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Talking Business in Ukraine: Conversation with Uklon, Ukraine's leading ride-hailing service

Uklon is Ukraine’s leader in the ride-hailing market (Uklon press service)
by Nina Mishchenko January 22, 2024 11:14 PM 10 min read
This audio is created with AI assistance

Getting around Ukraine’s major cities like a true local means having the Uklon ride-hailing app on your phone, and maybe even digitally bartering for the price you want to pay.

Ukraine’s leader in the ride-hailing market, Uklon — originally named Ukron for the web version “Ukraine Online” but changed to make it more aesthetically pleasing — is unique in that allows its riders to adjust the suggested price.

In a hurry and the app will nudge you to add a bit under a dollar to entice drivers to accept your ride request more quickly.

While in many European countries, using a taxi for daily commutes is a privilege of the affluent, in Kyiv a trip may cost only 4-5 euros depending on the distance. Many office workers don't buy cars because it's convenient to use inexpensive taxis.

Despite the presence of American Uber and Estonian Bolt in the Ukrainian market, Uklon is the leader in the ride-hailing industry, bringing together tens of thousands of drivers who collectively complete over four million trips each month. Ukrainians have downloaded the Uklon mobile app over 12 million times.

At the beginning of the full-scale war, Uklon, like most Ukrainian businesses, suffered significant losses. But since spring of 2022, when the taxi order volume was almost negligible, it has fully returned to pre-war levels and continues to grow as winter approaches.

Since the start of the war, the company has entered the international market, adding Azerbaijan and Uzbekistan to its presence in 27 Ukrainian cities over 13 years of operation. The company already has a plan for the next three to five years to continue expanding, Uklon’s co-owner Sergii Smus told the Kyiv Independent in an interview.

As part of an interview series with Ukrainian business leaders on doing business during the war and their outlook for 2024, the Kyiv Independent sat down with Smus to discuss how the war has changed Uklon's business, what the government could do to help businesses, and reintegrating veterans.

Sergii Smus, co-owner of Uklon. (Uklon press service)

The Kyiv Independent: How has Uklon lived through these almost two years of war?

Sergii Smus: The war has significantly hindered the development of all businesses. What exists now in 2023 doesn't correspond to the forecasts we planned for 2022. However, we take pride in our Ukrainian Armed Forces, which allow us to work, provide employment, and pay taxes.

Compared with January 2022, we had ambitious plans for development in Ukraine and expansion. Before the war, we entered Chisinau in Moldova and planned to launch Uklon in five more countries in 2022.

At the beginning of the full-scale invasion, we focused on retaining our team and paying salaries. After six months, thanks to the Ukrainian Armed Forces, we realized we could gradually expand more actively, and by December, things had significantly improved. We also returned to Kherson after the city was liberated.

Regarding international expansion, we proceeded cautiously, and the first launch was in Baku, Azerbaijan in May 2023 with a strong partner. A month later, Uklon appeared in Tashkent, Uzbekistan. These are just two of the planned five countries, but it was a good result during the war.

In December 2023, we launched the Uklon Delivery courier service initially for business clients and later for passengers using the Uklon application.

The international franchise launch of the Uklon promo. (uklon.com.ua)

The Kyiv Independent: Regarding percentages, how much revenue in Ukraine have you recovered compared to pre-war figures?

Sergii Smus: In terms of percentages, as of December 2023, we have returned to pre-war revenue figures in Ukraine. In some cities in western Ukraine, we even showed growth. Many attribute this to people's migration. But I don’t think that’s the reason. The increase in western Ukraine is associated with Uklon reinvesting in these regions.

Before the full-scale invasion, western Ukraine was less developed than other regions of Ukraine. We invested more in large cities than in smaller ones. Now, we have shifted the focus to supporting western Ukraine.

Kyiv has also recovered, not just because many moved there from other cities. Kyiv simply did not experience a significant decline during the war.

In general, the company has recovered after the full-scale invasion. However, we still need to work on restoring demand and development in all regions of Ukraine.

The Kyiv Independent: What are the company's losses (in quantity and money) since the start of the full-scale invasion?

Sergii Smus: Our most significant loss is the death of two of our employees who were not military personnel. One of our employees, who lived in Irpin, evacuated his family to western Ukraine and returned to help evacuate people from the city. As far as I know, he evacuated hundreds of people. Unfortunately, he was shot along with his mother and child during intense shelling in Irpin.

Another loss is our colleague from the call center team. He worked for us and had a part-time job at the Retroville shopping mall in Kyiv when rockets hit — he was there.

Unfortunately, we lost Mariupol, a crucial city for Uklon before the war. We had excellent relations with the local administration that had invited us to operate there. Other business losses we incurred are not worth mentioning compared to human lives.

The Kyiv Independent: How do you plan business development during the war, and what scenarios are you considering depending on when victory comes?

Sergii Smus: Indeed, we have developed plans and a roadmap for the year, and there are plans for the next three to five years for international expansion. However, we are currently living month by month.

Planning is very challenging during the war. For example, we planned 2023 during severe shelling, blackouts, and electricity problems and planned (for the future) pessimistically. But what we planned didn’t really make a difference because we were focused on one thing, and it turned out much better.

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We have planned for 2024, but we still make adjustments every month. If the results for January are different, we can adjust the following months. This is how we work now. For example, we can switch to more long-term planning for the new delivery project if it shows planned figures for at least three consecutive months. Then we can work more calmly.

