Is it still profitable to buy and attach car to Uber in India?
In past 24–48 hrs, I spent a considerable amount of time analyzing attaching a car to Uber/Ola as a way to generate side income. All the research was done in Jaipur, Rajasthan. Part of the research, I spoke to about 10–12 Uber drivers (in which only 1 was driving a car owned by someone else) as well as people who has attached car with Uber/Ola for over a year.
Here are my findings in a Q&A manner:
1. What car should you attach?
A sedan — either Maruti Swift Tour or Toyota Etios. Note that you can’t get Dzire as per Maruti policy. I decided on Maruti Swift Tour as Etios was bit expensive. This is based on talking to drivers/car owners/Uber partners, all suggested to attach a sedan.
2. How much cash do you need upfront to start?
INR 2L — 2.5L.
After obtaining 2 quotation from different showrooms in Jaipur, the on road price for Swift Tour is INR 6.87L (after discounts of INR 25K (=INR 15K seasonal offer + INR 10K when you attach to Uber/Ola)). Assuming you have to pay 20% down payment and get a loan for 5 years at about 12.5% for rest of 80%, you would need to pay INR 187,958 towards down payment. This includes:
— 1 yr. insurance coverage
— Extended warranty for upto 4 year
— Standard accessories
— INR 20.5K (out of total INR 85K) towards RTO fees for commercial license registration for 15 yrs.
If you decide to pay all of INR 85K RTO fee upfront, it will bring the total upfront cost to INR 2.5L. If you chose to defer it, you would end up paying INR 1.9L upfront (and INR 10.5K once every two month for the first year to cover the rest of RTO fees).
3. How much is the monthly expense?
Fixed: INR 28.5K — INR 32.5K
Variable: INR 15K — INR 30K
— — — — — — — — — — — — — — —
Total: INR 43.5K — INR 62.5K
For the calculations, I am assuming that there will be one driver per can and will be working 12 hrs per day for 6 days in a week.
FIXED EXPENSES: INR 28.5K (and INR 32.5K for second year)
EMI: INR 11,248
Maintenance: INR 2,500
Insurance: INR 0 (about INR 2500 for second year)
Driver: INR 15K (and about INR 16K for second year)
VARIABLE EXPENSES:
The only variable component here is the diesel that the car is going to consume which in turn depends upon on how much the car runs. Based on my understanding, you need to put in about INR 30K worth of diesel if you run the car for 24 hr or about INR 15K for 12 hrs. This is a rough estimate.
4. How much is the monthly revenue?
INR 24.5K — INR 98K.
The way Uber incentives work depends upon the revenue generate per day.
Revenue generated is calculated as follows (for Uber X):
INR 25 base far + INR 8/Km + INR 1/minute waiting.
Say the driver drove the car around for the day and based on above formula, he made INR X. Based on X, his final revenue will be determined. As an example, if X = INR 650, the total earning will be INR 943.125/day or INR 24521.25/month (after deducting 20% Uber commission and ~4.5% service tax). The maximum earning can go up to INR 98085/month if the driver does a business of INR 2350 in a day.
Note that these incentives fluctuates a bit from time to time.
What’s the conclusion?
Assuming the driver runs car around for 12 hrs, realistically I am expecting monthly expenses to be around ~ INR 50K (assuming 15K for diesel + 32.5K for fixed monthly expenses (worst case) + INR 2.5K/month for unexpected or error in calculations). In order to break even, the driver needs to run car as such that he does a business of at least INR 1400 per day.
With investment of 2.5L, headache around finding and maintaining driver, I expect to make at least INR 20K per month from a car. This means that driver needs to do a business of at least INR 1800 per day which is doable.
As per how my conversation ended with all drivers I talked to, here is my conclusion — “Sirji, paisa to ban jayega. Bus driver ka dhang ka hona chahiye”.