Uber abandons its growth-at-all-cost strategy in Pakistan

After six years of jostling with local competition and aggressive expansion, Uber seems to be finally abandoning its growth-at-all-cost strategy, and is shifting gears in Pakistan.

On October 11, the ride-hailing giant notified its users in Karachi, Islamabad, Faisalabad, Multan, and Peshawar that it was discontinuing service in the cities; it continues to maintain a presence in Lahore. To continue getting rides in the places it has exited, Uber said, its drivers could switch to Careem, the local ride-hailing company that it acquired for $3.1 billion in 2020.

The move was “a long time coming,” Natasha Uderani, co-founder of Data Darbar, a Pakistan-based data intelligence platform, told Rest of World. “Some people were surprised that Uber was still relevant because it has always been operating on the fringes of Pakistan.”

The decline of Uber’s direct presence in Pakistan is part of a series of prolonged reassessments of how it operates its businesses in South Asia. In India, the company discontinued Uber Eats in 2020, selling it to local rival Zomato in a deal eventually worth $376 million. The company also appears to have ceded hard-fought ground to Ola, which now leads the mobility business in India with a presence across more than 200 cities, compared to Uber’s 100 cities. In October, local authorities in Bengaluru ordered cab aggregators to stop three-wheeler services — one of the fastest-growing mobility segments for Uber in India.

“Most American mobility firms have struggled to find their footing in South Asia, especially because of local competition,” Siddharth Surana, a mobility analyst with RedSeer, told Rest of World, citing the dominance of Indonesia’s Grab and Pakistan’s Careem in their respective geographies.

But this retreat does not necessarily mean that Uber is giving up on the region, experts said. Uber did not respond to Rest of World’s questions about its South Asia strategy.

In Pakistan, Uber has prioritized the growth of Careem, according to analysts. The company has also launched a new product in the country called Go Pass — a subscription that lets drivers buy a one-day, three-day, or one-week pass, for which the company won’t deduct commissions on the trips accepted by the driver. There’s enthusiasm amongst drivers for Go Pass, Rest of World’s review of Facebook driver groups showed. “Bahut Achi cheez hai Go Pass,” an Uber driver posted on a Pakistani driver group on October 26, which translates to “Go Pass is a very good thing.”

In India, the company is doubling down on its core mobility business with solutions such as rentals, bus transport, package delivery, and more.

Through this, “Uber is able to capture more wallet share in the life cycle of a customer journey,” Surana said. “The mantra has changed from growth at any cost to operational profitability. So, as long as it is able to achieve operating profitability, I think there is a bigger long-term goal in the future.”

Uber entered Pakistan in 2016 as part of a $250 million push for global expansion into the Middle East and North Africa. “Back then, everyone wanted to have a job at Uber,” Asif, a former Uber Pakistan employee who led the company’s community operations in Islamabad in 2019, told Rest of World. “There were no other major tech companies — like we don’t have Facebook, Amazon, all those companies in Pakistan.” Asif asked to use a pseudonym, fearing retribution from Uber.

Asif told Rest of World that Uber blew money freely in its early days in Pakistan. He recalled a 2019 episode in which Uber rented prime real estate in Karachi for its in-person support and sign-up centers for drivers, called Greenlight Hubs, paying a monthly rent of 600,000 Pakistani rupees ($2,717). “We actually paid that rent for 6–7 months and never utilized that facility,” Asif said. “Money was never a problem, at least back then.” The early spending blitz was passed onto drivers, who were paid 500 Pakistani rupees (around $2) as incentive for every hour that they clocked on Uber, he added.

Uber’s splashy entry and incentives helped educate users and drivers, normalizing app-based ride-hailing in Pakistan. But the app also developed a reputation for being unsafe.

Two former and current Uber Pakistan employees told Rest of World that since inception, the company struggled to make a mark outside of Lahore, and was marred by poor customer service. “Uber was not safe at all,” said Uderani of Data Darbar. Meanwhile, Uber’s chief rival, Careem, “had a dedicated customer care helpline — and sometimes, complaints slipped through the cracks — but Uber was negligent.” (Prior to co-founding Data Darbar, Uderani worked for Careem for a few years, before its acquisition.)

Despite its constant expansion, Uber consistently lagged behind Careem in most of the cities, with the local company outspending in offering lucrative sign-up bonuses for drivers and heavy discounts for users. “Careem bulao” — call a Careem — became the catch-all phrase to hail a cab in Pakistan.

“A big part of what endeared Pakistan to Careem was their constant gimmicks, over-the-top controversial ad campaigns that got people talking, promo codes, competitions, etc.,” Mutaher Khan, co-founder of Data Darbar, told Rest of World. In 2019, Uber announced it would acquire Careem for $3.1 billion, consolidating its position in Pakistan.

By late spring 2020, the pandemic had shocked the global ride-hailing sector, with an 80% drop in rides in Pakistan. Careem also laid off Pakistan-based employees. The post-pandemic operational pressures, coupled with the public market push toward profitability, forced Uber to roll back driver incentives.

Experts believe that the new strategy to shut direct operations and focus on Careem might still be hard to execute, given the recent dizzying rise of Siberian startup inDrive.

Launched in Pakistan in 2021, inDrive’s haggling feature and minimal driver commissions have made it a runaway hit among the country’s price-sensitive users and drivers. “When inDrive launched in Pakistan, they were literally charging 0% from the drivers,” said Asif, the former Uber community operations executive. “At this point, there was no barrier for drivers to convert from Uber to inDrive.”

Uber’s focus on profitability meant steep expenditure cuts that impacted both Careem and Uber. InDrive leveraged this downturn to expand operations to 11 cities, becoming the most-downloaded ride-hailing app in Pakistan within a year of its launch. Another local competitor, Bykea, has also entered the fray.

According to analysts who have observed inDrive’s emergence in Pakistan’s ride-sharing market, the company managed to keep costs low by not hiring any leadership or support staff. The lack of on-ground support meant that “a lot of drivers misbehaved, charged extra, did rash driving, and when you report about that driver, nothing happens,” Talal Massod, a Pakistani inDrive user, told Rest of Word. Though consumers had complaints about the ride-sharing newcomer early on, its cheap prices have helped inDrive achieve dominance in Pakistan.