industry

The challenges before cab aggregators in India


Many commuters in Mumbai were forced to turn back the clock last week. With most of the 1,00,000 Uber and Ola drivers in the city on strike, they were forced to return to local trains, buses, black-and-yellow cabs, autos and buses for their commute.

Amarendra Singh, a financial services professional who commutes from the northern suburb of Thane, even started driving 40 km to work. He was willing to face Mumbai’s notorious traffic jams instead of the uncertainty of a cab aggregator ride. He was tired of booking taxis and waiting for long, only to be refused the ride by the driver on one pretext or the other. On Tuesday, the cab showed up 30 minutes after booking and cost nearly thrice the usual fare at 11 am. Enough is enough, Singh told himself, before picking up his car keys.

Drivers on cab aggregator platforms say they also have had enough. The heady days of meaty commissions and exploding consumer interest have plateaued. The aggregators and drivers now find themselves punched into a corner. Drivers complain that incentives have dwindled due to changes in companies’ policies, causing earnings to fall from as high as Rs 80,000 a month to under Rs 30,000 today. The aggregators are unwilling to revise the payment terms, they say.

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This has led to drivers logging off the platform in droves across the country. Over 20,000 drivers have logged out of cab aggregator portals in 12 months, according to analysts and investors. Many others are struggling to keep paying the monthly installment of car loans. Apart from a fall in earnings, drivers are also facing the double whammy of increasing fuel prices and loan instalments. Some 35-40% of drivers in the top five cities have left these aggregators in the past two years due to these issues, say investors, analysts and drivers.

These reasons made the Mumbaibased drivers on aggregator platforms go on a strike from Mumbai. Taxis and autos in Delhi also went off the roads but only on Monday last week. Similar action was seen in the cities of Hyderabad and Chennai. It might soon spread to Bengaluru, too, where drivers had struck work a few months ago.

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“We have been watching the strikes closely in Mumbai and Delhi, and have deferred our own action because the state government promised to help us,” says Tanveer Pasha, president of Ola, Taxiforsure and Uber drivers and Owners Association in Bengaluru. “However, much of these claims have not translated into anything on the ground and we are being forced to reconsider our stance.”

Leading cab aggregators Ola and Uber declined to comment on the series of strikes and related issues. These companies do not share the number related to drivers and earnings.

Privately, officials of these companies say these strikes were driven more by political motives than business ones. Drivers, they claim, prefer to stay home rather than risk having their vehicles damaged by vandals during a strike, irrespective of who has called it. Several officials say they regularly meet with drivers and discuss incentive and commission structure.

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Ola has claimed that over 60% of riders for its cheapest offering, Micro, were first-timers. The company sees it as an expansion of the customer pool. These officials also insist that India will be a supplyconstrained market for years to come. Despite the challenges in the market, there are no changes to pan-India expansion plans. “We are a long way from being saturated in a market like India. We have a long way to go,” says an official of the cab aggregator.

Newer Ride Mode
One way forward, another executive says, will be adding more drivers and also newer offerings such as bike-taxis. Some states, including Karnataka, are already working to liberalise rules that restrict this form of carriage. Bike-taxis can help ease the traffic on roads of cities such as Bengaluru.

In Tumakuru, a town two hours south of Bengaluru, Mahadeva (who refused to share his last name) drives customers around for eight hours daily. The employee of a local cab rental service sometimes has to take customers to semi-rural boroughs outside the town. But he says this is better than driving for a cab aggregator. “I stopped driving for Uber and Ola six months ago. I was driving 12 or 14 hours daily, and not getting time to eat. Yet, after all that, I was earning barely Rs 20,000 a month,” says the 30-year-old.” Now I earn less, but I get to stay close to my family and have peace of mind.” Making ends meet driving a cab and taking care of his family of four became too much for Mahadeva.

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Four years ago, drivers were jostling to sign up on Uber or Ola. Incentives were high; drivers could work for themselves, choosing when to log in and log out; and rides were in plenty. Many gave up stable jobs as private drivers or employees of goods transporters to join in. There were even reports of MBAs and techies leaving their jobs to drive for a cab aggregator or doing it part-time to make an extra buck.

