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Embattled Uber Takes Its Next Fight to Israel

By Yaacov Benmeleh
August 24, 2014 5:03 PM EDT 1 Comments
Uber car in Japan
Photographer: Junko Kimura-Matsumoto/Bloomberg
Uber car in Japan

Doing business in Israel this summer has involved periodic trips to bomb shelters, among other war-related precautions, but Uber has soldiered on. The global car-booking company plans to introduce its service in Tel Aviv today.

Uber was expected to launch in Israel early in the summer, according to reports that had circulated in the Hebrew press. But then Israel accused Hamas, the militant rulers of the Gaza Strip, of abducting and killing three Israeli teens, sparking an ongoing round of violence in Gaza that has claimed at least 2,100 Palestinian lives and 68 on the Israeli side. A barrage of missiles from Hamas and a short-lived flight ban have routed tourism to Israel, which fell 21 percent in July, according to Israel’s Central Bureau of Statistics.

"In July and August, there are lots of tourists, and we get great work; but with the war, business fell 50 percent," said Shlomo Gafni, a 69-year-old taxi driver. "For Israelis, it’s also difficult. People are feeling down, and they don’t want to go out, shop and enjoy."

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Uber’s Jambu Palaniappan said the timing of the Tel Aviv debut was unrelated to the conflict. Uber chose the Aug. 25 launch date so it could ensure it was offering a reliable product, said Palaniappan, the company’s head of expansion for Europe, Middle East and Africa.

Uber isn’t taking many pit stops in its quest for global expansion. Last week, the San Francisco company began letting customers book a car using apps from Starbucks, United Continental and others. Uber is bringing on David Plouffe, a former top adviser to U.S. President Barack Obama, to counter what CEO Travis Kalanick calls “the Big Taxi cartel” that he says is helping to orchestrate mass protests in Europe and elsewhere. Despite several German cities weighing Uber bans, the company is continuing to operate there. It’s facing similar blow-back in Jakarta, Indonesia’s most populous city where Uber began operating on Aug. 13, according to the Jakarta Post. A central bank decision in India to close a loophole that allowed Uber to offer a more customer-friendly payment system over local competitors may hamper business there, too.

Israeli Transport Minister Yisrael Katz said on June 26 that Uber won’t “be allowed to operate here under a different set of rules and laws than the ones applied to taxi drivers and everyone else.” Palaniappan said: “Minister Katz is committed, and we are impressed with what they’ve done.”

Regulation isn’t likely to be Uber’s biggest obstacle in Tel Aviv, Israel’s financial and technological hub. The company will have to contend with GetTaxi on its home turf. The Tel Aviv-based startup raised $150 million in funding two weeks ago, and its cab-hailing app is practically ubiquitous in Israel. The country is home to 20 of the two-dozen cities in which GetTaxi operates.

GetTaxi is estimated to achieve $150 million in sales this year, according to Vostok Nafta Investment, the Swedish fund manager that contributed $25 million to the startup’s latest funding round. The total amount of funds GetTaxi has raised from investors exceeds $210 million, which it plans to use to expand to more cities outside of Israel.

Uber isn’t exactly strapped for cash, either. The company said it raised $1.2 billion at a $17 billion valuation in June. And it was already off to a nice start in Israel even before the official debut. Palaniappan said “thousands” of Israelis had downloaded Uber’s app before today.

“Most of the markets we enter or are in now are very competitive, and our philosophy is to compete,” Palaniappan said in an interview last week. “I’m fully confident we will be relevant in Tel Aviv.”

Shahar Waiser, GetTaxi’s chief executvie officer, is convinced GetTaxi can handle Uber’s challenge in Israel. He cited a head-to-head battle in Moscow, where GetTaxi has brought 8,000 taxis onto its system. Uber has ’’several hundred’’ drivers in the Russian capital, according to Palaniappan.

“When you already have one leading player in the market, it’s almost impossible for a second player to come in and be significant,” said Waiser in a recent phone interview.

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