Why Uber will win the Uber Vs Ola war in India
“Uber pays us really well and is easy to deal with. Even though we get more pickup orders through Ola, I prefer to drive for Uber”, said Shantilal as he drove me in his Ola marked cab during my recent trip to Pune. I was however using Uber. This bias towards Uber was a common theme amongst drivers driving Ola/Uber cabs in India. I traveled extensively in Kolkata, Bangalore and Pune during my summer trip to India and used these taxi services extensively.
Ola drivers are fast converting to Uber, even as they continue to drive cars clearly marked as Ola. Most drivers drive for both Ola and Uber. Ola is currently the market leader in on demand taxi service in India, but is getting a run for its money as Uber expands across Indian cities.
Most drivers, including Ola drivers, unanimously agree that Uber gives them better terms. In addition to the regular cut from the fare, they also get paid about Rs. 180 ($3) per ride in addition. Given that average fare in India is about Rs. 150-Rs. 220, this is almost a 100% markup paid by Uber s pure profit. Not just that, Uber charges the least amongst all taxi services. Ola charges about Rs. 12 / km and Uber charges about Rs. 8 / km (averaged between UberGo and UberX). This of course attracts more customers towards Uber. The drivers have a win-win from lower fare (at least for the time being).
Uber is appealing to drivers and they have become its greatest spokespeople. And this word of mouth advertising is definitely helping Uber. And the drivers have a good reason to side with Uber. Most Uber drivers in India do not own their own Taxi. But Uber is helping them own one, if they drive Uber Taxi for about five years. “If we drive Uber for 5 years, Uber will let me have this Taxi”, Ajit mentioned chirpily as we sped to a nearby mall in Pune.
While Uber is cajoling the drivers, Ola is unfortunately working hard to distance the drivers. Drivers frequently complain of under payment, harsh treatment, and micro-management by Ola. When Ola had started out, it was paying drivers bonus just to join Ola. Then it payed them bonus if they took certain number of rides. Soon these extra perks and bonuses went away. One driver I spoke with was paid Rs. 200 short for a fare he just did. He would have to contest with Ola for that money and would lose half working day. These kind of experiences really frustrate drivers.
Ola is probably tightening the belt because it is more focused on bottom line. While Ola is trying to get profitable, Uber is capturing the market and is focusing on top line. And Uber is definitely succeeding with its strategy of lower fairs and betters terms for drivers. According to Amit Jain, president Uber India, Uber does 1 M rides a day and is growing at 40%.
Of course this growth does not come free for Uber. If Uber pays Rs. 180 extra to every driver per ride and is charging only Rs 8/ km, it is losing about $4 per ride. Uber is losing $4M per day, $120M per month. and upwards of $1B in a year at this rate. Uber is investing $1B in Indian market and I suspect most of this money is to fund lower fares and overpayment to drivers.
This is a great strategy for a company with deep pockets like Uber. At this rate, Uber can break Ola’s dominance. Ola is valued at only $2.5–3B which is substantially lower than Uber’s $50B and Ola does not have the deep pocket of Uber to compete on prices in long term. This and its fracturing relationship with drivers will ultimately relegate Ola to only a fringe market.
I am glad for drivers like Shantilal and Ajit, since they are at least on a path to financial independence.
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