FILE – In this July 15, 2015 file photo, an Uber driver sits in his car near the San Francisco… [+] International Airport. Uber and advocates for the blind have reached a lawsuit settlement in which the ride-hailing company agrees to require that existing and new drivers confirm they understand their legal obligations to transport riders with guide dogs or other service animals. The settlement is designed to resolve a lawsuit in federal court that alleges Uber discriminates against passengers with service dogs.(AP Photo/Jeff Chiu, File)
The Saudi Arabian sovereign wealth fund is making the largest single investment yet in ride-hailing service Uber by purchasing a five percent stake for $3.5 billion. Investing in the future of on-demand mobility is potentially a very smart move for one of the world’s largest producers of crude oil. In the long-term it could help to address a number of thorny political issues in the country.
The single biggest issue for Saudi Arabia is its dependence on pumping and selling oil to the rest of the world. Some 80 percent of government revenues and nearly half of the GDP comes from the oil industry. That income has made Saudi Arabia one of the wealthiest countries in the world but that wealth is far from evenly distributed. That inequality is a problem now, but it is likely become a bigger problem for the royal family in the future if the oil wealth starts to evaporate, something that has already happened over the past two years as oil prices have collapsed.
While oil as a transportation fuel isn’t going completely away anytime soon, demand will probably taper off as efforts to improve efficiency and reduce pollution around the world accelerate. Eventually, electrification of ground transportation will become the norm. In combination with connectivity, automation and steadily increasing urbanization, on-demand mobility services will probably also become the primary mode of getting around megacities.
Uber is currently the 400-pound gorilla in urban ride-hailing in many parts of the world and like its competitors it eventually wants to do away with the expense of sharing revenue with drivers. Today, the Saudis skim off a percentage of the cost of every mile driven around the world by supplying a significant chunk of the fuel. In the future, if people are getting around megacities in self-driving, electric pods, owning a stake in one or more of the companies providing these services to commuters will allow the company to maintain a revenue stream. It’s a long-term play, but it could well pay-off handsomely for the Saudis.
Investing in Uber and encouraging its use in the Kingdom may also enable the Saudis to circumvent another issue that’s raising the ire of a big part of the kingdom’s population – women drivers. More precisely, the absence of women drivers. Saudi Arabia, which is ruled under an extremely fundamentalist interpretation of Islamic sharia law prohibits women from driving. In recent years there have been increasing protests from women that want the right to drive which in turn has led to crackdowns from the religious police.
Approximately 80 percent of Uber customers in Saudi Arabia now are women. In the future, it’s not inconceivable that human-driven cars could be banned from urban areas in favor of mobility services using autonomous vehicles. While in most parts of the world this idea is being championed as a way to reduce energy us, while increasing safety and improving traffic flow, in Saudi Arabia it addresses a very thorny political issue. It would enable women as well as men to move about without directly addressing the religious problem and raising the ire of the zealots that have supported the ruling family for more than 80 years.
Neither of these issues are going to be addressed overnight by an investment in Uber today, but it does indicate that the Saudi ruling family is at least thinking about how to deal with the future without leaving the present and past behind.
https://www.forbes.com/sites/samabuelsamid/2016/06/02/saudi-arabias-uber-investment-seeks-to-tackle-multiple-political-problems/
2016-06-02T13:13:00+00:00