What is Uber Ola's business model

Digital revolution on India's streets

India's taxi industry is booming. Internet-based service providers are constantly expanding their offerings and are receiving three-digit million amounts from investors.

A driver in uniform, long negotiations about the amount of the fare and a rocking ride in a strikingly painted Hindustan Ambassador - for a long time these were the constants of a taxi ride in India. Today, smaller, more modern cars from Japan and South Korea have long outstripped the Ambassador, despite being named the best taxi vehicle in the world in a BBC series in 2013. The former king of the Indian roads only has a future as a car enthusiast for nostalgics; production was finally stopped in spring. But the biggest changes are not taking place in the vehicle fleet.

Largest market after the USA

The emergence of internet-based service providers like Uber (see article below) has turned the estimated $ 9 billion taxi market in India on its head. The industry is in a state of upheaval worldwide, including in Switzerland, but such services, which provide customers with self-employed drivers or small businesses and are financed through commissions, are in particularly high demand in India. For Uber, India, where the company is present in ten cities and continues to expand, is already the largest market after the USA. The Californians are only the youngest competitors in the Indian taxi business, domestic companies such as “Ola Cabs” or “Taxi for Sure” have been active in the country with similar business models for some time.

"We are in the process of creating a new market," explains Gagan Bhatia, head of Uber in Delhi. The demand for individual passenger transport is increasing, because an increasing number of people can afford a taxi ride instead of being transported from A to B in a three-wheel motorized rickshaw; the mostly completely overloaded public transport is not an option for the growing middle class, also for reasons of status.

The Indian taxi industry is barely organized, with only 4-6% of drivers belonging to companies with fleets of more than 50 vehicles. In megacities like Delhi or Mumbai, with their often completely congested streets and the correspondingly long journeys to get there, that is not enough to offer a customer a car within a useful period. The potential of brokerage services that have a dense network of drivers without the high fixed costs of a stationary fleet is correspondingly great. The transparent cost structure and the uncomplicated ordering process via smartphone app are further pluses in India, which is just as price-conscious as it is in love with technology. “We are also reliable and offer security because our customers give feedback about the driver after every journey, and black sheep like that fly up quickly”, adds Bhatia with a special focus on the female clientele. In cities like Delhi, where women are advised not to go out alone after dark in view of the numerous attacks, the safety argument is of great importance.

An intense competition

Investors also believe in the market's growth opportunities. While around $ 100 million in venture capital has flowed into the various players in the industry in recent years, Ola Cabs received $ 277 million from investors this October, 210 million from the Japanese communications group Softbank alone, which operates across the entire Indian e- commerce business. Sector plans to invest billions. According to the Indian daily "The Economic Times," Uber is said to have invested $ 400 million in its Indian business.

Companies are investing in the future and they are preparing for tough competition. In Delhi, for example, Uber has temporarily cut the already cheap fares by a quarter without passing the costs on to the driver. In addition to the basic rate of R 40, a trip costs R 1 per minute plus R 12 per kilometer; a thirty-minute drive over ten kilometers costs R 190 or CHF 3 in the cheapest category. As a result, the company, which receives 20% commission from its drivers, currently incurs a loss of 5% per trip. Ola Cabs and Taxi for Sure also have special offers, but are also redesigning their smartphone applications to keep up with Uber in this regard. The extremely uncomplicated handling of the business is still the greatest competitive advantage of the Californians.

Intervention by the central bank

However, the company in India has to revise a core element of this, the payment system. Because, according to local law, every credit card transaction requires a two-step verification process and the one-time deposit of credit card details is not permitted for an unlimited number of payments, Uber processes its India business via an account in the Netherlands. Like many other Indian e-startups, Uber's competitors criticized these requirements for credit card transactions, but still let their payments go through domestic banks. As a result, they could not offer an automatic debiting of travel expenses as with Uber.

In August, however, the central bank stated with a view to the taxi business that Internet business in India would have to be carried out via Indian banks. A few days ago Uber launched an alternative payment method using an e-wallet; The company will have to discontinue direct debiting services by credit card in the medium term. The manager Bhatia speaks of an opportunity to win new customer segments because people without a credit card could now also use Uber. First and foremost, the decision by the central bank ensures that the new taxi market remains equally long-lasting - and other sectors of internet-based trading.

It is not just about passengers, but also about drivers. Companies try to retain chauffeurs with attractive additional services. Ola and Uber, in cooperation with banks and car manufacturers, offer their drivers financing models for the purchase of their own car. Uber also offers a free iPhone that is locked for private use. To reward drivers who mainly work for Uber, the company also offers bonus payments after a certain number of hours worked per week. Ola, on the other hand, recently distributed bonuses such as flat screens or washing machines to the drivers with the best customer ratings.

Rickshaw with GPS

The business model of online services also spreads to other sectors of the transport industry. In Bangalore, the company mGaadi has developed a smartphone app that can be used to order motor rickshaws. Because a smartphone is unaffordable for many rickshaw drivers in view of the significantly lower financial possibilities than in the car business, they can also be located by a simple call to the headquarters or have a GPS transmitter installed for a deposit of 2000 R (30 Fr .). Of the roughly 160,000 motorized rickshaws in Bangalore, around 10,000 are currently registered with mGaadi.

A similar system was recently launched in Delhi. However, behind the “Pooch-o” program, which is currently being advertised everywhere in the city, is not a private start-up company, but DIMTS, a public-private partnership initiative to improve the transport system in Delhi. Pooch-o is therefore not pursuing commercial interests, but rather the upgrading of public transport in the capital with its chronically congested streets. By improving the range of offers in passenger transport and by better coordinating the various providers, transport could be organized more efficiently, which would reduce travel times and also have a positive effect on the problem of air pollution, according to DIMTS. The digital revolution on India's streets is raising high hopes in many ways.

On the subject