Some even moved cities to chase this pot of gold. “I used to be a truck driver in Bellary when the mining boom was at its peak,” says Reddy, who prefers we use his surname. “I left as soon as raids started and moved to Bengaluru to drive a cab. The going was good here. But, nowadays, I have started feeling the liquidity squeeze here too.”

To make ends meet, he has sent his wife and children back to his hometown on the Karnataka-Andhra border. He shares a room with other drivers. Sometimes he spends the night in the car outside the airport hoping to get a ride early in the morning, when international flights land. “Sometimes, foreigners tip you. It’s a welcome change.”

But today, drivers have deserted what they see as a sinking ship. Growth rates of the two biggest players have slowed. While both Uber and Ola does not share official data, estimates from analysts and investors show growth rate in rides for the two has declined to around 20% in 2018, against 58% in 2017 and over 90% in 2016. While both companies have tried to stem cash burn, increasing rates from Rs 10 to Rs 15 per km on an average, drivers seem nonplussed by these changes.

“We are on strike and will continue to persuade drivers to keep away from work,” says Sunil Borkar, a union leader for cab drivers in Mumbai. “Drivers are told to survive on barely Rs 6 a km when even kaali-peeli taxi rates are Rs 16 per km.”

For much of the past week, Narayan R, who says he is a driver on both Uber and Ola, has sat at home waiting for the deadlock to break. He says he has lost around Rs 1,000 a day in earnings. His patience may be wearing thin. “They (unions) have been claiming things will change, but I have a family to support and need to consider their future.” He says he has job offers to be a private driver and also from transporters. A decision must be taken soon, he adds.

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Each city provides a different challenge for cab aggregators and drivers. For example, Mumbai has always had a history of metered cabs and residents and visitors are used to hailing one of these vehicles irrespective of the time. Delhi, on the other hand, is used to a system of neighbourhood cab stands, where drivers live, eat and ply their trade. Bengaluru has never had such a system, but has relied on a network of autos and buses as a means of public transport. Cab aggregators have helped consumers deal with the different vagaries of these offerings, providing a convenient way to commute.

Price Factor
Executives in Ola and Uber say not only have they provided a more convenient commute, but they have also reduced prices of travel along the way. For example, Ola when it started back in 2011, had a base price of Rs 200. But its lowest category, Micro, today starts at Rs 40. Shared rides are even cheaper.

Priya Prabhu, a lawyer who moved to Bengaluru from Chennai in 2014, agrees. “Uber and Ola made it easy for us to get around a city like Bengaluru, to work late, without owning a private vehicle.” However, in the past six months, the pincer of rising prices and poor availability has been unnerving. “Waiting 20 minutes for a cab to do a half-hour commute seems stupid. But first, you have to deal with at least two drivers who will refuse to pick you up.” In October, she got tired of all this and got herself a second-hand sedan.

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Drivers often accept bookings but refuse to pick the customer up because it does not suit the driver. In Delhi-NCR, where several people cross the state border (Delhi-Haryana-Uttar Pradesh) daily, often numerous times, drivers refuse rides as they have to pay tax at the border. Indrajit, who drives on Ola and Uber, says he often gets saddled with short rides of under 5 km, which doesn’t cover the cost of fuel and operations. Skipping on these low-value rides can earn a driver poor ratings and demerits from the companies, compounding an already difficult situation for the drivers. “We have to complete over 15 rides a day to earn a decent amount,” says Indrajit. “On most days, I barely manage eight or 10. I cannot manage like this for long?”

Consumers, used to the convenience of getting a cab pick-up at home, say drivers are to blame. “During peak hours, getting a cab is like winning a lottery,” says Shashank Rao, a retired banker in Bengaluru. “The drivers choose which rise to accept and often have preconditions — pay cash, do not turn up the AC.” One has to book at least three times before a cab driver will agree to ferry you, he says, especially if you are going from Jayanagar in south Bangalore to MG Road after 5 pm. “How is this making things more convenient. It is as painful as dealing with the autorickshaw drivers they want to replace.”

In this battle between convenience and commerce, the consumer may be the one losing out.





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