On March 23, taxi hailing company Uber dragged rival service Ola to the Delhi High Court on charges of ‘false bookings’. Uber claimed that Ola created 93,000 false accounts to book its cabs and then cancelled all, resulting in loss of business and 23,000 drivers abandoning its platform.
Ola had denied any wrongdoing. According to Ola, India’s third most valued startup after Flipkart and Snapdeal, Uber has moved court only to counter a plea filed by it in court on February 17 against Uber’s practice of plying diesel vehicles in Delhi. Only CNG cabs are allowed in the city. Uber denies running diesel cabs in Delhi.
The court will hear Uber’s plea on September 14 and Ola’s is on April 18. The courts cases are the latest salvo between the country’s principal taxi hailing companies against each other in what is turning out to be a bitter and protracted battle for domination of India’s streets. At stake is a market worth $15 billion.
Uber has a fearsome reputation of taking on competitors in every market it has entered. It is not for nothing that it is the most valuable American company of its generation. But India could be a different ballgame.
For one, it has a rival who is willing to take competition head on. Ola, run by Bengaluru headquartered ANI Technologies, seems to be closely tracking its main competitor’s strategies in key markets. Indeed, the charge of false bookings and cancellations that Uber, headquartered in San Francisco, has levied against Ola in India, was lobbed at Uber by rival service companies Lyft and Gett in the US market.
For another, the rival has some deeppocketed backers. Ola is funded by A-list investors such as SoftBank, Tiger Global, DST Global and others. One of its backers happens to Didi Kuaidi of China, the world’s largest app based cab provider, ahead of even Uber in the Chinese market, and valued at $20 billion. In November 2015, Didi Kuaidi was part of a consortium that invested $500 million in Ola.
On the streets, Uber and Ola have gone head to head so far. Both thrive on offering services that are cheaper, cleaner and more reliable than traditional taxis.
To get drivers on board Ola runs special programs like Ola Pragati, where driver can avail of a loan from State Bank of India, buy a car and drive for Ola. It also gets drivers via referrals. High performing drivers called OlaStars get additional benefits like cash back, fuel subsidy and scholarships for their kids. Uber runs a similar referral program called ‘Uber Dost’ and loan melas (fairs) to rope in new drivers. High performers join Uber Club with benefits on health, free insurance, education subsidy for kids and so on.
Both have almost similar offerings. They have cars of different sizes offering various slabs of fares. For example, the cheapest rides on OlaMini and UberGo (hatchbacks) cost Rs 5 to Rs 8 per km. Both retain a 20% commission and the rest goes to the driver. Ola also offers e-rickshaws, launched on April 4, and bus shuttles. The fares undercut conventional taxis which offer a flat rate of Rs 23 per km for a sedan and Rs 16 per km for a hatchback (in Delhi) but increase when demand for rides is high. Uber fares had shot up by up to three times when the Delhi government introduced the odd-even car plan in January. Besides the similar fares and offerings, Uber and Ola have also matched the other in innovations. On March 3, Uber started a new category of services under bike taxis and Ola announced the same within 24 hours. They have also taken their battle to cab pooling and auto rickshaws.
“We compete with Olawe believe competition makes us strive harder,” says Prabhjeet Singh, chief strategy officer, Uber India. Vijay Shekhar Sharma, founder Paytm says Uber is an alpha company that knows how to fight. “In New York it spent about $50 million to ward off resistance from Yellow Cabs in the $5 billion cab market there.” Uber uses Paytm wallet, besides Airtel wallet, cash and cardsdebit & credit, to help commuters pay for rides. Ola has its own wallet Ola Money and it also accepts cards and cash.
According to an industry watcher, Ola does more rides per day than any other player in the country. (Both companies declined to reveal statistics on daily rides.) That could be a result of the head start Ola has had on Uber. It launched in 2011, two years before Uber entered India. Knowledge of the domestic market too helped, enabling Ola to ramp up fast.
Today, Ola offers services in 102 cities and has 450,000 drivers on its platform compared with 10 cities and 30,000 drivers a year ago. Uber is present in 26 Indian cities with 250,000 drivers using the platform. Globally, Uber operates in 58 countries and 300 cities.
