Two tyrants in cab aggregator industry trying to success as market leader

Earlier this year, in the month of January, cab service provider and giant in the sector, Ola had lost 45% of its market share to its main competitor and the other giant in the market, Uber owing to cheaper cab fares provided by Uber. Since then, Ola had introduced the cheapest ever ‘Micro’ segment of cabs (at Rs. 40/- for the 1^st 4 kms and Rs. 6/- per kilometer thereafter) in the month of February and has been successful in keeping Uber at bay so far. In response, Uber had reduced prices in Delhi and is now offering rides for as low as Rs.20/- in Mangalore for a week. Ola plans to respond with discounts and price cuts of its own in some of its markets.

War to attract investments

Uber had given at least Rs. 43 crore to the Mumbai-based car leasing firm, Xchange Leasing India Pvt. Ltd between January and March this year to significantly boost its cab supply (availability of cabs to customers). It had also started buying cabs and lending them to new drivers for the same purpose. Ola intends to raise $300-400 million through investments from new and existing investors such as Didi Chuxing and SoftBank Group to buy cabs and boost its supply to keep par with Uber. Ola had previously raised an equivalent of U.S. $500 million through investments from its existing investors in November last year. It plans first, to get funds from its existing investors and then top it up with funds from new investors. Ola’s fund-raising efforts come at a time when the company has regained the lead from Uber, in the race to dominate India’s booming cab-hailing business.

New government regulations

The group of ministers (GoM) set up by Union road minister, Nitin Gadkari, to frame stricter traffic and road safety rules, recommended capping fares of taxi aggregators and liberalizing city taxi permit schemes. The mobile application-based cab operators will be allowed to aggregate (operate) only those cabs which have a valid taxi permits and they should follow rules relating to fares, fuel and safety, the panel headed by Rajasthan transport minister Yunoos Khan recommended. It also suggested reserving a fifth of the space in public parking lots for taxis and backed the introduction of e-rickshaws and two-wheeler taxis citing their safety and ability to provide affordable last-mile connectivity.

 

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