I can see your Hailo. After crashing out of US, can taxi app find new life in Japan?

Transportation apps are creating some of the most heated tech rivalries across the globe, and Asia is no exception. Here on Tech in Asia, local players like India’s Ola and Malaysia’s GrabTaxi tend to occupy headlines, as homegrown competitors crop up against the global behemoth that is Uber. But our readers probably aren’t aware that Hailo – the UK’s darling black cab app, which recently pulled out of New York city – has been active in Japan since 2013.

Followers of transportation network companies in Asia can be forgiven for the oversight. For over a year, Hailo has spun its wheels in Osaka, Japan’s third-largest city, and hasn’t yet expanded into Tokyo or other areas. The company chalks this up to management issues, but is hoping that appointing a new CEO, formally announced today, will put the car in high gear.

“We’re going to be a new Hailo, with new investors just for the Japanese operation,” says Ryo Umezawa, who assumed the role of president and CEO last August after working as the startup’s general manager in Japan. “I’ve done my own successful startups, so I’m ready to become the CEO of a global startup. I’ll use my experience as an entrepreneur, a VC, and an angel investor in this new role.”

Umezawa’s experience in the startup community is extensive. He’s worked for Tokyo-based incubator J-Seed Ventures for almost a decade, assisting young startups with marketing and business development. He helped build an iPhone advertising network and companion app at TrafficGate (now owned by Rakuten), and also runs his own marketing startup while serving as an angel investor in several others.

Umezawa says that the Hailo Japan’s decision to enter Osaka first, rather than the capital of Tokyo, was a deliberate tactic.

“Osaka is a more controlled area, there’s a lot of small and medium taxi corporations, and the radio system is about to switch from analog to digital, so we thought it would provide the best chance for us to come in,” says Umezawa. “We can help local taxis raise revenue, as Osaka fares are cheaper than in Tokyo. We thought we’d contribute more to Osaka first as a pilot, then enter Tokyo for full throttle activity.”

Hailo claims to have 500 cars in Osaka on its network – which Umezawa claims exceeds that of UberTaxi in Tokyo (Uber Japan declined to share the number of vehicles it has there) – through partnerships with about 40 taxi companies and independent taxi drivers. “We’re going to pump in a few hundred more independent drivers soon,” Umezawa says.

Key partner

One obstacle that taxi apps face in Japan – especially those that work exclusively with street cabs – is poor smartphone penetration among drivers. Umezawa says that in Osaka, only 10 to 20 percent of taxi drivers own a smartphone – likely because most drivers are over 50 years old.

Hailo Japan attracted a key partner and investor to work around this obstacle. Hikari Tsushin (Tokyo: 9435) a Japanese telecommunications, advertising, and insurance firm, will sell discounted smartphone packages direct to Hailo drivers. This recalls Uber’s policy of giving its drivers free handsets or tablets in order to get them on the network. In addition, the company has injected an undisclosed sum directly into Hailo Japan – not the parent company in London (which fully funded the subsidiary’s initial entry to Japan). Umezawa says the funding is in the seven-figure US dollar range.

“Getting smartphones to drivers is key,” Umezawa says. “Then, we have to balance user acquisition to provide jobs for our drivers.”

Umezawa didn’t share details on revenue or exact booking frequency for Hailo in Osaka, but he says that the startup only takes its 10 percent cut if a driver accepts a fare, adding that “good drivers” are getting five or six Hailo riders a day. He also says it was easy to attract the typically conservative taxi companies by showing them the startup’s track record in London and other markets. Umezawa says that Hailo has already increased sales with partner companies, which serves as ammunition for expansion to other cities.