Despite their similar products and fares, both companies have adopted a different strategy to long-term growth. Ola is not content with 102 cities it wants to expand to more cities. Uber is not excited about a 100-plus cities; it prefers to go deeper in the cities in which it is present, according to a spokeswoman.
As it happens, the potential for growth in India is huge. So far, 80-90% of the business of the two companies comes from top 10 cities. The India market is also largely unorganised, with just 10% of the $15 billion being the share of organised players such as Uber, Ola, EasyCabs, Meru and others. Over time, both companies aim to become so popular and ubiquitous that hundreds of people give up their cars hop onto their taxis.
“In technology business the biggest fear is winner takes all,” says Sandeep Aggarwal, founder Droom.in. “Five years back there were 100 plus companies in group buying business in the US. Today there’s only one Groupon. When the business is just an app, you want to chase and win every penny. That’s what’s unfolding in the cab business.” Droom.in, an automobile e-tailer, has in the past partnered Uber for promotional campaigns.
In India, the battle in the taxi business will ultimately between Ola and Uber. All the other competitors are bleeding as a result of their no-holds-barred battle. Siddhartha Pawha, CEO, Meru Cabs, says the objective of deep discounts (offered by Uber and Ola) is to kill competition. “Their fight is sign of desperation as billions of dollars are at stake.”
Meru, once the leading player in the cab business in India, lost that position to Ola in 2015. It also approached anti-trust regulator Competition Commission of India in Bengaluru against deep discounting by Ola and Uber, which was dismissed. “It is irrational pricing and unsustainable,” says Rajiv Vij, CEO, Carzonrent, which runs EasyCabs.
Carzonrent has put on hold part of its expansion plans. Says Vij, “The taxi market has been impacted due to pricing competition between Ola and Uber. We have not invested in growth for some time now. We believe some sanity will emerge in another one or two years as investors look for profits.”
That seems a long way off. Uber and Ola will continue to square off by matching similar products and deep discounts. In the end, as it is the case with other segments of ecommerce, it will depend on who has the deeper pockets.
For now, money is not in short supply. In August 2015. Uber announced it will spend $1 billion in India, its third largest market after the US and China, over 12 months. In the same month, Tata Opportunities Fund invested $100 million in Uber. In all, Uber has raised $10 billion since its launch in 2009.
In an interview to ET Now in September 2015, Uber co-founder Kalnick said India has the potential to be Uber’s biggest market. “We are super excited about India,” said Kalanick.
Ola, for its part, has raised $1.3 billion in all in the past four years. Ola is also part of a consortium formed in December that is fighting a common enemy in Uber. Besides Ola, that alliance includes Didi Kuaidi, Lyft and Singapore-based GrabTaxi. People travelling across countries will be able to book rides via a single app. Pranay Jivrajka, COO, Ola says the integration will be available this quarter.
Collectively, Ola, Didi Kuaidi, Lyft and GrabTaxi have raised around $7 billion compared with Uber’s $10 billion. Didi Kuaidi is also backed by online powerhouses Alibaba and Tencent.
Both Ola and Uber plan to use the funds for expansion. Fortunately for them, a growing number of Indians even in small towns are relying on technology for their daily needs. In cities like Rourkela, Ranchi, Dharwad, Bhubaneshwar, where Ola is present, the market may not be huge, but more and more people want to use technology to connect with basic needs like transport.
Both companies are relentlessly focussed on growth for now. That means profitability will take a back seat for some time. But there are limitations to the growthonly strategy. Abdul Majeed, partner, PricewaterhouseCoopers, a consultancy, says there are only 60 cities with more than 10 lakh population in India and beyond that, business may not be viable. “Ola has the advantage of local knowledge and Uber has deep pockets. Animosity between the two will hurt overall business and thoughtless expansion won’t do any good. They, particularly Ola, have to start making money soon.”
Not that Ola needs any reminder. In March 2015, it bought Taxi For Sure (TFS), a promising startup that ran out of money due to deep discounting and was forced to sell to Ola. An investor who wished not to be named says, “In its fight with Uber, it will be a pity if Ola forgets how it ended up buying TFS.”Share This