The narrative of ride-hailing and mobility in India so far revolves around the duopoly of Ola and Uber, similar to Flipkart and Amazon in the ecommerce segment, and even Zomato and Swiggy in the food delivery space. Despite ruling the space, the duopoly has done little to revamp the ride-hailing segment in the country.
As of 2022, data sourced from Statista indicates that Ola commanded a 41% market share, closely trailed by Uber at 37%, leaving little room for other players. But this stranglehold on the ride-hailing segment and the disruption of legacy cab and ride-hailing players has largely come on the back of steep incentives and discounts.
While one cannot deny that technology and the platform model of connecting drivers and commuters totally changed the mobility market, the extensive market share can be primarily attributed to substantial discounts offered to riders and incentives extended to drivers in the early years.
For the initial years till early 2016, both platforms claimed driver earnings exceeding INR 1 Lakh per month, which enticed a segment of the lower and lower-middle-class individuals to ply their vehicles for Ola and Uber. Numerous auto-rickshaw operators also sold their vehicles to join the growing trend.
On the consumer side, the growth came on the back of heavily subsidised rides and VC-funded discounts.
But the times have changed drastically since then.
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Over the past few years, the euphoria surrounding Ola and Uber has given way to disillusionment for a significant portion of commuters due to recurrent ride cancellations by drivers, while drivers complain about lower earnings, as both platforms have looked to maximise their margins.
Today, drivers find themselves grappling with rising aggregator commissions, diminishing per-ride margins and increasing fuel costs.
Consequently, we are witnessing a number of challenges such as ride cancellations, demands of cash payments, dirty cabs, damaged seats, and lack of basic hygiene. The ride-hailing sector is also marred by many instances of drivers outrightly refusing to turn on air conditioning during rides, unless commuters shell out more.
For every INR 100 received by drivers, 20%-25% of the total fare goes into paying the platform commission, INR 5 towards GST and then there is fuel and maintenance cost, leaving drivers with very little to take home.
The predicament is exacerbated for drivers saddled with car loans, where equated monthly instalments (EMIs) are another source of distress.
Various state governments have raised concerns about surge charging and other pricing issues, while drivers have gone on strike to protest against their falling earnings.
So, what’s the solution?
At least for Ola, the answer came in the form of Prime Plus, a premium-tier service that addresses the concerns of commuters such as cancellations and promises drivers consistent earnings for drivers.
Launched in May 2023 in Bengaluru, Ola Prime Plus comes with a minimum business guarantee (MBG) scheme which ranges from INR 1,815 and INR 7,700 on a daily basis for drivers in Bengaluru.
For instance, according to various Prime Plus drivers operating in Bengaluru, completing six rides entitles a driver to earn INR 1,815, while 11 rides lead to INR 3,300, 18 rides to INR 4,900, and 28 rides to INR 7,700 (approximately).
In fact, Ola makes up for any difference between the actual earnings of the drivers and the promised MBG. If a driver completes 11 rides and only earns INR 2,500 through these rides, Ola adds an additional INR 792 (INR 800 – 1% TDS) as the incentive to uphold the MBG terms.
The MBG offered by Prime Plus is notably higher than that of regular Ola rides, according to some Prime Plus drivers that Inc42 spoke with.
Having piloted the model in Bengaluru, Ola has expanded the Prime Plus service to Mumbai, Pune, and Hyderabad. However, the specific MBG differs from city to city.
In Delhi, for instance, the MBG for 11 completed bookings will reportedly be set at INR 2,800, while Pune and Hyderabad have an even lower MBG threshold.
Is Ola Prime Plus The Answer To Ride-Hailing Problems?
At first glance, Prime Plus seems to have solved two of the biggest problems in the ride-hailing sector, but analysts are sceptical about the long-term viability of the solution.
The Indian market is highly price-sensitive, and Prime Plus charges commuters a premium of 20%-30% above the standard fare. Remarkably, the fare for Prime Plus even surpasses that of Uber Premier, the highest tier of service on rival Uber.
