Regulations Turn Away Investors
Masayoshi Son, chairman of the Softbank Group of Japan, is having difficulties making his investment in Korea as he continues to invest in world-class car sharing companies. Chairman Son allocated up to 1 trillion won for investment. But he is unable to make investment because there is no car sharing company that continues to grow steadily in Korea due to Korea’s extremely tough regulations.
According to the car sharing and investment banking industries in Korea on July 16, Softbank recently showed its intention to invest in Kakao Mobility, a transportation service subsidiary of Kakao Corp. "Softbank has steadily explored opportunities to invest in Kakao Mobility since last year," said an IB official familiar with the car sharing industry. “There has been no big progress now that Korea’s regulatory environment has not changed.”
The founder of a Korean bus-sharing company said, "Softbank has secured about 1 trillion won for its investment in Korea and visited several companies including Kakao Mobility. But it has put off making investment as it judged that it could not solve regulation problems.”
Earlier, Kakao spun off Kakao Mobility, which operates Kakao Taxi (currently Kakao T), and received an investment of 500 billion won from a consortium formed by the US Texas Pacific Group (TPG), which is one of the world's four largest private equity fund (PEF) management companies, in July of last year. At that time, Softbank also wanted to invest in Kakao Mobility but failed.
Even after that, Softbank considered investing in a car sharing company in Korea but could not find an alternative to Kakao Mobility, which is based on taxi-hailing calls. This is because only Kakao Mobility maintained its position as a large platform (base service) in the market which grew mainly with car sharing due to Korean laws that allowed car sharing during designated commuting hours only.
Kakao Mobility created a business model that connects taxis and passengers. But it was forced to to fully revise its business plan (the introduction of a paid taxi-hailing service) due to opposition from the central government, local governments and interest groups among others. In addition, LUXI and Poolus, which were classified as pure ride-sharing companies, failed to grow on their own due to regulatory hurdles.
The problem is that the global alienation of the Korean car sharing market is likely to deepen in the future. Softbank already invested heavily in the largest share-holding companies in the world including Uber in the US, Didi Chuxing in China, Grab in Singapore and Ola Cabs in India except for those in Europe. Since then, Softbank have been steadily reshaping its business in each region to prevent unnecessary competition for each car sharing company.
Softbank's 2017 annual report shows regional car sharing strategies centered on the four companies including Uber (North and South America), Didi Chuxing (China), Grab (South East Asia), and Ola Cabs (Southwest Asia). This means that even if Kakao Mobility and other car sharing companies grow in the Korean market, it is not easy to compete against the global mobility alliance of Softbank.
"The ultimate goal of the car sharing business is autonomous driving. But representative Korean car makers such as Hyundai and Kia will be totally dependent on overseas platforms if Korean car sharing companies continue to stay in the Korean market only due to regulations," said Lim Jung-wook, head of the Start-up Alliance Center.