For Uber: Lyft Should Be Keeping the Taxi Industry Up at Night

LyftIs Uber or Lyft a Bigger Threat to Taxis?

Taxis are watching their industry be taken over by Uber Technologies Inc., but rival Lyft may be their bigger concern.

Lyft is Uber’s main competitor. Recently, the alternative rideshare, or vehicle for hire (VFH), service secured alliances in Asia in order to challenge Uber. Lyft, which, like Uber, is based in the United States, said its subscribers can now use the services of Didi Kuaidi in China, Ola in India, and GrabTaxi in Southeast Asia through its application. It is almost as if Lyft is inaugurating the rideshare equivalent of the airline alliance.

In so doing, Lyft has secured a group partnership between four companies, which gives it the chance to have a greater impact on urban development in the world. The partnerships will allow Lyft to expand from an economic perspective, but react more strategically than other similar services in recognizing the peculiarities of local markets and avoiding ending up getting a media-induced black eye.

Indeed, Lyft and its partners (the abovementioned Didi Kuaidi, Ola, and GrabTaxi) are planning to offer their shared products as early as the first three months of 2016. In this way, for example, a Lyft user traveling in China can use Didi Kuaidi and still receive all the benefits he or she may experience when traveling with Lyft in the U.S. This makes traveling more convenient for Lyft’s users and more attractive for that very reason. (Source: “World war declared: Ola, Didi, Lyft, and GrabTaxi gang up to kill Uber,” Tech in Asia web site, December 3, 2015.)

Anthony Tan, head of GrabTaxi, explained in an e-mail to Bloomberg how local-level partnerships can benefit Uber’s competitors. Lyft and its partners can share technology, special knowledge in specific markets and sales resources, giving them a combined competitive advantage. (Source: “Didi, Lyft Enter Four-Way Alliance to Take on Uber for Rides,” Bloomberg, December 3, 2015.)

According to filings with authorities in Delaware, Lyft aims to raise more than $1.0 billion in funds, bringing its valuation to $4.5 billion. This is up from $2.5 billion just last February, when Lyft ran its previous round of fundraising. (Source: “Uber’s Rival Lyft Plans to Raise Up to $1 Billion in New Funds,” Bloomberg, December 20, 2015.)

Lyft, meanwhile, has taken a lead over its competitors in international expansion. It appears as though Lyft has done so by using a savvier approach, already tried and tested by the world’s major airlines, which secures alliances to expand their route offerings. This helps that company expand elsewhere without having to develop the infrastructure first.

Lyft’s alliance with China’s Didi is a step in the right direction. Lyft has gone further still, reaching agreements with traditional companies like Hertz and Shell to better manage car and fuel availability and costs.

Lyft drivers can obtain, for example, a refund on fuel or bonus-awards from Shell. Better still, thanks to a test program in Las Vegas, for now, Lyft drivers can take advantage of a free rental from Hertz. This offer allows Lyft to attract more drivers, who, unlike in the case of Uber, do not have to use and pay for the related maintenance of their own car. This feature alone should do wonders for attracting potential candidates to become a Lyft driver, rather than work for its rivals, while also increasing the service’s appeal to socially conscious consumers.

Additionally, Lyft can count on the fundraising support of activist investors like Carl Icahn and big-money company Alibaba. (Sources: “Carl Icahn Takes $100 Million Stake in Lyft,” The Wall Street Journal, May 15, 2015; “Alibaba invests in ride-sharing app Lyft,” The Financial Times, April 2, 2014.) No wonder, Lyft and Didi were able to make a deal and a strategically smart one at that.

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