Uklon co-founder speaks of war’s impact on taxi market and entering new countries and niches

This year, Ukrainian taxi service Uklon marked its 13th anniversary. Chances were, however, that 2022 would have been the last for the company. In the first days of the war, the number of taxi orders through Uklon decreased by 70 to 90 percent, says Serhiy Smus, Uklon's chief operating officer and co-founder.

The company survived the uncertain times thanks to the owners' previous hesitancy to enter foreign markets – including money set aside for expansion, entry into small Ukrainian cities, and the incredible efforts of the Ukrainian Armed Forces to repel the enemy.

The service is now available in 26 Ukrainian cities; since the start of the full-scale invasion, Uklon has suspended operations only in Russian-occupied Mariupol. The year of the full-scale invasion ended in the red for the company, Mr Smus admits, adding that the dynamics of recent months are inspiring.

Uklon is now actively working on expansion and plans to enter three countries in the coming months – Mr Smus refuses to say which so as not to jinx it. In addition, the service expects to enter several new niches in Ukraine this year.

Uklon’s co-founder tells LIGA.net how the war has changed the taxi market in Ukraine; how much fares have risen; and how taxi drivers' earnings are affected by the curfew.

How war affected Uklon’s operation

How has the full-scale war affected Uklon's operations? How much has the orders decreased?

Significantly. March was the most difficult month – we fell by minus 90 percent in Kyiv (in terms of the number of trips), and by about 70 percent in all of Ukraine.

In the first days of the invasion, we completely removed the commission for drivers across the country. It was a crazy period. We had to take care of our employees amid the fall, so in the first days of the invasion, we launched two important projects, ‘Volunteer’ and ‘Evacuation’. The former helped with logistics for hospitals and various territorial defence headquarters – throughout March, the team made the project automatic.

After the invasion, people tried to leave all the cities that suffered the most in the first days of the war – they were looking for a way out. Some of those who managed to leave in one car called me and told me where the keys were to the second car which remained in the cities under shelling or occupation.

At first, we processed evacuation requests manually, but in a few weeks our team automated the process and managed to launch ‘Evacuation’ in the app.

How long did the company operate at a loss? What were your actions then and have you managed to recover?

We calculated how long the money we had put aside for expansion would last us, and we had to cut our team's remuneration by 20 percent.

In April, when the Ukrainian Armed Forces drove the enemy out of the Kyiv region, the recovery began. After that, it developed dynamically. In July, we were able to return 100 percent of the payments to employees.

In the end, 2022 still turned out to be a year in the red, with about 17 to 20 percent fewer orders compared to 2021.  Based on the plan for 2022 and what we had planned, we lost about 60 to 70 percent of growth. But the dynamics are encouraging: in January 2023, there were only 10 percent fewer orders than in January 2022.

How Ukrainian taxi market has changed 

Which cities now have the largest shares in the company's overall revenue structure? Where is the biggest growth trend?

The greatest dynamics are in small cities with less than 200,000 inhabitants. Over the year, their share [in the profit structure] has more than doubled – now they generate about 20 percent of Uklon's orders.

The company had a lot of discussions when we started entering such cities, because we needed to invest a lot in them, and there was no understanding of whether there was a market there. But during the war, they helped us a lot, because by the end of 2022, such cities were in the black.

Accordingly, the share of ‘million-plus’ cities familiar to our business began to decline, although they still remain key for us. For example, in 2020 and 2021, 70 to 75 percent of taxi trips in Kyiv were made through our service, while in 2022, it was only about 40 percent.

How did the average check size change compared to 2021?

We have a very price-sensitive market, so it is highly competitive. We were the first among our competitors to take a risk and raise the tariff, as fuel prices have risen and prices for car parts have gone up enormously. In total, we raised tariffs four times in 2022, as did our competitors.

But as a result, the average bill increased by only 4 percent over the year. Why? Because it depends on two indicators – the standard tariff, which increased by 25 to 40 percent over the year, the growth depending on the city, and periods of high demand.

In 2021, there were peak times in the morning and evening, when there was a shortage of drivers and cars – accordingly, the system recorded increased demand and raised the tariff.