An analyst from Deloitte expressed reservations about this approach. He argued that by presenting higher prices under the guise of addressing basic issues, Ola has essentially inflated the cost of access to service.
While Prime Plus might initially seem appealing to commuters and has experienced some success in the short term, its long-term feasibility is questionable. Drawing a parallel to Uber and its attempts to break up the services into Uber Premier, Uber Black, and Uber Lux based on the cost to the commuter, the analyst asked why commuters would pay a premium for basic services such as a ride guarantee.
Ola too has discontinued its premier services like Ola Select (launched in 2015) and Ola Play.
The disparity in pricing becomes especially pronounced during peak hours when standard services are already subject to 2-3X surges and Prime Plus imposes an additional premium over this, making a simple cab ride significantly more expensive than otherwise.
Analysts argue that this approach might not be economically sound in the long run.
Moreover, when considering the core offerings of Prime Plus — assured rides and well-maintained cabs — critics argue that if a service provider is unable to deliver these essentials, it’s an issue on the provider’s end, rather than a consumer problem. Charging extra for such basic assurances seems unjustifiable at this point in time.
Girish Kumar Agrawal, the founder of 3 Cube Analytics and Strategy Solutions, raises concerns about Prime Plus’ requirement for drivers to commit to rides without cancellations. He notes that enforcing such contracts with drivers has historically proven nearly impossible.
Over the past decade, numerous schemes have been attempted but none remained successful. Agrawal contended that unless a feasible breakeven point is achieved for all participants — riders, drivers and the platform — the model is prone to failure.
Does Ola Prime Plus Address Driver Concerns?
There are other concerns when it comes to Ola Prime Plus.
According to Tanveer Pasha, the president of the Ola and Uber Drivers’ Association, which represents over 36K cab drivers in Bengaluru, the service does not adequately address issues of lower earnings and unfair working conditions for drivers.
Currently, the number of cab drivers in Bengaluru has decreased from over 1 Lakh in 2019 to approximately 45K-50K drivers in 2023. The driver enrolment numbers for Ola and Uber fluctuate daily, with drivers choosing the platform offering the better deal at the time, said Pasha.
“In Bengaluru, Ola and Uber charge a 25% commission. Our demand is to reduce this commission to a maximum of 10-15%,” Pasha emphasises.
On a typical day, for normal Ola rides, drivers complete around 12-18 rides and achieve a net income of INR 800 to INR 1,000 at most. When considering maintenance costs for the cab, the actual earnings come down to INR 500. Given Bengaluru’s high cost of living, this level of income is insufficient to make ends meet.
Pasha has engaged in numerous discussions with Karnataka Transport Minister Ramalinga Reddy and CM Siddaramaiah. The aim is to either compel ride-hailing platforms to reduce their commission rates or establish a new platform like “Namma Yatri” with reduced commission rates tailored for cab drivers.
This is another chapter in the ongoing struggle of drivers seeking sustainable earning opportunities and improved working conditions through ride-hailing platforms.
“Ola Prime Plus does not give us the freedom to choose our destination. As a result, most of the time, we have to drive even 30 Km without any ride while returning home at night,” an Ola driver told Inc42.
Moreover, there is a fear that Ola might completely change the MBG terms as it has done in the past. Drivers claim that often the company changes terms without any explanation and this means earnings are extremely inconsistent.
Ola’s Deeper Issues
Ola has been sidestepping core issues for a while, and Prime Plus seems to be part of that pattern. This strategy is unlikely to bring Ola closer to achieving financial sustainability. To genuinely achieve breakeven, Ola needs to address its fundamental challenges by integrating the principles of Prime Plus into its regular services.
The company finds itself grappling with a staggering increase in year-on-year losses. Additionally, with its valuation plummeting by over 50% in the books of its investors, Ola’s readiness for an IPO seems questionable at best.
Recently, Vanguard, the US-based investment advisor with about $7.7 Tn in global assets under management, which previously invested $51.7 Mn in Ola, has devalued its Ola shares to $25 Mn. As a result, Ola’s valuation has plummeted from $7.3 Bn to $3.5 Bn in the investor’s books.
