexico City Airport. French cities like Paris, Marseille, and Nice have also laid witness to the violence of anti-Uber strikes and riots as hundreds of French taxi drivers took to the streets to burn tires and overturn vehicles. Uber executives responded to the riots, denouncing the violence and reaffirming that all matters would be handled through proper legal procedures. At home and abroad, Uber seems to prefer a ‘reactive’ approach to handling disputes but the success of this strategy remains to be seen.

A Dynasty, Toppled?

In the midst of regulatory struggles spanning three continents, Uber faced its greatest challenge when it launched operations across China in early 2013. China is often portrayed as a formidable market for foreign-based technology companies due to strict regulatory guidelines and government standards that tend to favor domestic business over foreign multinationals. Yet, Uber and CEO Travis Kalanick were determined at the onset to change the tone of the discussions. Financial Times correspondent Leslie Hook explains: ‘Uber decided on a China strategy that was unlike anything it had tried elsewhere. It would set up a separate Chinese entity, Uber China, which would court local investors as well as getting financial support from the global Uber business.’ With this more ‘proactive’ approach, Uber China invested over $2 billion between 2013 and 2016 in order to fight domestic competition and regulatory constraints.

Despite its best efforts, however, Uber has joined the ranks of other US-based technology firms like Amazon, Google, Yahoo, and Twitter. In different ways, each failed to secure long-term stability in China and consequently ‘exited’ the Chinese market. In August 2016, Uber agreed to sell its subsidiary company, Uber China to its Chinese rival, Didi Chuxing. Uber is now the largest stakeholder in Didi Chuxing and Uber will also receive a $1 billion investment from Didi. While some have described the deal as a ‘rapprochement’ of sorts, it seems hard to deny that Uber drew the short straw. Looking ahead, the terms and success of this settlement are likely to impact similar confrontations with US-based Lyft as well as competitors like Ola and GrabCab, both of which operate across Asia.

The Road Ahead

 In spite of global resistance, Ubertopia continues to thrive. As Uber exits China, the platform will pivot towards other regions for expansion. Earlier in 2016, Uber accepted a $3.5 billion investment from Saudi Arabia in order to pursue development across the Middle East. Over the last several months, Uber has also rolled out a variety of new features— namely UberEats, a food delivery service, and UberPool, a ride-sharing option that allows you to share your Uber and split the cost. More recently, and perhaps more controversially, Uber announced that it was also in the process of developing autonomous ‘driverless’ vehicles.

If Uber wants to move forward and change the face of global transportation, however, its foreign policy playbook needs some revision. Like any seasoned diplomat, Uber should look to develop its cultural awareness and local sensitivity in parallel with its expansion plans. Although Uber’s experiences in China resulted in less than ideal circumstances, there are important lessons to be learned, many of which may prove useful in other markets. More broadly, in the place of retroactive efforts to satisfy its critics around the world, Uber should continue strengthening its public image and work more closely with consumer advocates. By maximizing the power of its broad rider and driver base, Uber has the potential to gain momentum in ongoing disputes as well as tackle future challenges with greater discretion. Uber should not be afraid of a good fight in the name of innovation. There are bound to be triumphs and losses in the game of Uber diplomacy but the story is far from over. Consumer wars may be waged. Tires may be slashed. But no one said that reinventing the wheel would be easy.