Therefore, the average bill in 2021 was greatly influenced by these surges in demand. In 2022, there was no such thing. There is only one peak now – before the curfew.

During the war, many people lost their jobs, so it is logical that the number of taxi drivers should have increased. Has it, though? Because in some cities – especially in Lviv – one can wait for a car for half an hour off-peak. What is the reason for this?

Not entirely and not everywhere.

Even in December 2022, we did not yet reach the number of active drivers – those who make at least one order per month – that we had in December 2021. However, due to the fact that the number of orders has decreased overall, the response to orders is high – the percentage of completed taxi trips reaches 90 to 95 percent.

Lviv has always had a somewhat specific situation: drivers from this city are always ready to fight for higher fares, organise themselves, hand out special offers, and sometimes even make fake orders to load the system.

Does Lviv have the highest fee for using the service?

No, the highest one is in Kyiv – 19 percent. And the lowest is in frontline cities, within 5 percent. But in general, our fee remains the lowest among the services.

Is there a general approach to working during curfews? In some cities, the car arrives, while in others it is impossible to even call a taxi. Do you communicate with local authorities about this?

We had a long discussion about the curfew, whether we should allow our drivers to work during this time.

But then we realised that there was no need to ban it because we have different drivers cooperating with us, including those who have special permits, or because we need to give a ride to someone with a permit – there are plenty of cases.

We have tried to solve this issue at least in small towns to give all our drivers the right to move around, but it is difficult.

Expansion, new niches

Recently, it was announced that Uklon would deliver foodstuffs from Silpo stores. Are you entering the food delivery niche?

For Silpo, in this case, we are just a logistics partner. We have no plans to enter the retail sector as a marketplace; this is a market we cannot afford to enter yet.

Instead, we are looking at services related to our core business, such as scooters. In 2022, before the full-scale invasion, we were 90 percent ready to enter this niche. Now we are thinking of returning to these plans.

What other niches should we expect you in?

We are planning to launch a cargo service, with delivery by trucks up to 3.5 tonnes within cities.

We also have an idea to launch an inclusive car class, which we came up with in 2020.

Together with our partners Macpaw and MasterCard, we launched the Inclusive class. From now on, passengers who use wheelchairs can travel freely in specially equipped cars. The new car class is available in Kyiv and the suburbs within 20 kilometres.

We are implementing the project as part of first lady Olena Zelenska's No Barriers initiative. We are currently testing the project in beta, but we plan to scale it up soon.

We have also launched the Raging Birds fundraiser, collecting UAH 30 million for about a thousand drones for Dignitas Fund. The money will go to five Ukrainian drone manufacturers – many of them have difficulty scaling up, so this will be a good boost. We are also trying to help them with our management expertise.

I'm sure that after the victory, Ukraine can become the main supplier of drones in the world, and major global UAV manufacturers, apart from [Turkey’s] Baykar, can definitely enter this market.

What about your expansion plans? Even before the invasion, you had spoken of them, and entered Moldova.

I regret that it took us a long time to decide to expand.

We had planned to enter the first country in May 2022 and at least three countries in total by the end of that year, with a franchise launched in one other.

We are now working to ensure that this happens very soon, perhaps as early as April. First, we plan to enter two countries, which I won't name yet, three to four months apart, and we will enter another country with a partner.

What is the biggest obstacle to your expansion? How much money do you need to enter one country?

Starting a million dollars per country. It is very difficult to plan a budget in a new country. All countries are now quite competitive, there will be at least one global competitor everywhere.  

What went wrong in Moldova? How much did this experience cost you?

We launched it as a test and it gave us a lot of experience. We closed this market because we could not go there: the war, many unknowns, we decided not to spend money on that market.

But the main factor was a partner who did not meet our expectations.

Did anyone offer to buy your business over the past year – perhaps international players or competitors?

No, not internationally.

There was one person who wanted to buy a stake in the company, but at a valuation that did not suit us – with a very large discount for the war.

I'm not swearing off the possibility, but now fewer and fewer people are ready to consider this option, especially if the expansion is successful.