Careem gets regulatory approval for cheaper services in Abu Dhabi

Careem is to make its cheaper services available in Abu Dhabi after receiving regulatory approval to charge rates that will make the cost of journeys using its ride sharing platform in the capital closer to what it is in Dubai.

The decision concludes what has been a five -year period of uncertainty over the legal status of both Careem and its rival Uber in the emirate.

They both launched in 2013 but suspended their services in 2016 amid concerns from transport authorities over their pricing structures being in violation of regulations for private hire car, or limousine, companies.

While Uber currently does not operate in Abu Dhabi, Careem re-entered the market but without offering its lowest priced car service.

“We have just received word from the regulator that we expect to be able to introduce a new, lower pricing structure for Careem services in Abu Dhabi within a matter of weeks,” said Bassel Al Nahlaoui, the company's managing director for the gulf region.

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All fares for private hire car operators in Abu Dhabi must be approved in advance by TransAd but according to the rules, private operators in Abu Dhabi must charge a minimum of Dh40 for the first 10 kilometres, after which a rate of at least Dh4 per kilometre should apply. Careem’s app shows the rates for its limo service in Abu Dhabi currently meet these requirements.

However, soon Careem’s offering in Abu Dhabi will include its economy, business and minivan services in line with what customers can get in Dubai and with a similar pricing structure, Mr Al Nahlaoui said. Careem could not provide exact pricing for these services in Abu Dhabi at this time but it is understood that fares will be about 30 per cent more expensive than taxis. The minimum fare for a journey in a standard taxi in Abu Dhabi is Dh12 with the charge per kilometre Dh1.82.

In Dubai, its economy service has a minimum fare of Dh16 and a per kilometre charge of Dh2.24. Its business service has a Dh20 minimum and a rate of Dh2.6 per kilometre. The rules in Dubai stipulate that fares must be 30 per cent above taxi rates.

Now operating in more than 90 cities, Careem became the Middle East’s first tech “unicorn” in 2016, when a funding round led by Japan’s Ratuken and Saudi Telecom gave the company a value of $1 billion.

Mr Al Nahlaoui said that the ability to offer more of its services in Abu Dhabi is “a fantastic opportunity for us to fully embrace our potential in the capital after five years of operating here”.

According to a 2017 study on ride sharing by economics experts Robert Hahn and Robert Metcalfe, platforms like Careem and Uber have the potential to benefit consumers and increase their welfare in the markets in which they operate. These platforms can encourage higher utilisation of vehicles which may lower emissions per individual and fewer drivers searching for parking can also reduce congestion. According to Strategy&, GCC consumers spent $10.7 billion in 2016 on sharing economy platforms, including transportation.