Uber starts to lease cars to its drivers on the lines of Ola4 min read . Updated: 30 Dec 2015, 12:24 AM IST
Uber has partnered Mumbai-based Xchange Leasing, which will own the cars, to run the leasing business
Ride-hailing company Uber has started leasing cars to drivers in India, borrowing a page from the play book of its larger rival Ola, as it seeks to expand market share.
The leasing programme, aimed at attracting more drivers to its platform, is being tested in select cities such as Delhi, Mumbai and Bangalore, according to three people familiar with the development who requested anonymity.
In July, Uber unveiled a programme called Xchange in the US, its home market, which allows it to directly lease cars to its drivers on the UberX platform. UberX is Uber’s cheapest service outside of India; in India it runs UberGo at a lower price point than UberX.
Uber has partnered Xchange Leasing India Pvt. Ltd to run its leasing business, according to two of the three people mentioned above. The cars leased out to Uber drivers are owned by Xchange Leasing, a Mumbai-based leasing firm.
Uber’s director of financial reporting Joshua James Waldron joined Xchange Leasing India’s board as a director on 7 November.
Six days ago, Xchange Leasing posted job opportunities on multiple recruitment sites looking to hire ‘Leasing Executives’. According to the website, the company is looking for people who can talk to partners and drivers and explain to them the process of obtaining leased vehicles, manage the fleet and follow up on leads. The job posting read:
“About The Company: Uber is evolving the way the world moves. By seamlessly connecting riders to drivers through their apps, they make cities more accessible, opening up more possibilities for riders and more business for drivers. From their founding in 2009 to their launches in hundreds of cities today, Uber’s rapidly expanding global presence continues to bring people and their cities closer. Job Description: - Talking to partners on contractual terms. - Explaining the process for obtaining leased vehicles. - Fleet management (inventory, maintenance, planning) - Following up on leads"
Xchange Leasing and Uber India Systems Pvt. Ltd have a common director. Documents with the Registrar of Companies accessed by Mint show Mohd Akbar Khan as an additional director on both companies’ boards.
The documents also show Xchange Leasing operates with Uber in the US and South Africa.
Mint could not independently verify if Uber holds any stake in Xchange Leasing India. Uber declined to comment.
Uber drivers have to pay a security deposit of ₹ 30,000-35,000 to be part of the leasing programme and then pay monthly lease payments with an option to own the vehicle after three years. Uber in Delhi has bought CNG-fueled cars such as Maruti Suzuki India Ltd’s WagonR and Ritz, among others.
The company is also in talks with other large car manufacturers such as Tata Motors Ltd, said one of the three people mentioned above.
The idea behind Uber’s leasing programmes globally has been to help drivers borrow at better interest rates and be able to get the cars on road faster.
According to a news report in Fortune US, Uber started leasing programmes back in late 2013 in partnership with firms such as General Motors Co. and Toyota Motor Corp.; as the company had data on the cash flow from drivers, it allowed the auto makers to predict their risks and offer better rates to drivers.
“It is a welcome move and it will help accelerate the market further. There are enough drivers today who struggle to get loans because they don’t have a credit history," said Abhishek Goyal, co-founder of Tracxn, a data analytics firm for start-ups.
“I think these leasing programs will be only required till the time lending systems evolve in the country and banks have enough data to start extending loans to the drivers directly," he added. “It will help extending the market as long as the driver incentives remains the same."
Uber India in July said it will invest as much as $1 billion in India in six-nine months to enter new cities and clocking more than one million daily rides.
Ola claims to have a market share in excess of 80% in India. Uber claims to control 35% of the market. There’s no independent way of verifying the claims.
In September, Ola, run by ANI Technologies Pvt. Ltd, committed to invest ₹ 5,000 crore in a span of 12 months towards its cab-leasing programme. Ola, too, has created a separate, unnamed unit for the programme. Ola’s leasing model requires a driver to pay a monthly lease, while maintenance expenses are borne by the company. Uber is experimenting with a model where apart from the monthly equated monthly instalment the drivers need to pay for maintenance and fuel; they are rewarded with incentives based on performance.
It is also trying out a salary model where Uber is paying drivers a monthly salary while the car remains in the name of Xchange Leasing.
Ola’s unit, which the company refused to name publicly, has already piloted the leasing programme with more than 1,000 vehicles across Bengaluru, Chennai, Hyderabad and three other cities, Mint reported in September.
Ola declined to comment on Uber’s leasing programme. The company is working with Maruti Suzuki and other large car makers and financial institutions to reach its goal of having 100,000 drivers through the leasing programme. Bengaluru-based Ola in November raised $500 million in fresh funds from investors such as investment management firm Baillie Gifford, China’s largest taxi-hailing service company Didi Kuaidi and existing investors Falcon Edge Capital, Tiger Global, SoftBank Group and DST Global.