Taxis in India — The History, Geography and Economics of it
The word “taxi” elicits nostalgic images of the black-and-yellow Premier Padmini (now Santro and i10) cars for Mumbaikars or the ubiquitous yellow Ambassadors for Kolkatans. For many of us who have seen the glory days of good old taxis, maybe a couple of decades ago, will remember that these taxis were the very lifeline of cities. They would take you to places you couldn’t travel to by bus or didn’t know where it was located. The genteel “taxiwala” would crank down the meter and off you’d go!
But all cannot be well with something for too long. Competing associations, monopolistic attitude, poor service and refusal to provide services eventually created a distressed customer base. This was the spark that ignited an alternative taxi service. Better organized taxi service with better rates and high level of customer service came into being in the form of Radio Cabs at the beginning of the new millennium.
The birth of the organized taxi industry
In the early days, players like Mega Cabs and Fast Track Taxi started operations with their own small fleets, with drivers as employees. Passengers could book rides through telephone calls and payment was done in cash. In 2006, other players like Meru Cabs, Easy Cabs and Savaari appeared on the horizon. They took on drivers as “subscribers” who placed a deposit with the company. The company would buy a car, train the drivers in soft skills and charge a fixed amount from them per day. In turn, the driver had to bear the cost of fuel, while maintenance of the car was taken care of by the company. Some companies completely owned the car throughout its lifetime, while others, like Easy Cab, had a system wherein after five years of non-stop driving, the car became the property of the driver.
However, for obvious reasons, this was never a viable and scalable way of doing business and the first phase of owning the entire fleets of taxis petered down considerably, although some companies are still in business after tweaking their business models.
2010 marked a historic year for the taxi business when Ola entered the scene with its fleet aggregation model. This lean business model attracted many drivers who owned cars to join the platform to offer services. TaxiForSure joined the bandwagon in 2011 and Uber arrived on Indian shores a couple of years later. The phenomenal growth of these companies is intricately tied to the mobile revolution in India. Riders could simply pull out their smartphones, enter the app and book a taxi. The true ride-hailing revolution was born.
The age of Ola and Uber
From the technological standpoint, leaders of the ride-hailing cab industry have achieved the “golden mean” by utilizing the growing impact of smartphone mobility and the gap created by the problems of the unorganized taxi sector in the country. Their user base increased exponentially, as the idea of hailing a taxi through a mobile app was enticing and refreshing to the everyday commuter. Honest pricing, GPS location and safety features were other attractors to these services. The daily commuter was happy.
And so were VCs who saw the ginormous potential of this kind of service and have pumped in millions of dollars in these ventures, the latest being the close to $10 million personal investment by Flipkart co-founder Sachin Bansal, and $300 from Korean Auto giant Hyundai Motors, in Ola. Uber, on the other hand, has raised capital too and is ready to suffer losses for an “indefinite period of time” because it sees the potential of the enormous market size.
The market potential for taxi service in India
According to statistics, the market volume of taxi services in India is more than 2 million rides per day. The market is expected to grow at a CAGR of 13.7 and reach around $14 billion by 2022. The changing lifestyles of the urban middle class and an increase in the disposable income will drive the market.
It is noteworthy that the organized taxi market is still in its nascent stages and the aggregator companies like Ola and Uber comprise a mere 4–5% of the market in terms of a number of vehicles. The unorganized taxi services across the country still account for around 90% of the market and radio cabs and affiliates like Meru and Savaari make up the remainder.
All of these statistics indicate that the taxi aggregator services have barely scratched the surface of the Indian market that holds tremendous potential for growth and the number of investments the two incumbents are attracting is a testimony to this potential.
But “all is not well”
While Ola and Uber are fighting tooth and nail for a bigger share of the lucrative Indian market pie, the only stakeholder that is happy is the customer. Investors are still waiting to see green on their Excel sheets. And probably the most important stakeholder of this ecosystem is getting frustrated.
One might argue that the drivers of the ride-hailing ecosystem have always been short-changed. While customers dictated service and quality parameters, who wants to listen to the drivers, who are made to follow and serve?
That Uber is facing an existential crisis in its core market, the US, is all too well known. Internal policy issues are being compounded by the disillusionment of drivers who are barely making enough money to remain sustainable.
Ola, on the other hand, is trying to learn from the mistakes of Uber by keeping itself nimble and going a few steps ahead to avoid these problems. However, drivers aren’t too happy with them either. Driving for these companies seemed like a lucrative offer when it all started. But with passing time, the focus has now shifted on increasing profitability. Drivers are paying more commissions, paying for fuel and for the maintenance of the car and are also caught up in the vicious circle of low fares that companies are charging from riders in a bid to expand their markets.
The brunt, unfortunately, is being faced by the drivers. Many drivers bought cars on loans which they are finding difficult to repay considering they aren’t left with much at the end of the day. The promises that the companies made when they started operations attracted tens of thousands of drivers to join them. That rosy picture has now well and truly faded into nothingness.
The problems are being percolated downwards and are being faced by riders too. Frustrated drivers are getting into heated debates (sometimes, even physical assaults) with riders. Many drivers are cancelling rides, leaving riders fuming and at the mercy of either private cabs or a sketchy public transport system. Riders aren’t getting the kind of service they had tasted earlier. And let us not even begin to discuss the problem of surge pricing. That is a discussion for another time.
So, what is the solution?
Technological advancements are happening so fast that a new technology enters the market before an earlier iteration has been fully monetized. Most often than not, the new iteration is a solution for the pain points of the previous one. Blockchain technology is one such technology that has the potential to address the pain points of many real-world problems. The taxi service in India is no different.
Based on the democratic principles of decentralization, trustlessness and complete transparency, any system that is based on blockchain technology also enjoys the benefits of its core tenets. So why not create a ride-hailing service on the blockchain? Drife is seeking to do just that.
What does Drife offer?
Drife is a NexGen ride-hailing platform that seeks to empower both the riders and the drivers. A self-sustaining community that runs like a well-oiled machine without the control of a central entity driven by capitalist tendencies seems like a Utopian dream. But it is not and is gradually taking shape.
Drivers pay a nominal sum to become part of the platform. They keep all that they are paid as fare for a ride. They pay no commission. All fares are transparent and there are no “surge prices.” The platform does not just offer services, it endeavours to create a community wherein every individual is vital to the smooth functioning of the platform. Members are rewarded for good behaviour and for helping other community members. Drife seeks to make each stakeholder important within the entire ecosystem.
Parting thoughts
A diverse country such as India comes with its own set of problems and opportunities. What is important to note here that we are a nation that puts the community before self, unlike many Western nations that celebrate an individualistic way of life. We are equally concerned with the well-being of our brethren as much as we are concerned with ourselves.
Drife is basing its business model on exactly this kind of moral and societal obligation towards our community. The thinking that “if my community is happy, I am happy” is the underlying principle that will guide the platform. No doubt there will be monetary incentives, but a feeling of mutual trust and respect will drive every stakeholder to give (and receive) the highest level of service and satisfaction.
About DRIFE
While ride-hailing apps have come a long way in the past decade, there remained a demand in the market for a system that truly empowered drivers and passengers. Enter DRIFE, the first-ever decentralized ride-hailing app that runs on a Blockchain network. We connect drivers and passengers with high-speed smart contracts and function with an economic model that is subscription-based. Drivers utilizing the DRIFE app do not pay a commission from their fares the way they do with current ride-hailing apps. Ultimately, the success of our app will bring a much-needed level of efficiency and transparency to the ride-hailing industry.
