Why Spain’s Cabify will end up being bought out
Recent reports that Lyft was about to buy Spain’s Cabify for some $3 billion have been denied by Cabify, which insists it will follow a roadmap that includes a Spanish IPO in over the next one or two years, while Lyft has issued the usual no comment. Cabify, one of the few Spanish unicorns, was valued during its latest round of financing at $1.4 billion and is present in 39 cities in 11 countries.
Is Cabify really up for sale? No doubt, even if they don’t know it just yet. Will it take place soon, and will it be to Lyft, with which it shares a key shareholder, Japan’s Rakuten? That’s harder to answer. But I will say this: the future of urban transportation is autonomous driving, and that’s an area Cabify has no expertise in.
Who are the leaders in autonomous driving that will be able to operate fleets of self-driving taxis within a few years? Way ahead of the pack is Alphabet’s Waymo, a company more interested in providing the technology rather than running vehicles. In those cities where it already has a license to operate autonomous taxis, it does so through agreements with other companies with experience in the maintenance of vehicles, such as Avis. In its nine years of life, Waymo has yet to turn a profit, but that hasn’t stopped it from considering investing $2.5 billion to acquire fleets of tens of thousands of vehicles from Jaguar or Fiat-Chrysler, while it patiently awaits the opportunity to license its technology.
The three other urban transport monsters: Uber, Lyft, and China’s Didi, have also dabbled with self-driving vehicles. While Didi and Lyft have combined their own initiatives with technological alliances with third parties, Uber was responsible for the first fatal accident involving an autonomous vehicle and a pedestrian as a result of road-testing vehicles unready for real traffic conditions in a bid to hold onto its valuation.
China’s Baidu is developing self-driving initiatives such as the Apollo open platform, which brings together a large number of motor industry and technology players. There is also a plethora of smaller and interesting companies such as Drive.ai, whose vehicles are already on the roads in Boston without the need for a safety driver.
What happens when autonomous driving technology is ready for use in other cities? There will be a race to put it into use. A driver makes up around 70% of the cost of running a taxi fleet, which means that companies still using them will be at a serious competitive disadvantage. Add novelty value and the safety factor and the adoption of this technology will happen very quickly, depending on how investors see its potential.
Who will these investors be? In all likelihood, companies like Uber, Lyft and Didi. The first does not seem especially active in buying a market share, instead directing its investments to companies able to offer differential factors such as technology or access to other types of vehicles for its fleet. In most cases, Uber is developing its own technology, rather than buying it in. But Didi is keen to pursue acquisitions or agreements with other companies that can open access to other markets, as seen by the recent acquisition of Brazil’s 99 for $1000 million dollars. Lyft is a mystery: it doesn’t have much of an international presence and is estimated at $15 billion — much lower than Uber’s $70.2 billion or Didi’s $56 billion, meaning it could end up being bought.
And of course, there will be other players competing for a slice of the self-driving taxi market. This is technology that is likely to replace the private vehicle for a large number of trips, as cities become aware of the need to apply carrot and stick policies to encourage the use of combinations of public transport and privately operated fleets, in addition to bicycles and scooters for shorter journeys. As a result, we could see car manufacturers investing in fleet companies or developing their own: GM’s Mary Barra, BMW, Daimler and Volkswagen have all hinted at their interest.
All this places Cabify in a perfect environment for an acquisition that will undoubtedly be very substantial. The company, which has carried out a brilliant international deployment based on a sustainable culture that in many cities beats Uber in terms of price/quality, currently lacks the technology to develop autonomous driving, although it could, eventually, reach agreements with tech companies. But the simplest route and the one its investors would likely choose, and they call the shots, not the founders or managers, would be the eventual sale to a bigger fish prepared to pay a good price for access to a key market.
To reiterate, I have little doubt that Cabify will eventually be sold and will make its founders and investors very rich. Whether that time has come or whether it should continue developing its expansion plans to improve its price is another matter.
(En español, aquí)