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Business News/ Companies / Start-ups/  Ola, Uber pick divergent paths to raise cab supply
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Ola, Uber pick divergent paths to raise cab supply

WhileOla wants to get more cars on the road via leasing unit, Uber seeks to launch peer-to-peer cab-hailing

Ola has bet big on its leasing unit, through which it buys cars and then leases them to drivers. Photo: Hemant Mishra/MintPremium
Ola has bet big on its leasing unit, through which it buys cars and then leases them to drivers. Photo: Hemant Mishra/Mint

Mumbai: Cab-hailing services Ola and Uber have adopted divergent strategies to grow their business after the initial surge in supply of cabs has stagnated, raising the stakes in a highly-charged market share battle between a homegrown start-up and a US technology behemoth.

The lure of professional independence and high earnings brought cab drivers in hordes to Ola (ANI Technologies Pvt. Ltd) and Uber India for two years. Since late last year though, both have struggled to keep up the pace of signing up drivers in a nascent market with a limited supply of cabs.

Now, the two companies are taking different routes to create new supply.

While Ola wants to get more cars on the road, Uber wants to stick to aggregation, albeit in a risky and radical format for India.

Ola has bet big on its leasing unit, through which it buys cars and then leases them to drivers. Last September, Ola said the firm, along with financing partners and car makers, will invest Rs5,000 crore towards this cab-leasing programme over the coming year. It’s not clear if the company has invested the promised amount but its plan is to bring in thousands of new cars on the roads to gain an edge over Uber. Leasing cabs brings two main benefits to Ola: the drivers of the leased cars can’t switch to Uber’s platform and Ola pays lower incentives to the drivers.

Uber is taking a different approach. While the company has also set up a leasing unit, its big bet over the long term is to introduce peer-to-peer (P2P) cab hailing, two people familiar with the matter said. Under this, 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.

In the US, which is Uber’s biggest market, a majority of Uber’s business comes from P2P. In China, too, P2P had been one of the company’s main drivers of growth.

What’s holding back Uber from launching P2P in India are regulations that ban this business model. Additionally, personal vehicles cannot be used for commercial purposes under insurance contracts, said the two people cited above. Uber had tried out P2P in Punjab last year, but it hasn’t launched the service nationally because of regulatory and insurance issues.

“Uber’s thinking is simple: we don’t need more cars on the road considering how poor the infrastructure already is. P2P has been massively successful for Uber in other markets; so, they are working to launch the same in India. They’ve been exploring this for nearly two years. The biggest stumbling blocks were the regulations and insurance issues. They’ve been working behind the scenes to get this done," the person said.

Uber India head Amit Jain confirmed the firm is trying to convince regulators to allow it to launch P2P.

“You have got challenges of congestion, pollution and you have got traffic on the cities that is growing on a daily basis. Yet, as you look at the number of cars today, in Delhi, 70% of the cars are travelling with one passenger in the car. If all those cars can be enabled with travelling with two or three passengers, we could reduce the number of cars on the road by as much as 35-40%. Ride-sharing is one of the key solutions to the challenges our cities face today. We are working with the regulators to say what regulations can we amend or can be amended to help and propagate private ride-sharing in India," Jain said.

Ola didn’t respond to an email seeking comment on whether the company is also working on a P2P service.

The divergent strategies of Ola and Uber toward supply recall the contrasting approaches by Flipkart and Amazon India last year. While a large part of Amazon’s growth came from its retail business (a joint venture with Catamaran Ventures), Flipkart went the other way, deciding in early 2015 that it would shut its retail business and become a marketplace. That didn’t work and Flipkart is now moving back to a largely-inventory model under chief executive Binny Bansal and Kalyan Krishnamurthy, the company’s retail and advertising head.

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Published: 18 Sep 2016, 11:44 PM IST
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