For Ola and Uber India, growth from their core business of ride-hailing has started resembling rush hour traffic crawl. Industry analysts and company insiders, who spoke off record, said the number of daily rides has inched up by just 4% – from 3.5 million to 3.65 million – in the last six months. This is as per a report in the Economic Times.
For consumers, this gets reflected in far higher wait times – from an average 2-4 minutes two years back to 12-15 minutes now, – and higher fares, around 15%-20% in non-peak hours in major cities.
Savage reductions in driver incentives leading to supply shortage of cabbies is the prime reason for this low single-digit growth in a business that had seen a growth of 20% in 2018, 57% in 2017 and 90% in 2016 (all data is on Ola and Uber India).
“The market is facing a saturation for point-to-point cab-hailing and over the last six months the growth of the industry has been in single digits,” said Jaspal Singh, co-founder Valoriser Consultants, a transportation sector focussed consultancy.
Ola and Uber India did not comment on ride numbers. “While our core mobility categories continue to grow, we have further strengthened our offerings with deeper penetration of first and last mile categories like Ola Autos and Ola Bikes which are now present in over a 100 cities across the country. , an Ola spokesperson said in a statement.”
“Our rides business continues to show encouraging growth across India and South Asia. We believe that the future of transport is shared, multi-modal and electric,” an Uber spokesperson said in a statement.
Other data confirm the slow crawl in Ola and Uber India’s business – commercial vehicle registrations are falling. For example, in Maharashtra 66,683 tourist cabs, which largely work with Ola and Uber India, were registered in 2017-18, but the number fell to only 24,386 in 2018-19, according to the state transport department website.
Driver incentives were cut by 40% over the last year. This resulted in several cab drivers defaulting on their loan payments, abandoning vehicles sourced from the Ola and Uber leasing programme as they went back to jobs they held before registering with ride-hailing apps, experts say.
Bengaluru has seen a 25%-30% drop in the supply of active drivers, according to a top government official. “Ride prices have increased by at least 15-20% during non- peak hours across cities,” said Neil Shah, Partner & Research Director, Counterpoint Research. ”
”However, the slowing growth is concerning for these app-based ride-share companies in India which is surprisingly still an underpenetrated market,” said Shah.
Finding new businesses
Both cab-hailing majors are betting on other businesses to grow. “Ola is betting big on electric mobility for two and three-wheeler segments to bring in affordability along with pushing self-drive two-wheeler segment through its bet on Vogo. It is also ramping up its self-drive and rental verticals even as it expands internationally and makes inroads into financial services,” said a top executive at Ola requesting anonymity.
“We are also on track to achieving Mission Electric- our commitment to put a million Electric Vehicles on the road by 2021 that will help drive sustainable mobility, for India and the world,” Ola spokesperson added.
The Bhavish Aggarwal and Ankit Bhati-founded company has separately raised more than Rs 400 crore from Tiger Global, Matrix Partners, and Ratan Tata for its Ola Electric business.
Its American rival, Uber, which recently went public, has been under investor scrutiny for piling up losses globally. In India, which is one of the strategic growth markets for the company, it is now looking at its food delivery platform UberEats, corporate and rental businesses and bike rentals.
There has been similarities between the the ride-hailing businesses in both US and India.
- Growth in US has slowed to lowest in many years
- Uber and Ola have both slashed driver/customer incentives
- Change in business focus as well
“As we continue to move forward to solve mobility issues, we will add more products such as Electric Vehicles, especially 2/3 wheelers, High Capacity Vehicles, and last mile connectivity options that will provide cleaner, convenient and affordable transportation to all,” Uber said in a statement.
Uber’s CEO Dara Khosrowshahi has acknowledged slowing growth in Uber’s core ride-hailing business and said this will account for less than 50% of Uber’s business transactions in the near future. Last week, Uber in its first quarterly results reported that its ride-hailing revenues globally grew by just 9%. Uber completes about 15 million trips a day globally. In comparison, China’s Didi Chuxing does over 30 million trips on its platform every day.