BluSmart, the EV ride-hailing startup, recently announced the expansion of its services to the UAE, in its first international foray. The move has reportedly been in the works for over a year.

UAE adds up neatly to BluSmart’s expansion plans. The Middle Eastern country is among the fastest-growing markets in the global ride-sharing business, with a $1.48 billion industry that is estimated to grow at a compound annual growth rate of 16.18% between 2024 and 2029. To succeed here is crucial because based on how things pan out, BluSmart could expand to other countries in the Middle East.

But the EV ride-hailing startup is not jumping into this race head-first. Instead, it is looking to cater to a more “premium” eco-conscious clientele, with its offerings of premium limousine services in the region, starting with Dubai.

However, this could be a tricky proposition. In India, the company had to resort to crowdfunding to keep itself afloat after disappointing fundraising results in May last year. Then there’s also its links to known hawala operator Hari Shankar Tibrewala. In November, we even reported how the company’s proposed charging infrastructure collaboration with Jio-BP fell through.

Also, between 1 June and mid-August, BluSmart UAE has reportedly managed to chart just about 1,500 trips in Dubai. This is in a city of 3 million, with a bustling tourist market to boot. Also, based on the Road Transport Authority of Dubai’s 2022 report, total taxi and shared mobility ridership was at 183 million, an 18% jump from the year before. Compared to that, 1,500 trips is barely a drop in the ocean.

For a company that claims customer goodwill in India and Indians being some of the most significant participants in the Emirati economy, the move is nothing short of an uphill battle. Let’s understand why.

Holes in its Dubai game plan: First, despite being a business-friendly destination and with a lot of scope to set up businesses, the UAE is also a hard market to crack. The region boasts local players like Careem that have successfully adapted to the cultural sensibilities of the UAE, which helped the company evolve from a humble website-based service for corporate car bookings into a super-app. This makes it hard for new entrants to break into the market that BluSmart is eyeing.

Careem boasts of a range of options from budget to premium, including electric vehicles.

Then there’s Uber, which has the Black and Green cabs in the premium and eco-friendly segments, respectively.

So, with ride-hailing rivals far more competent than the ones in India, the startup would need an iron-clad strategy to grab significant market share in the UAE. It is relying on its USP of a full-stack, zero driver cancellation EV fleet to help its case. But its promise of no cancellations and no surge pricing instils little confidence after it practically did away with this in India by introducing a revised pricing structure in January accounting for “relaxed and rush hours”.

Second, its luxury-as-a-service positioning in the UAE market could be a bad bet. You see, BluSmart UAE’s fleet is a far cry from the electric Tata, BYD, MG and Citroën vehicles it deploys in India. The Dubai arm is operating a fleet of Audi e-Tron cars.

BluSmart maintains that there is a significant market for an all-electric luxury ride-hailing service, thanks to the UAE’s efforts towards decarbonization and promoting green energy. But in all likelihood, it is yet another case of a company falling for the “luxury” tag that has been tied to the emirate forever. And this is far from true. Luxury-as-a-service models seldom break into the mainstream in the region. Luxury fleets operated by existing cab providers such as Blacklane and Wheely don’t see large numbers compared to budget offerings like Hala taxi, a collaborative effort between the Dubai Taxi Company and Careem for budget-conscious riders.

It certainly doesn’t help that the UAE has a very high car ownership and only 29% of the population considered using public transport, according to a 2020 study, with an even lower 9% dependency on taxis.

Third, BluSmart’s growth estimates seem unrealistic. With a fleet of 30 Audi electric cars, and an order for 70 more, the company can manage a few thousand rides by the end of the year. But that’s not all. It wants to have an 1,800-strong workforce of drivers and 1,200 EVs by 2025. Incidentally, even the government-backed Road Transport Authority of Dubai—which has its own fleet of chauffeur-driven VIP cabs and electric Tesla Model 3s under the Dubai Taxi Company and others—has set itself a lower electrification target.

Four, its full-stack claim is questionable. In a show on the Dubai Eye 103.8 radio station, Amin Aslam—BluSmart UAE’s chief corporate officer—said that the company is making strides towards building EV infrastructure in the country, along with a luxury fleet for the app’s user base in Dubai.

Basically, he means that everything—from the drivers, the app, the cars and even the charging stations—is developed from the ground up and handled in-house. This is an aspect of the company that is quite notable, as this would mean their drivers don’t have to work on a commission basis or worry about ownership costs related to the car they drive. But, at the same time, this would mean bigger upfront expenses for the company. What is questionable in particular is their claim of an independent charging ecosystem, due to the sheer logistical headache that developing something of scale will be in the time frame that the company has set itself.

Charging stations in the country are predominantly controlled by the Dubai Electricity and Water Authority and the federal electricity utility—Etihad Water and Electricity. Other proprietary charging stations like Tesla’s Superchargers are expected to register and comply with local laws, which is not a process that can be fast-tracked in a matter of months.

Add to that the fact that more than 73% of the electricity generated in the emirate comes from natural gas, it makes one wonder whether the truly green credentials that BluSmart espouses hold any real weight.

The other argument going against BluSmart is the fact that the EV model perpetuates a chain reaction of scarcity. Only limited vehicles can be on the road, they can only cover a limited distance, and they have long wait times for battery top-ups in limited charging stations. Efficiency, which is paramount in the ride-share business, takes a significant hit in this case. Taking all this into account, a BluSmart UAE customer will have to exhaust every other option before even considering the startup. Add to that the scheduling time, which is at least half an hour in advance, and we have ourselves a service with few takers.

BluSmart’s entrance, at best, is flashy, with little in terms of fundamentals that actually move the company forward. It doesn’t help that it has not been on a strong financial footing. Investors are losing patience and its tendency to hype itself is unlikely to impress them.

Cover image from X/ @blusmartuae