Ola, Uber may find a new rival in HDK Cabs in Karnataka
JD (S) leader H.D. Kumaraswamy has announced an investment of Rs50 crore over the next two years into his venture HDK Cabs, which is set to rival Ola, Uber after its roll out in a month
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Bengaluru: The tussle between disgruntled drivers and ride-hailing services such as Ola and Uber may soon turn into a political battleground, with former Karnataka chief minister and Janata Dal (Secular) politician H.D. Kumaraswamy throwing his hat in the ring in the state.
Kumaraswamy, who had publicly supported drivers earlier this month when they hit the streets to protest against a fall in incentives offered by Ola and Uber, has announced an investment of Rs50 crore over the next two years into his venture HDK Cabs, which is touted to rival venture capital-backed Ola and Uber, in Karnataka.
The venture will roll out in a month in the state.
Thousands of cars affiliated to Ola (ANI Technologies Pvt. Ltd) and Uber Technologies Inc. went off the roads for more than 10 days in Delhi and Bengaluru, beginning 12 February. The protesters’ major grouse was a drastic cut in incentives, which has impacted their monthly earnings, and the constantly changing incentive structure of the companies.
While Ola pays incentives based on the number of rides per day, Uber’s incentives depend on the total value of rides in a day.
Kumaraswamy said the lure of high income had prompted a multitude of youth to take loans, buy a car and flock to the cities to drive for Ola and Uber. However, a sharp drop in incentives over the last six months have consequently impacted their monthly earnings and ability to pay off the loan.
“I decided to assist them by introducing a new app system to protect them and get proper profit to those drivers,” he said on Monday.
The former chief minister said while he will invest to build the technology, drivers, who will essentially run the company, could decide on fare and incentive structures.
Driving for Ola and Uber had become a lucrative option for a large number of drivers, especially because of the incentives paid by the companies to the drivers over and above the fare charged from the consumers.
According to multiple company executives and industry experts, it is a common practice to attract a steady supply of drivers with goodies in the early days of operation. However, both companies were constrained to reduce incentives to contain burn and chart a road map to profitability as investors become increasingly cautious on their bets.
Uber is the most valuable start-up in the world at $68 billion, having raised more than $10 billion in investments. Ola, one of the so-called Indian unicorns at $5 billion, has raised at least $1.3 billion.
Both companies incur a burn of at least $25 million a month, especially towards driver incentives and offers and discounts to consumers, according to multiple industry executives.
The spending power of Ola and Uber thus makes them too big a competition for Kumaraswamy’s HDK Cabs’ Rs50 crore coffer.
Unlike Ola and Uber, which charge Rs6 and Rs7 per km, respectively, for their cheapest hatchback offerings, HDK Cabs will be pricier at Rs10-12 per km for hatchbacks. The company will charge Rs12-14 for sedans, said Tanveer Pasha, president of Uber, TaxiForSure and Ola (UTO) Drivers and Owners Association and a proponent of HDK Cabs.
Unlike Ola and Uber, which charge drivers a commission of 25-30%, HDK Cabs plans to deduct a mere 2-5%, but won’t pay drivers any incentives over and above the fare, Pasha said. Besides, drivers will get benefits such as insurance and maintenance, Pasha added.
Kumaraswamy, however, maintained that the venture is not meant to compete with either of them but for supporting “aggrieved drivers on humanitarian grounds”.
He denied that the initiative was for electoral gains. Incidentally, a large number of drivers have come from small towns and farming backgrounds, the traditional voter base for JD(S). Though many leaders and parties have backed demands by auto drivers, there have been a few sympathizers for cab drivers, who are a small chunk as compared to auto drivers.