Even before the war, planning for the long term was challenging in Ukraine because many things were constantly changing. We wanted to make plans for Uklon's investments and significant expansions. We are doing this with the money we managed to set aside before the war.

The Kyiv Independent: How difficult is attracting investments to develop an IT company now?

Sergii Smus: Obtaining investments for development in Ukraine, and even for expansion into each subsequent country, is almost unreal now. In 2022, Ukrainian IT companies received about $600 million in investments, but these funds were entirely geared towards global development.

Our core, Uklon, is currently in Ukraine. For many investors, this appears risky, or they want to enter at a very low valuation, splitting the value of our company by five. I can't say that we are trapped. We are developing as much as possible with our funds in other countries and believe in Ukraine's victory.

Currently, businesses that had already decided to come here before the full-scale invasion are investing in Ukraine. Even our competitors, such as Bolt, continue investing because they have already achieved results. The same can be said for IT companies from other segments.

The Kyiv Independent: What advice can you give entrepreneurs and international companies on planning for 2024?

Sergii Smus: Businesses are concerned about the economic situation and currency exchange rates. I recommend relying on IMF data as they understand the situation in Ukraine, given that they provide funds to the country. Everything will not go as their analysts predict, but their indicators can be considered minimum for planning.

I recommend short-term planning that adjusts long-term plans depending on the specific war situation. IMF data can be helpful in terms of the economic component.

In addition to the regular donations, Uklon also provides trips to the volunteer organization Hospitallers Paramedics. (facebook.com/uklon)

The Kyiv Independent: How do you assess the current business climate in Ukraine?

Sergii Smus: If a company wants to sell its business, it's straightforward now but inexpensive. In December, I met with foreign investors who genuinely wished to buy Ukrainian companies because the prices are currently low.

Tangible investments are currently going into the military sector and everything related to weapons. For example, there's an incredible development — a box with software that can be installed on drones, allowing them to maintain communication with GPS even if the signal is lost. This development is now in the USA, but its Ukrainian.

Many such developments are emerging, and the state must increasingly assist in the military tech direction. In Ukraine, there is a real war, and many excellent military personnel are not just soldiers but also entrepreneurs, designers, and manufacturers. They are getting experience from the weapons coming to Ukraine.

An example is an automated mortar machine gun. I hear feedback from the military stating that these devices weigh up to 500 kilograms because they haven't been tested on the front line. In logistics during the war, weight is crucial. Such weaponry should consist of three parts that can easily and quickly be assembled and deployed on-site. If we develop our military-industrial sector, it will be very challenging for the enemy. Russia will assess what we have and what resistance we can provide. Moreover, this could become a significant export and an additional currency influx for Ukraine's recovery after the war.

The Kyiv Independent: What does big business expect from the authorities now? What would you like the government to do for your industry and business?

Sergii Smus: Speaking about our sector, we are eagerly awaiting and want the adoption of a bill for self-employed individuals. It applies to taxi services and all self-employed individuals, such as electricians, plumbers, etc. This bill is excellent because it envisions that a driver conducting cashless trips will automatically pay taxes through a bank. This document will help bring a significant portion of the delivery market out of the shadows and increase budget revenues.

There are several reasons why drivers don’t want to have individual entrepreneur status (known by its Ukrainian acronym FOP). Firstly, it could be simpler and more convenient. Secondly, for many drivers, working in a taxi service is just a side job, and they want to save time and money on something other than opening FOP. The bill on self-employed individuals addresses these issues. A driver can simply pay taxes through the bank without opening FOP.

As for taxes, taxation should be more lenient during the war to stimulate economic development. We must teach people to pay taxes and explain why it is necessary, making them more acceptable. On the other hand, we need to strengthen control over tax payments and introduce penalties for violations. People won't like this, but Ukraine must become a prosperous country.

The Kyiv Independent: Some of your employees and partner drivers are now in the Armed Forces. Do you plan to implement programs for veterans' integration?

Sergii Smus: In our IT company, more than ten people are in the Armed Forces, and each receives the same salary as before the war. Each of them also has a quarterly budget we provide for purchasing necessary items, and the team organizes targeted collections. Speaking of veterans, we have a separate program with a veterans' fund to help and reintegrate people returning, assisting them in becoming Uklon drivers and finding other employment.

A person using a wheelchair-accessible Uklon service. (Uklon press service)

The Kyiv Independent: During the war, you launched the Uklon Inclusive project in Kyiv with large vehicles for people in wheelchairs. Is this also for future war veterans?

Sergii Smus: Currently, military personnel and civilians use it. Unfortunately, we understand that the number of veterans in wheelchairs will increase. Unfortunately, there is very little infrastructure for such people in Ukraine, but the number of ramps has recently started to increase, which is good.

The demand is there; these particular vehicles are already in short supply. We have over 1,000 orders per month. It's a subsidized project because such a vehicle cannot perform anything else, and increasing the number of such cars raises operational costs. However, we have partnered with Mastercard and the IT company MacPaw for the project in Kyiv.

We plan to launch Uklon Inclusive in Lviv with the largest gas station chain OKKO, which is purchasing three special vehicles. Before the New Year, we met with the project on inclusivity with President (Volodymyr Zelensky’s) wife, Olena Zelenska, and we called on other businesses and companies to join to scale accessibility for people with disabilities across Ukraine.

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