Bengaluru: Ride-hailing services Ola (ANI Technologies Pvt. Ltd) and Uber Technologies Inc are facing a crunch in supply of cars, with the number of vehicles affiliated to their platforms dropping by almost 25% in the March quarter from the preceding three months, according to a report by RedSeer Management Consulting Pvt. Ltd.
The report suggests that cab supply peaked in the December quarter since January last year to approximately 500,000 vehicles, before plummeting to about 380,000 vehicles in the March quarter, largely because of a fall in incentives for drivers, prompting them to either explore other driving jobs or quit entirely.
“This trend was precipitated largely by continuously dropping incentives and driver incomes. Drivers who left the online platforms either shifted into other (offline) driving jobs or changed professions entirely," says the report.
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To be sure, the numbers claimed by Ola and Uber are significantly higher than RedSeer’s. Both companies claim to have about 5-6 million cabs each affiliated to their platforms. But it is not clear how many of these cabs ply on a regular basis.
Scores of drivers in Bengaluru and Delhi, two of the biggest markets for the ride-hailing companies apart from Mumbai, hit the streets in February and March this year to protest against the sharp fall in incentives, which, they claimed, had taken a toll on their livelihood. The protestors also resented constantly-changing incentive structure of the firms.
Both Ola and Uber had showered the drivers with money over and above the fares to build a large supply of cars and earn their loyalty. Both companies have been cutting down on such spends after scaling up the businesses, as they aim for profitability.
While the protests have since been called off, the strikes highlight the flaws in these companies’ business model, Mint reported on 6 March.
While the asset-light model of these cab-hailing services has merit, the strikes by drivers over incentives, their key attraction to list on such platforms, mean that these businesses cannot afford to rub the dissenters—car and fleet owners—the wrong way.
Uber India president Amit Jain said in an interview in March that the recent strike by drivers was the work of a “small number of individuals who do not represent the majority of the driver community".
“There is this mix between organic and incentives. Incentives might have come down, but what a driver partner takes home is organic money plus incentives. When we go into a market, the reason we offer incentives is because the rider will not take a ride if there is no driver partner available. For a driver partner to be available when the demand is not there or just picking up, he or she has to make sustainable earnings then. You have to have an initial set of supply. Over time, when demand catches up, the organic earnings become sustainable for a driver partner," Jain had said.
About 80% of the drivers across India who are online for more than six hours a day, make Rs1,500-2,500 after paying Uber’s service fee, he added.
“The future of our business depends on making driving with Uber the most attractive choice. Given the strong demand from riders, drivers across cities continue to join the platform to get entrepreneurial work at the tap of the app and we are committed to supporting them. We currently have 240,000 active driver partners (who would have taken at least one ride in a week) and are seeing new sign-ups every day. We are not seeing any significant churn," an Uber spokesperson said in an email response.
Both Ola and Uber have set up car-leasing businesses—Ola Fleet Technologies Pvt. Ltd and Xchange Leasing India Pvt. Ltd—over the past 18 months to ensure a supply of cars over which they have strict control.
This apart, Uber is lobbying the government to ease regulations to allow the firm to introduce ride sharing using private cars in India, where any person who owns a car can sign up on Uber and ferry customers around either on a part-time or a full-time basis.