What Uber’s bid for peace with Didi Chuxing means for Ola

A truce between Uber and Didi Chuxing could escalate the market share battle between Ola and Uber in India


Ola raised some $500 million from Didi, SoftBank and others last November. Photo:
Ola raised some $500 million from Didi, SoftBank and others last November. Photo:

Bengaluru: A potential truce between ride-hailing services Uber Technologies Inc. and Didi Chuxing in China could have ramifications for the ongoing battle between Uber and Ola, the market leader in India.

Investors in Uber are encouraging the company to sign some kind of an agreement with Didi, which also owns a small but strategic stake in Ola, Bloomberg reports. Both Uber and Didi are bleeding hundreds of millions of dollars every year in order to increase their market share in China. Didi is a clear market leader and investors in Uber are concerned about the growing losses in China, according to Bloomberg.

ALSO READ: Uber backers push for Didi Chuxing deal in China

A truce or an agreement between Uber and Didi is far from being signed, the report cautioned.

In December, Ola, Didi and two other international cab-hailing services, US-based Lyft and Singapore-based GrabTaxi, entered a global ride-sharing agreement to take on common enemy Uber, which wants to dominate urban transportation across the world.

If a truce were to be agreed on between Uber and Didi, it could escalate the market share battle between Ola and Uber in India or it could translate into a similar agreement between the companies here—depending on who you’re talking to.

The first theory is marginally more plausible.

If Didi continues to win by a significant margin in China, India may become for Uber what it is for another American tech giant, Amazon: a market it cannot afford to lose. In that case, a truce between Ola and Uber is unlikely, especially as Uber fancies its chances of winning in India more than it does in China, analysts say.

ALSO READ: Uber’s bid for peace with Didi has ramifications for India

The other possibility—of a truce in India—potentially spells bad news for drivers and customers.

On 4 September, Mint reported that Ola (ANI Technologies Pvt. Ltd) and Uber India had started charging drivers Rs.300 per week, as they attempt to prevent drivers from using other platforms. The logic was that a driver who pays the company will stick to it. That illustrated how the dominant positions enjoyed by Ola and Uber gave them tremendous pricing power with drivers as well as customers.

In India, Ola and Uber practically enjoy a duopoly as both are significantly larger than cab services pioneer Meru, which has struggled to compete with the speed, tech expertise and funding power of the two. A fourth, TaxiForSure, was acquired by Ola in March 2015 for $200 million, in a deal that helped Ola expand its lead and consolidate its status as the most attractive alternative to Uber for investors who want to bet on cab services.

ALSO READ: Behind TaxiForSure’s sellout

For customers and drivers, any truce in a duopoly would be far from ideal as alternatives are anyway scarce. Such a scenario is also somewhat unique among India’s nascent but fast-growing internet market, which investors and analysts say has too many firms in most niches.

“In India, such a scenario (a truce between Ola and Uber) may play out over a longer time and not possibly in the immediate future, especially given that Ola still has a bigger market share. India is still behind China. There is still ample scope to cut through this market on your own,” said Vinod Murali, managing director at InnoVen Capital India.

“There are a few reasons you would want such an arrangement. One, if you feel that the local player has an advantage and there is no level playing field. That is not the case and Ola does not have any major advantage because it is an Indian company. Their investors are largely foreign entities. Besides, the Indian market has not evolved to that point and they still need to invest to grow their market share as well as the market altogether,” Murali added.

Ola raised some $500 million from Didi, SoftBank and others last November. The company has initiated talks to raise a new, large round of funds, Mint reported on 15 June.

Ola and Uber didn’t respond to emails seeking comment.

Sayan Chakraborty contributed to this story.

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