Three recent stories from the mobility sector – featuring Uber, Didi and Daimler – form a convenient structure on which to assess the current state of play in the sector formerly known as taxi apps.

Taxi apps are part of what is know more often these days as “mobility” but, in Uber’s case specifically, the taxi app part of the business is most people’s immediate point of reference, including the mainstream media.

Dara downplays the decision

Uber’s lawyers are probably busier than most – hardly a week goes by without some regulatory ruckus coming to the fore. Last week Uber was on the receiving end of a ruling by the Court of Justice of the European Union which said Uber is not an app, it is a taxi business and as such needs to be regulated accordingly.

The official summary press release said:

“The Court finds that the intermediation service [as in, the Uber app connecting drivers with passengers] must be regarded as forming an integral part of an overall service whose main component is a transport service and, accordingly, must be classified not as ‘an information society service’ but as ‘a service in the field of transport.”

The ruling was widely reported in Europe and the US as a blow for Uber. The New York Times coverage ran under the headline Uber Dealt Setback After European Court Rules It Is a Taxi Service

Enter, stage left, Dara Khosrowshahi.

The former Expedia Inc CEO has been in charge of Uber since late August, and is getting used to having to firefight in a diplomatic way. He responded to the New York Times tweet with a tweet of his own:

Uber’s only official repsonse thus far is:

“This ruling will not change things in most EU countries where we already operate under transportation law. However, millions of Europeans are still prevented from using apps like ours. As our new CEO has said, it is appropriate to regulate services such as Uber and so we will continue the dialogue with cities across Europe. This is the approach we’ll take to ensure everyone can get a reliable ride at the tap of a button.”

Dara’s assertion that Uber is complying with local transportation laws stands up to scrutiny. Each member state of the European Union – all 28 of them at the pre-Brexit time of writing – have their own transportation laws. In the UK and France, for example, Uber operates under transport regulations and in cities such as Berlin and Madrid it is working with professional drivers and getting the regulatory approval that way.

A footnote here is that the local laws have to be adhered to, and its ban in London is based on it not complying with these laws rather than operating outside them.

This adds another layer to the legal complexity, more work for the lawyers and another entry on Dara’s to do list.

Peering under the hood

The European Union has taken the art of small print to a new level – have a look at the full judgment – and the small print of this decision casts a different light on the matter. Uber is more than a taxi app and the ruling is specifically related to its peer-to-peer service – connecting drivers with passengers. The other products and services – including UberEats, Uber Pool, Uber Freight and – with an eye on the future, Uber Advanced Technologies – do not fall under the latest ruling.

So the extent to which having to operate as a transportation service in Europe is a blow or a setback to Uber depends on how much revenue it currently generates from its peer-to-peer operations in Europe. Uber’s financials are a mystery wrapped in an enigma. However, the cost base of its peer-to-peer service is likely to increase across Europe and it could be that it takes a different approach, depending on what the long-term strategic vision is for the entire business.

Enter stage right, Barney Harford.

The former CEO of Orbitz and long-time colleague of Dara was named as Uber’s chief operating officer about the same time as the news about the European ruling broke. In an interview with the Financial Times on his appointment he talked the talk in terms of bringing “financial discipline” to Uber. The FT claims that Uber losses rose to $1.5 billion  in the third quarter of the year so there is a lot of disciplining for him to do.

Didi Chuxing finds another gear

Elsewhere, China’s biggest mobility business Didi was also releasing an announcement of its own, the small matter of it having raised another $4 billion in equity funding, backed by Chinese and international investors.

Didi, like Uber, started as taxi app but has gone way beyond that – its list of products and services includes Express, Premier, Luxe, Hitch, Bus, Minibus, Designated Driving, Car Rental, Enterprise Solutions and Bike-Sharing. It has a bigger product footprint in “mobility” than Uber and the areas highlighted to benefit from the latest round shows the scope of its ambitions – “AI capacity-building, international expansion, and new business initiatives, including the development of new energy vehicle service networks.”

While Didi is embracing mobility, it has not forgotten its taxi app roots. It has investments and partnerships with seven different taxi app businesses outside China and says that this gives it access to 60% of the world’s population. Its partner network – which was originally branded as Rides Everywhere when it invested $500 million in Lyft in September 2015 – includes south-east Asia’s Grab, India’s Ola, Brazil’s 99, Taxify and Careem in the Middle East.

And as part of its takeover of Uber China in 2016, Didi also owns a stake in Uber and vice versa. There are other shared investors between the pair, hardly a surprise when the pair have raised so much capital over the past five years.

Daimler driving the changes

Didi’s stated intention to address every aspect of mobility is a worry for businesses other than Uber. Motor vehicle manufacturing is one of the most obviously exposed to the new world of ride-hailing apps, platforms for car sharing, on-demand autonomous vehicles.

A study from Cap Gemini, released this May, looked at eight mature markets and found that “more than a third of car buyers now see ride-sharing and tap and ride services as a genuine alternative to car ownership.”

Many if not all the big car makers are involved – operationally or financially – in “mobility”, with Germany’s Daimler AG one of the most active. Around the same time Uber was having its knuckles wrapped and Didi was expanding its warchest, Daimler announced it was buying a majority stake in Chauffeur Prive, a French private hire business with more than 1.5 million customers and 18,000 drivers.

Daimler’s transition from a carmaker is taking place under its CASE initiative – CASE standing for connected, autononous, shared & services and electric – a convenient acronym which aggregates everything mobility is about.

Its mobility portfolio includes stakes in Careem (see Didi’s investments above), a joint venture to bring US-based ridesharing business Via to Europe and Europe’s biggest licensed taxi app mytaxi.

So where is all this going?

In one of his first public appearances as its new CEO, Dara told a conference in New York that he was gearing Uber towards an IPO in 2019. This is where his pal Barney’s “financial discipline” quote comes into play. With reported losses running into billions every quarter, one of the priorities will be tidy up the accounts ahead of the IPO prospectus.

The documentation needed for an IPO will expose Uber to even more scrutiny. Of particular interest, in light of the European decision, is the cost base of the business in this key region.

In the other hand Didi Chuxing will keep on expanding, and is likely to do so without the need to come clean about its financials in the same way as a pre-IPO Uber. Didi has taken a different approach to taxi apps – and its global network of partnerships takes care of that aspect of mobility, allowing it more room to move into next-gen transportation products.

Sat in the middle of these two business are the carmakers. Daimler is probably the most advanced in terms of its transition to mobility and many of its portfolio businesses and investments would fit nicely into Didi. There has yet to be a massive mobility deal on this scale and while Daimler’s market cap at around $75 billion at the time of writing is a bit rich even for Didi.