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Sunday, December 17, 2017 | MANILA, PHILIPPINES
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Date posted: Thursday, March 30, 2017 | Manila, Philippines

TOP 1000 Corporations in the Philippines (2016)

Can Uber help solve Manila’s traffic? (or Why Uber wants you to stop driving)

LAURENCE L. CUA wants you to stop driving.
Instead of taking your car to work and competing with two-and-a-half million other vehicles for road space in Metro Manila, you need only bring your smartphone and tap an app to get a ride.

Mr. Cua isn’t saying that out of altruism.

After all, he is the country manager of Uber, the world’s most popular ride-sharing smartphone application (which, by the way, recently sold its China operations to a rival so the company can focus on other markets, including the Philippines).

Since Uber rolled out local operations in April two years ago, smartphone users, who number half the population of the Philippines’ financial capital, found it easy to heed Mr. Cua’s advice. Thanks to rising incomes, a lot of Filipinos are able to afford pricey gadgets, online audio and video on-demand subscriptions, and yes, ride-sharing services such as Uber.

In recent years, the country’s per capita income increased by more than 5%. That growth owes to robust economic expansion that has earned the Philippines the moniker “Asia’s rising star.”

With more cash in their wallets, Filipinos took to Uber the same way they embraced smartphones and social media. In short, Uber in Metro Manila (and Metro Cebu where it was launched in December of the same year) became “sticky,” despite initially being made available only to credit card users. Cash later was introduced to boost usage, giving riders the option of taking Uber X (its low-cost category featuring standard sedans and subcompacts) or Uber Black (where you get to ride an SUV or luxury car).

Amid the brisk take-up of Uber, the government last year released the world’s first-ever rules on ride-sharing services, thereby creating a new transport category, the Transport Network Vehicle Services (TNVS).

The taxi industry immediately took a hit.

The 52-member Philippine National Taxicab Operators Association (PNTOA), which has a combined fleet of 40,000 cabs, saw utilization rates plummet by double digits in 2014.

Before the Uber “invasion,” 85 of every 100 taxicabs in the industry were up and running. Now, it’s down to 70%, according to lawyer Jesus Manuel “Bong” C. Suntay, a former Quezon City councilor who heads the PNTOA.

“If the utilization rate went down by 20%, then you have a 20% decrease in revenues because 20% of taxis are underutilized. You’re not losing money but the projected revenues are not met,” he told BusinessWorld.

He blames the exodus of taxi drivers who moved to Uber, enticed by incentives, such as additional cash depending on the number of trips taken in a day.

“They pirated drivers from us. That’s the disruption,” Mr. Suntay said.

What’s more, the ease of ride-sharing registration opened a door to “colorum” taxis -- referring to those plying the streets without any franchise -- to legitimize their operations, Mr. Suntay said.

The taxi industry hit back, successfully lobbying for an indefinite suspension of TNVS approvals that left 23,000 applications in limbo.

But less than a year after its launch, Uber has become a hard habit to break, like reading friends’ Facebook comments. The ride-sharing service gave an alternative to commuters disgusted with the taxi industry’s failure to weed their ranks of abusive drivers, not to mention decrepit units.

Whenever one wanted to go anywhere without driving, Filipinos took to their phones and tapped on the app. Sometimes, they agreed to pay fares three times as much or more -- via Uber’s surge pricing, which kicks in when cars are in short supply -- if only to get around in a megacity that has one of the highest numbers of people and vehicles per square kilometer. For the same amount of space, Singapore has only a third the number of people or vehicles while Tokyo has less than that.

Owing to Metro Manila’s population and vehicle density, speeds on EDSA, the Philippines’ busiest highway, have slowed to 10 kilometers per hour, according to one transport expert’s estimate.

As a result, the so-called “carmageddon” encouraged nearly eight out of ten Metro Manila residents to leave their cars at home, based on results of Uber’s internal survey conducted this year.

“People just want to get around conveniently and it starts with people who don’t want to drive,” said Mr. Cua, who uses Uber to go to the office, spending three hours a day checking e-mails in the backseat, a leap in productivity from those days when he was behind the wheel.

“After people used [Uber], they stick and that’s very fortunate for us. This means that the product works and we want to keep that up. We want to keep them as regular users,” he told BusinessWorld.

Thanks to its popularity, the local unit of the ride-sharing platform already posted a profit on its first year. Drivers and partners say Uber takes a 25% cut on all fares, a figure the company refused to confirm or deny.

Moving more people in fewer cars
Not content with its initial success, Uber took its game up a notch, apparently setting its sights on another public utility vehicle category: the UV (utility van) Express.

Months after it launched in Manila, executives examined data generated by the trips taken by the 24,000 registered vehicles, more than 90% of which, according to Mr. Cua, fall under Uber X.

Based on these trips -- the number of which Uber says is confidential -- the company discovered that thousands of passengers exhibit common riding behaviors. Simply put, the data showed that Uber users who may not necessarily know each other depart regularly from the same location around the same time heading for the same direction every day.

It didn’t take long for the company to turn this insight into a product: Uber Pool, a real-time carpooling service accessible on the same app and now available in 44 of 400 cities where the company operates.

Effectively, Uber Pool -- which offers fares for as low as P20 per person -- puts more people into fewer cars, according to Mr. Cua.

“With Uber Pool, what used to be a ratio of one passenger to one car is now two to one, or three to one,” the Kellogg School of Management MBA degree holder said. “Pause for a second and think about how hard and technical that is. Of the millions of people in Metro Manila, Uber Pool is able to find you and another person heading to a destination in real time and then you share a ride together.”

First offered in June, Uber Pool had 121,000 users by September, with the company claiming the service allowed people to forgo traveling a combined 1.5 million kilometers and to save on 75,000 liters of fuel. “That would have been [otherwise traveled and consumed] by someone else taking the same route on a different car,” Mr. Cua said.

The technology and resources behind Uber Pool -- which has a lot of math, computing power, and scale big enough for drivers and riders to get a match -- has raised Mr. Cua’s hopes that Uber Philippines can make a dent on Metro Manila’s huge and hairy traffic mess.

“Wouldn’t it be just nice actually to solve traffic? I say that as if it’s not a business thing but honestly, part of it is not a business thing,” Mr. Cua said. “My dream is I want people to stop driving and start sharing [their rides] and by doing that, we make the roads more efficient.”

And need we add, make Uber more profitable along the way. -- With research support from Leo Jaymar G. Uy.

Mr. Basilio is the Opinion and Engagement Editor of BusinessWorld.

For inquiries, send e-mail to research@bworldonline.com

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