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Business News/ Companies / Start-ups/  Ola looks to enter inter-city taxi market

Ola looks to enter inter-city taxi market

Ola is piloting an outstation taxi service in Delhi

Ola will deploy a part of its fleet affiliated to the Mini and Prime categories for outstation rides. Photo: Hemant Mishra/MintPremium
Ola will deploy a part of its fleet affiliated to the Mini and Prime categories for outstation rides. Photo: Hemant Mishra/Mint

Bengaluru: Ride-hailing service Ola, owned by ANI Technologies Pvt. Ltd, is piloting an outstation service in Delhi, a move that will help the company boost revenue as well as use the diesel cars on its platform that are banned from plying in the city by the Supreme Court, said two people aware of the development.

The services may be extended to other cities if Delhi proves to be a success.

The SoftBank-backed company said in a statement in March that it had 26,000 vehicles running on compressed natural gas (CNG) affiliated to its platform. The company also claimed to have set aside 200 crore to push CNG adoption.

The company will deploy a part of its fleet affiliated to the Mini and Prime categories for outstation rides, said one of the two people cited above, both of whom spoke on condition of anonymity. “However, the company is promising drivers to reimburse them in case of one-way trips, if they have to return without any passengers to Delhi. This may lead to some cash burn, but is a way of getting more drivers take those trips initially," said the person.

Ola did not respond to an email seeking comment.

The move comes close on the heels of Ola closing its food and grocery delivery services within a year of launch, after the verticals failed to scale up, in order to focus on transportation amid stiff competition from US-based Uber Inc.

The food and grocery delivery services, launched in March and July last year, respectively, were shut down in March this year.

To be sure, Ola, which began operations in 2010, offered outstation trips initially, but discarded the service later to focus on point-to-point drops within the city. The move to relaunch the service is aimed at shoring up the company’s revenue and getting a foothold in all possible modes of road transportation.

Its biggest rival in India, Uber, the world’s most valuable start-up at $62 billion, is yet to enter the segment and only facilitates intra-city travel. Some of the online ride-hailing services which facilitate outstation travel are Meru Cab Co. Pvt. Ltd, Savaari Car Rentals, Roder and MyTaxiIndia Pvt. Ltd.

According to industry executives, inter-city is a lucrative segment at $4-6 billion because of the higher order values, which help boost revenues, though the segment is highly unorganized, with most of the bookings still happening through operators and agents.

According to Siddhartha Pahwa, chief executive officer at Meru Cabs, overall contribution from inter-city trips to Meru’s overall business is currently “a high single digit".

“Meru intends to have added focus on inter-city business in the coming future by further adding dedicated fleets to its inter-city service and introducing special packages in this segment. Also, we will be launching a ride share service in inter-city segment very soon," said Pahwa.

Gaurav Agarwal, chief executive officer at Savaari Car Rentals, said less than 5% of the outstation segment is organized, giving all businesses ample headroom for growth.

“The way we understand inter-city is that the category is genetically different from point-to-point, where both Ola and Uber are big. Their stronghold is getting the car at the right location at the right time, which works for short distances. But for inter-city, you have to have a planned trip. That is when you have to align your entire process and technology around it so that you can meet planned requests," said Agarwal.

Uber and Ola are fighting for dominance of India’s cab business. India is an important market for Uber, especially since it is possibly the last frontier in Asia with lucrative market potential. In China, Uber is still a distant second to Didi Kuaidi, which is also an investor in Ola.

Ola, with a valuation of $5 billion—making it one of the so-called unicorn start-ups valued at more than $1 billion—has so far raised $1.2 billion from investors.

Uber announced in July last year that the company would invest $1 billion in India.

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Published: 10 May 2016, 12:42 AM IST
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