Uber struggles in Saudi Arabia as traffic rules tighten

Rules imposed in 2021 limited the pool of drivers by requiring them to be Saudi citizens and personally own their vehicle, although families often share cars

With little public transport, stifling hot summers and investments from the sovereign wealth fund, Saudi Arabia seemed like a dream destination for the taxi company Uber Technologies Inc.

But the mood has soured as complaints about long waits to get a ride with Uber or competitors like Careem, Jeeny and Bolt mount. Locals as well as visitors and businessmen the kingdom wants to pursue in a challenge to nearby Dubai are frustrated.

That’s mainly thanks to a slew of government regulations that have provided the companies with huge retroactive tax bills, restricting what cars are allowed and who can drive them, according to people familiar with the matter. As one side of the state invests, another squeezes in, highlighting tensions in how Saudi officials plan to attract businesses and financing to diversify the economy.

The impasse has left travelers like Kareem Salama stranded.

The experience driving Saudis is “the worst I’ve ever had in the world,” said the 34-year-old medical device salesman in Riyadh, who described a mix of tedious waiting and drivers calling to ask for directions. and then cancel. “It’s crazy.”

It’s a sharp turnaround from 2016, when the Public Investment Fund invested $3.5 billion in Uber, putting it at the forefront of the gig economy in Saudi Arabia. Saudis with few choices in how they get around have already relied heavily on the company and its rival Careem — later acquired by Uber — especially women, who were banned from driving until 2018.

In Riyadh there are only a handful of public buses and a metro system that has been under construction for years is not yet open. It is a car-dependent society and many people who can afford it use Uber as their main form of transportation.

The apps used to be a reliable and comfortable way to get around, especially when summer temperatures soar above 100 degrees Fahrenheit and haunting a cab isn’t easy. But wait times have skyrocketed since early 2021, with smaller ride-hailing apps like Bolt sometimes showing no cars at all.

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Rules imposed in 2021 limited the number of drivers by stipulating that they must be Saudi citizens and personally own their vehicle, even though families often share cars, the people said.

This year, officials enforced a rule that ride-hail cars can’t be more than five years old, excluding more drivers, they said. The companies also have to pay a surcharge of about half a riyal (13 cents) per trip to Elm – a firm majority owned by the PIF – to manage and store their trip data, according to the people.

Uber and Careem declined to comment when contacted. Elm declined to comment. Their data platform links driver, vehicle and travel information from taxi companies to the industry’s regulatory body, according to Elm’s website. “The service monitors and tracks every ride data to systematize transportation operations in an effort to improve quality and ensure safety and security,” the website says.

The ride-hailing industry’s struggle is a microcosm of clashing priorities within Crown Prince Mohammed bin Salman’s “Vision 2030” program to diversify the oil-dependent economy.

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It aims to boost entrepreneurship, build non-oil sectors and have foreign direct investment more than fivefold by 2030. of Saudis in private companies, which depend on cheaper foreign labor.

The agenda “encourages ministries to increase or create new government revenue, and I think we’re seeing some examples of lack of coordination in these efforts,” said Karen Young, a senior fellow at the Middle East Institute in Washington, D.C.

Other examples include tax authorities’ push to collect tens of millions of dollars in delinquent bills from companies in the gig economy, as well as new privacy and data proposals that foreign companies complain would increase costs. Customer call centers must be onshore and employ Saudis, adding an additional financial burden, the people said.

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Saudi Arabia’s General Transport Authority, which regulates the taxi industry, did not respond to a request for comment. Neither does the Ministry of Investment.

Ride-hailing companies are lobbying officials for change, according to those familiar with the case.

At one of the smaller outfits, the combined impact of the new regulations has led to a 70% drop in driver numbers since early 2021, one of the people said. Customer waiting times more than doubled.