Uber has seen “hundreds” of cities become profitable in the past six months and is betting that in two years’ time it will start to see parts of China start to make money, the chief executive of the US ride-hailing app told CNBC.
The company – which is valued at over USD 62 billion– recently said that it is profitable in the US but losing over USD 1 billion a year in China.
However, Uber’s boss defended this, saying that the company, which currently operates in 400 cities around the world, will not be able to scale up without investing and being unprofitable for a while.
“If you are focused on profits right out of the gate, you’re gonna have the smallest profitable business that has ever been seen,” Travis Kalanick, told CNBC at the Boao Forum in China.
Uber has seen “hundreds” of cities become profitable in the past six months and is betting that in two years’ time it will start to see parts of China start to make money, the chief executive of the U.S. ride-hailing app told CNBC.
“The good thing though is when you have profitable cities around the world, those profitable cities can then help us to invest more deeply in this country so you take like the…top 30 cities that we’re in around the world, we’re already generating a billion dollars in profits from those 30 cities a year today and those cities are growing by 2, 3, 4 times per year. And so that is sort of the fuel that allow us to go to places like China and invest deeply to make, to make the system work and to work in a big way.”
Asked by CNBCs Geoff Cutmore if he was losing a USD 1 billion a year in China, Kalanick replied he was “investing” USD 1 billion a year in the country.
Kalanick added that in the last six months “we’ve just been watching literally hundreds of cities go profitable, we’ve just tightened up the operation…we’re getting good at running profitable cities”.
The CEO of the world’s most valuable start-up compared itself to Amazon saying that it reinvests its profits heavily like the US e-commerce giant does.
Uber’s China unit alone is valued at USD 8 billion with the world’s second largest economy being flagged as a key market by the start-up. But it faces fierce competition from local rival Didi Kuaidi, which itself is valued at USD 16.5 billion investments from the likes of Alibaba and Tencent. Didi Kuaidi is using its deep pockets to expand across China and is matching Uber’s own cash piles.
Still Kalanick is optimistic some areas of China will begin to reap profits for the company.
“I’m not yet sure how much…investment will take to get to profitability in China, but I’m optimistic that within the next couple of years we’re going to start seeing Chinese cities start to prop up and be profitable,” the Uber CEO told CNBC.
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