What’s intriguing here is that Ola has garnered over $3.9 Bn in funding over the last 12 years. Given the state of its financials and the mega losses in ride-hailing, securing additional funds for the company appears to be an uphill battle. Indeed, the focus of Bhavish Aggarwal is squarely on Ola Electric, which the CEO claims will go public before Ola Cabs.
Notably, a considerable portion of the Ola Cabs app is dedicated to promoting Ola Electric vehicles. This emphasis on electric vehicles indicates a bigger focus on this vertical, rather than cab-hailing.
Revenue generation is a significant hurdle for the company. Analysts believe that execution challenges will require substantial rectification rather than surface-level interventions like Prime Plus.
Any model based on big incentives on a daily basis is not going to last long. Further, the Deloitte analyst quoted earlier, underscored the necessity for a refocussed approach. Ola’s current trajectory hardly addresses the fundamental issues at hand. Perhaps the starting point is in genuinely listening to the concerns voiced by both consumers and drivers.
In this regard, Ola’s customer and driver support systems leave much to be desired. The accessibility of Ola’s support number is severely limited for both drivers and consumers. This is in stark contrast to the principles of operating a company in the Indian context, where attentiveness to customer and employee needs is deeply ingrained, the analyst added.
This disparity between operational practices and customer expectations underscores the need for a comprehensive transformation within the company’s operations.
Disrupting The Disruptors
Unlike Ola, Uber has announced plans to go all-electric by 2040. A senior Uber employee told Inc42 that Uber has already acquired a significant number of electric cars from Tata Motors which is being rolled out under the Uber Green brand. Having signed an MoU with Tata, the plan is to acquire 25K electric cars in the next one year from Tata.
With EVs, the fuel cost could be minimised by 10x, and this is where a breakeven could be achieved for the company as well as for drivers.
However, electric cabs, too, have their own issues, including charging infrastructure and high ownership costs. An electric car is usually INR 3 Lakh to INR 4 Lakh more expensive than ICE vehicles.
While Ola, too, plans to acquire 10K electric cabs, no timeline has been assigned by the company. Meanwhile, Ola Electric plans to launch affordable electric cars by 2030, a distant dream as of now.
The emergence of local ride-hailing platforms in various cities poses more significant challenges for giants like Ola and Uber.
For instance, Bengaluru-based Namma Yatri has rapidly onboarded over 89K auto drivers, establishing itself as the largest auto platform in the city.
In contrast to Uber and Ola, which charge a hefty commission, Namma Yatri has operated as a zero-commission platform thus far. However, Namma Yatri is now considering to charge a subscription fee to cover platform maintenance, development, and operational costs.
The Ola and Uber Drivers Association of Bengaluru has even urged the Karnataka government to launch a state-led platform as a countermeasure against Ola and Uber, which is currently being deliberated.
Besides Namma Yatri, Bengaluru-based Rapido is another rival of Uber and Ola in the auto and bike rental segment. Smaller competitors such as Redtaxi have gained immense popularity in Tamil Nadu cities such as Coimbatore, Trichy, Madurai, and Salem.
Another rival InDrive has captured a significant market share in multiple cities. Interestingly, InDrive is known to onboard drivers that have been blacklisted by Ola and Uber, offering rides at a comparatively lower cost.
The biggest new challenger to Ola and Uber is Gurugram-based Blu Smart Mobility, which has positioned itself as an all-electric service and offers the zero cancellation feature that Prime Plus is banking on. The platform offers well-maintained cars, and good drivers as part of their basic services, unlike Ola
Naturally, analysts and observers have questioned whether Ola is adequately addressing the existential challenges marring its platforms, given that rivals are ready to jump in to fill the gap.
So, even as Ola has launched Prime Plus as a way to temporarily plug the service quality gap, this only serves to deflect attention from the core issues and it’s unlikely to be a lasting solution to the many problems that plague ride-hailing.
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