Berlin pits itself against Uber's inevitable ascent
It's a sunny but buttoned-up morning on Berlin's Jüteborger Strasse. Tucked behind trendy boutiques, day cares and an upscale covered market, the leafy corner of Kreuzberg is one of the German capital's costliest quarters. Media mums and dads take strollers to the park and local workers duck indoors for multisyllabic coffee blends.
But that's not where the real humdrum is. Beside the stores, the bars and the macchiatos sits a row of a dozen or so taxi offices. Each one is the size of a garden shed and packed with dispatchers and drivers working out the day's schedules. Flat-capped coffee-drinkers stand outside chatting. Car tyres flap-flap over rain-polished cobbles. Jüteborger Strasse is Berlin's unofficial taxi HQ.
Few folks here are fans of Uber, the San Francisco-based ridesharing firm that, rare among startups, appears to have fully justified its hype. Since 2009 it has grown at an estimated rate of 3.8 million users per year, who request around 1.1 million rides per week. According to New York magazine, Uber might be more valuable than Facebook.
CEO Travis Kalanick's company was this summer valued at a staggering $18.2 billion. To date it has raised $1.5 billion from six funding rounds, and is gearing up for another. After just five years it is available in 46 countries and 200 cities.
Berlin is one of them. But business has been tough. In August, Berlin's local government suspended its own ban on the service, less than a week after implementing it. In September the city announced that UberPop, its ride-hailing service, was banned once more.
In response Uber dropped its prices from $2 per kilometer to just $0.44, falling in line with an amount Germany deems the base cost of driving. Thus, no profit and few willing drivers. This week the firm offered fruit delivery to Berliners, as it gears up delivery services across the world. No-one at Uber would offer a comment on the new service when requested by Red Herring.
Perhaps another feather in Mr Kalanik's cap is his company's ability to ruffle them wherever it goes. Huge protests have brought Paris, London and Madrid to standstills, as taxi drivers have lobbied against Uber's 'untrained' drivers, who, they claim, lack the knowledge of their licensed counterparts. In London, where licenses are contingent on the completion of the gruelling three-year Knowledge test, this is almost certainly true. Elsewhere, it is less convincing.
Others, taking a leaf from the Hotels vs Airbnb share-economy handbook, have chosen to focus on safety. "Ridesharing services like Uber are unsafe, because they don't have a commercial insurance for the public transport," says Hermann Walder, CEO of taxi.eu and Taxi Berlin, two city-sanctioned brands.
"In Germany they must check their car only every two years than every year," he adds. "They also must do a check-up every four years. A ride-sharing driver could be 95 years old and half blind. Taxi drivers are more reliable, because only non-criminals can get a commercial driver license."
The German authorities agreed. "Non-approved drivers in unlicensed vehicles" posed a threat to public safety," it claimed last month. Uber in turn declared that rider safety was its "number one priority." Had the ban been upheld, Uber would have been hit with €25,000 ($33,400) penalties for each ride, in addition to €20,000 ($27,000) fines for its drivers.
Characterizing Uber's drivers as lethal joyriders may be extreme. But there are few who disagree on Jüterboger Strasse. "All of our cars are checked regularly for defaults and our drivers are highly skilled," says Kamal, a young driver sipping coffee outside. "We can understand why people might use Uber," says Farah, a visibly worried dispatcher who did not want her company name revealed. "But this is our life. And we have the best standards. Uber cannot compete."
Outgoing European Commission vice president Neelie Kroes disagrees. She voiced her "outrage" at the German officials' safety claims. "Slamming the door in Uber's face doesn't solve anything," she added.
Neither have cab drivers' demonstrations enamored them with the majority of the public. Widespread outcry followed London's protests in September, in which over a thousand of the city's famous 'black cabs' blocked some of the city's most vital thoroughfares. London, reported The Spectator magazine, has the world's second-most-expensive taxis behind Tokyo. Uber signups in Britain's capital leapt 850%.
Alex Fries is a leading Silicon Valley investor who matches European and U.S. businesses and capital. He cannot see how Berlin's continued efforts to stymie Uber's progress will have any real results. "Don't forget that Uber was also blocked for a while in U.S. cities too," he says. "The world is large enough for Uber to expand and if necessary, they will skip Germany. There are worse products, applications such as CouchSurf and AirBnB (which I like), that have the same business model and part of the share economy."
As Uber sets its sights on even more funding, there seems no way its march to ridesharing domination will be stopped – even by the capital city of Europe's largest economy. And with gross revenue expected to hit a run rate of $10 billion by the end of 2015, most analysts agree that the company's giant valuation wasn't actually that lofty. The drivers and dispatchers of Jüterboger Strasse may be able to enjoy their coffees for now. But, like Germany in the fall, it won't stay hot for long.
Filed Under: Consumer, Europe, Startups
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