German carmaker Volkswagen will write off its investment of over $300 million in shared transportation and ride ordering service company Gett. German weekly "Der Spiegel," which reported the write-off, said that the decision resulted from Gett's failure to establish a substantial presence in the market against its competitors, such as Uber, Lyft, Chinese company DiDi, and others.
Volkswagen's main investment of $300 million for a "substantial stake" in Gett took place in 2016. Der Spiegel quotes Volkswagen sources as saying that the German firm already previously wrote down its investment in its books to $16 million. Volkswagen declined to respond to the report. No response was available from Gett.
Relations between Volkswagen and Gett have cooled in recent months. "Globes" reported last month that Gett had not met its obligations to the German company, but the Israeli company denied this. Gett wanted to raise $500 million early this year, but as far as is known, Volkswagen did not want to take part in the financing round, so Gett dropped the idea. Volkswagen eventually agreed to a financing round of only $80 million.
"Der Spiegel," which reported the dramatic write-off under the headline, "Volkwagen's millions of dollars flop," reported that when the partnership began, Volkswagen called it a "milestone" in transportation. "Gett burned a lot of cash, but failed to conquer new markets," the magazine wrote.
According to "Der Spiegel," competing with Uber and other companies "required billions more in investment," which Volkswagen refused.
The "Bloomberg" news agency reported in November that Gett, whose value was formerly estimated at $2 billion, was conducting a pricing procedure among possible buyers in order to complete with its rivals in the global market. "Bloomberg" quoted knowledgeable sources as saying that the company had negotiated with online taxi companies, among others, and was likely to be sold completely, sell its business activity in specific locations around the world (excluding Israel), or make other deals. Gett responded to the report by saying, "Gett is clearly on the way to global profitability, including in the US, by the first half of 2019, and it is therefore no surprise that Gett is likely to receive acquisition offers from outside strategic partners."
Other indications of the company's growing competitive difficulties could be found in the reports by Swedish company Vostok, one of the main investors in Gett, which reflected a $1.39 billion value for Gett, 14% less than in the preceding quarter. It was also reported in July that Gett was considering abandoning the US market because of fierce competition, despite its $200 million investment in the acquisition of US company Juno. Gett's competitors are also facing problems - Uber's sales have dwindled dramatically and Lyft's losses rose substantially in the last quarter. Both of these companies are considering an IPO early next year.
Volkswagen meanwhile expanded its independent shared transportation activity and ride ordering app through its Moia division, which is now conducting advanced shared transportation trials in Hamburg. The company also recently announced the founding of a joint shared transportation venture in Israel with Mobileye and the Champion Motors group in which Gett has no part. Shahar (Dave) Waiser and Roi More founded Gett in 2010. The company, which has raised $700 million to date, was active in 120 cities in Israel, the US, Russia, and the UK at its peak.
Volkswagen has expanded its activity in Israel over the past year. In addition to the autonomous vehicles venture with Mobileye and Champion, the German company opened the Konnect center in Israel aimed at creating cooperation between the companies in its group and Israeli companies.
Published by Globes, Israel business news - en.globes.co.il - on December 23, 2018
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