Wed, 24 Jun 2015

Police in Jakarta have launched an investigation into Uber after local taxi companies filed a complaint against the ride-hailing app in the latest regulatory battles to blight the company’s expansion plans in Asia.

Five of Uber’s drivers in the country were detained last week, as local competitors questioned the legality of its operations.

Local authorities released the drivers this week, but the Organization of Land Transportation Owners (Organda), the Jakarta-based association behind the initial complaint, is pursuing the investigation.

“What they do is create the apps, hire individual cars, and operate just like other public transportation — like other official taxis — but without the proper licence,” says Shafruhan Sinungan, chairman of the organisation.

“Uber taxis compete in a wild way,” Mr Sinungan said. “Other regular taxi operators have to make big investments to establish a company, providing land for parking and garages, paying tax to the government and hiring workers.”

Alan Jiang, acting head of Uber in the country, said it was “really just a misunderstanding of what Uber’s business model is”.

He added that “there are some interest groups that want us to get a taxi licence”.

In a statement following the detention of its drivers this week, Uber said it “is fully compliant with applicable transportation laws and accredited by the local government”.

Indonesia is an increasingly important market for Uber, because of its population of 250m people, high smartphone penetration and a burgeoning middle-class.

The company, one of the world’s most valuable private technology companies, has expanded rapidly in the country since it launched in August last year, growing tenfold over the past year, in terms of the maximum number of rides per week.

Although the Indonesian market has traditionally been dominated by Blue Bird, the family-run operator that listed on the local stock exchange last year, competition is heating up.

A tremor passed through the foundations of the “sharing economy” this week after it emerged that ride-hailing app Uber had lost a case before California’s Labor Commissioner’s Office.

Southeast Asian taxi-hailing app, Grabtaxi, is also expanding quickly, while Gojek, a Jakarta-based start-up, has developed an app to connect riders with Indonesia’s motorcycle taxis, called ojeks, which are also used for food delivery.

These new players are unlikely to be caught up in the regulatory wrangling, according to Agustinus Reza Kirana, an analyst at Bahana Securities, a local brokerage.

“It’s a different business line — it’s not just about passengers but also couriers,” Mr Kirana explains.

The company has been expanding aggressively across Asia in recent months, with plans to move into several new cities across India and invest $1bn this year in China alone.

But Uber has faced resistance. Police raided its office in Guangzhou in April, and the app was temporarily banned in New Delhi, following the alleged rape of a passenger by an Uber driver.

Copyright The Financial Times Limited 2015.