Bengaluru: India’s largest cab-hailing service Ola is persuading drivers to sign up with a lower upfront payment for cabs, zero commissions and new car models to expand its cab-leasing programme which has struggled one year into the launch, three people aware of the development said.
Ola (ANI Technologies Pvt. Ltd) launched a cab-leasing programme through its wholly owned subsidiary called Ola Fleet Technologies Pvt. Ltd in September last year. Ola had then said that it, along with financing partners and carmakers, will invest Rs5,000 crore towards this cab-leasing programme over the coming year.
But a slower-than-expected growth of the business has prompted Ola to make changes to its leasing business. Apart from lowering the upfront payment and forgoing commissions, Ola has also increased the lease tenure by six months to 48 months, to keep the drivers on its platform for a longer period, the three people cited above said, on condition of anonymity.
“The programme did not take off as expected. It is apparently easy to get a supply of cars, but not easy to get loyal drivers. We also offer weekly and monthly leases for drivers to experience Ola’s platform and many drivers tend to take that up to test waters. It is extremely difficult to lock them in for four years,” said one of the three people cited above, on the condition of anonymity. Ola did not respond to an email seeking comments.
It is important for Ola to grow the leasing programme quickly because supply of cabs has stagnated since late last year after a two-year surge when the lure of professional independence and high earnings brought cab drivers in hordes to Ola and rival Uber India.
Ola has bet that the leasing programme will help bring in thousands of new cars on its platform and gain an edge over Uber. The company had partnered with Maruti Suzuki India Ltd and Nissan Motor India at the launch. Earlier this month, Ola struck a deal with automaker Mahindra and Mahindra Ltd to finance vehicles for more than 40,000 of its drivers by 2018. The alliance is worth Rs2,600 crore.
The leasing programme essentially addresses two major pain points for Ola—enables it to lock in a driver on its platform for at least four years and reduces the expense on driver incentives. The company does not pay additional incentives to drivers over and above the fare under this initiative, as is the case with drivers who come in with their own cars.
For instance, last month, Ola lowered the upfront payment for Maruti Ritz by about 30%, from Rs35,000 to Rs25,000. It has discontinued charging drivers a commission and pays them Rs14 per km, irrespective of the fare it charges consumers. For two of its most popular categories, Micro and Mini, Ola charges consumers Rs6 and Rs10 per km respectively. The company has, however, increased the daily repayment amount from Rs850 earlier to Rs950, the three people cited above said.
At the end of four years, drivers can pay an additional Rs62,000 to buy back the car from Ola.
Ola also plans to launch Maruti Suzuki Swift Dzire and Hyndai Accent under the leasing programme in the next two to three weeks, against an upfront payment of Rs 35,000 and a marginally higher daily repayment of Rs1,020 per day, these people said.
None of the three people cited disclosed the number of leased cars on Ola. Mint could not ascertain the number of such vehicles.
While Ola wants to get more cars on the road, rival Uber wants to stick to aggregation, albeit in a risky and radical format for India. Uber’s big bet over the long term is to introduce peer-to-peer cab hailing in India.