Why Tata wants Uber to speed up its super app Tata Neu, Auto News, ET Auto

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<p>Since its inception, Neu, offering electronics, groceries, and e-pharmacy services, has struggled to establish strong consumer loyalty. </p>
Since its inception, Neu, offering electronics, groceries, and e-pharmacy services, has struggled to establish strong consumer loyalty.

Salt-to-steel conglomerate Tata Group‘s ambitious project of being the sole leader of the super app race by investing over USD 2 billion has been marred with leadership issues, stagnation in user growth and low customer engagement. In a bid to revive its position, Tata Group’s digital arm has initiated conversations with Uber for a strategic partnership to increase traffic and revenue, ET has reported recently.

Dara Khosrowshahi of Uber Technologies and N. Chandrasekaran of Tata engaged in talks during a meeting in Davos earlier this year, with expectations of further discussions in Mumbai during Khosrowshahi’s upcoming visit to India, said executives aware of the matter to ET.

With Neu, launched in 2022, the Tata Group aims to increase its share in the country’s e-commerce market which is expected to be world’s second-largest by 2034, with an anticipated annual gross merchandise value of USD 350 billion by 2030. Currently, India’s first super app faces competition from e-commerce giants like Walmart-owned Flipkart, Amazon India and Reliance Industries’ Jio Mart.

Why is Tata Group trying to get Uber’s help?

Since its inception, Neu, offering electronics, groceries, and e-pharmacy services, has struggled to establish strong consumer loyalty. Despite onboarding Air Asia, Indian Hotels, and other Tata Group entities such as Titan, Tanishq, and Westside, the app’s adoption has been slow among users. Tata Group with already present services onboarded its Tata Neu HDFC card recently.

Since the launch of Neu, Tata Digital, which houses the Tata Group’s super app, has recorded standalone revenue of INR 204.35 crore for FY23 but recorded a loss of INR 1,370 crore, which was about 23 per cent higher compared with FY22.

Neu contributed less than a tenth of gross sales to Tata’s two biggest digital assets, BigBasket and 1mg, since its launch in April 2022. “The overall adoption has been low for Neu so far, resulting in lower numbers of new or existing users transacting for various Tata products and services. Existing users of BigBasket and 1mg have tried using Neu… many have resorted to transacting directly through the independent app,” a person aware of the matter had told ET early last year.

Chairman Chandrasekaran, who has personally worked on this project, has been impatient with the progress of the super app so far and mandated top leaders at the group’s digital arm to urgently focus on profitable growth as the unit prepares to revisit plans for external funding. The group has had initial talks with sovereign funds and financial investors but it yielded limited results following the slow progress of the superapp.

Tata Group has halved its expenditure on marketing and customer acquisition at the e-commerce unit this financial year, ET reported citing sources.“It is very clear now (that) Neu needs to grow. But the budget for spending this year will be nearly half, and the allocations will be made accordingly,” a company executive had told ET.

Recently, Tata Digital appointed Naveen Tahilyani as Chief Executive Officer (CEO) and Managing Director (MD) of the Tata Group’s e-commerce unit, replacing Pratik Pal. The replaced CEO was part of the first team put together by TCS when Tata Digital was formed, and he played a crucial role in setting up the entity and the launch of the app. Mukesh Bansal, who joined the firm as president in June 2021 bid his goodbye to the group by the end of 2022. Several top e-commerce executives hired by Bansal have left the firm over the past year.

Tata Group which has been able to steal its position in many segments has been facing hurdles, especially in the e-commerce market. Tata Cliq was launched a year before Tata Neu which somewhat overlaps with each other. But, just like Neu, Cliq was not able to disrupt the market as its owner, Tata Unistore Limited, posted a 16 per cent increase in net loss at INR 874.7 crore for fiscal 2022-23, even as its turnover dropped to less than half at INR 407.7 crore compared with INR 844.6 crore the year before.

How will Uber resolve Tata Neu’s trouble?

To address its challenges in user growth and customer engagement, Tata Digital is turning to global giant Uber for assistance. The collaboration could entail integrating Uber’s services as an ‘anchor app’ within that ecosystem. “Tata Digital needs a big push and scale up to its consumer installs and membership. At the moment, the other brands really can’t get in those kinds of numbers,” ET has reported, citing an executive.

Uber, which underwent a major crisis in 2017 during ex-CEO Travis Kalanick’s tenure, was able to revive itself under Dara Khosrowshahi’s leadership who took over the company in 2017. The company under Khosrowshahi’s leadership posted its first annual net profit last week since the company went public in 2019. The company reported net profit of USD 1.9 billion for the year 2023. In 2022, Uber reported a net loss of USD 9.1 billion. Uber Technologies said on Wednesday that it would buy back up to USD 7 billion worth of company shares for the first time following a strong recovery in ride-share and healthy demand at its food delivery business.

What is Uber getting out of the partnership?

Under the partnership, Uber which has planned to expand its green footprint through Electric Vehicles (EVs) in India, will benefit from Tata’s automobile arm which currently commands a 70 per cent share in the country’s passenger EV market. “How the discussion progresses hinges on mutual benefits,” an executive has told ET.

To further its EV mission, Uber has been forging partnerships with major companies, with the most significant deal to date being with Tata Motors for 25,000 EVs.

The said partnership will be able to solve Uber’s problem in India where small fleet companies find it hard to procure EVs due to the limited number of EVs manufactured in the country. “By signing a deal with Tata Motors directly, the company is bringing different stakeholders together. Buying electric cars has been a challenge for small fleet companies as only a limited number of electric cars are manufactured in a year. The MoU with Tata Motors will help small fleet operators buy electric cars more easily,” Prabhjeet Singh, president of Uber India and South Asia, has told ET.

  • Published On Feb 17, 2024 at 05:13 PM IST

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