Buses: The Golden Goose in the Mobility jungle
#Mobility #Transportation #WaterBridgeVentures #Perspectives
£140 pounds, London - Calcutta - London by Bus
The price Albert Tours charged for a luxurious, overland, trans-continental bus trip from London to Calcutta in 1957. Willing enthusiasts embarked on the world’s longest bus route to cover 16,000 km over an approximate duration of 115 days.
With most of us suffering from deep withdrawals of #wanderlust over 2020, you might find yourself fascinated by the thought of driving halfway across the world on a double-decker bus. This fascination is not new.
India has a deep and colorful history with buses, which stands as a time tested artery of transportation for over 250 million commuters. Fast, frequent, and the cheapest mode of transport around, buses have been culturally ingrained into the Indian experience.
Buses make up an incredible 42% of the USD 90B Indian daily commute market and generate more revenue than any other mode of transportation in the country. 1.5M vehicles operate across a spectrum of public/private and intra/inter city modes to ferry passengers on constantly evolving routes with tickets in the range of INR 7 - 28 (USD 0.1 - 0.4).
Interesting sub-sectors in the space include private intra city modes that bring in ~ USD 14B and inter city private stage carriers that bring in ~USD 7B in revenue. As a comparison, 4W mobility — which has seen Ola vs Uber take center stage accounts for USD 22B in annual revenue, a mere 58% of the revenue generated by buses in India!
As the Jio Platforms funding story shows, there is near universal validation of the scale and potential of the Indian Tier 1+ consumer ecosystem. Affordable transportation, much like internet access - enjoys robust demand across all demographics. Incredibly, bus penetration across Indian cities still hovers around the 20–35% range — highlighting the still dormant potential of the buses in the mobility space.
Buses have a universal appeal across the country. Per analyses by PGA Labs, 70% of bus users are in the INR 1 - 5 lakh income group with high ridership levels across both Millenials and Gen Z (10–29 yrs). Commuting for work makes up a dominant majority of the passenger use case and higher income levels do not affect bus popularity for distances larger than 5 km.
Price remains a large part of the decision to travel by bus. Purely from a cost perspective, buses beat any other mode of transport on a per kilometer basis. Averaging INR 1.4/km, buses are significantly cheaper than trains at INR 2.3/km, 2-wheelers which cost INR 7.6/km, and auto-rickshaws which average INR 12/km. Additionally, immunity against bad weather, ability to cross-utilize time, and comfortable usability over long distances are other demand level drivers.
On the supply side of things, India has a staggering dearth in bus supply. Today, we have ~1.4 buses per 1000 population compared to 1.9 in China, 3.4 in the US, and over 6.5 in South Africa. A large majority of buses today are run by fragmented, disorganized players that barely break even on daily operations. Unreliability, long wait times, poor vehicle maintenance, and high levels of pilferage across operations all point to a broken customer experience.
With over USD 30B of metro lines planned in India, there is some relief in sight for the Indian daily commuter. Dug up roads and construction around every corner in most large cities act as a constant reminder that infra is long term game - some pain for (hopefully) long term gain. Metro lines are undoubtedly a headline developmental milestone but may not be the silver bullet we all hope for. Fixed, expensive, and time-intensive - it might take a while before we reap the benefits of a connected rail and metro system.
In contrast, Buses are capital efficient, interoperable, and modular by design. Bus systems boast incredible flexibility in terms of routes, number of buses, size of buses, and frequency. Bus lines can evolve with a city and mould to an increasingly expansive urban population. One can argue that investment into better road infrastructure (higher utility outside of commuting) and dedicated bus lanes may have provided a quicker and cleaner solution.
At WaterBridge Ventures, we have had the privilege of partnering with the superstar team at Chalo, which has firmly established itself as a dominant player in the public transportation management space. Chalo has built a digitally enhanced customer experience with touch-free cashless ticketing, live bus tracking, and integrated last mile connectivity.
Tech integration into daily operations has vastly improved bus take rates and built predictability and data backed logic into routing decisions. Dynamic indicators like bus density and occupancy rates have helped Chalo buses react to changes in demand to emerge as an enhanced mode of safe transportation in a post CoVID world.
We are eager to double down on our optimism for the space and believe buses have the potential to have an outsized impact on millions of Indians. Companies with strong tech integration, on-ground operational excellence, and an obsessive customer focus can capture significant value. Transportation as a service for young, digitally native Indians over the next decades will undoubtedly feature buses and we are excited to see what the future holds!
With inputs from Manish Kheterpal
