Mounting woes threaten Rapido's stunning rise

Illustration: Ashish Asthana/Mint
Illustration: Ashish Asthana/Mint

Summary

  • Policy uncertainty in three states is undermining India’s biggest bike-taxi aggregator

New Delhi: One day in March, an autorickshaw driver from Bengaluru stopped a bike taxi driver riding a red scooter, somewhere in the city’s Indiranagar neighbourhood.

“Friends, take a look at how the illegal Rapido business is happening," the autorickshaw driver, in khaki uniform, is heard and seen saying in a video that went viral. “This fellow has come from another state and drives around like a king….He has come to pick up a lady despite having a white board (registration plate)," he further says.

The video next shows the auto driver crushing the pillion rider’s helmet by banging it on the ground multiple times. The bike taxi driver, threatened, sits mum on his scooter.

Rapido, operated by Roppen Transportation Services Pvt Ltd, is an Indian bike taxi aggregator.

Graphic: Mint
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Graphic: Mint

A fortnight later, the Bengaluru Auto Driver’s Union Federation, staged a protest against Rapido and other app-based bike taxi firms. In a Facebook video, the union’s head, Raghu Gowda, exhorted autorickshaw drivers to “burn each and every bike taxi on the road".

Then, on 3 April, a video emerged of an autorickshaw driver in Koyambedu area of Chennai attacking and damaging the bikes used by Rapido and Ola while blaming them for stealing his business.

These are just a few of the many instances of abuse that bike taxi drivers are increasingly facing. In some cases, autorickshaw drivers themselves book rides only to ambush—once the bike taxi drivers reach the location, they are harassed.

Ola and Uber, known for their cab aggregation business, also offer bike taxis as a service but Rapido is the largest and possibly the fastest growing in the segment. Television advertisements, being aired during the Indian Premier League matches, have only increased its brand recognition. And the company’s drivers appear to be facing most of the rage from autorickshaw unions who see bike taxis as their closest competition. From Bengaluru and Chennai to Delhi, Mumbai, Pune and Nashik, the unions fear that the seven-year-old Rapido is eating into their livelihood.

“Bike taxis will drive 14 lakh drivers and 10 lakh autos out of business in Maharashtra," says Shashank Rao, president, Mumbai Autorickshawmen-Taximen’s Union.

For Rapido, the resistance does not come as a surprise. A decade ago, the unions had reacted similarly to Ola and Uber in the cab business. Ultimately, the protests died down. In the case of bike taxis though, there is a greater level of anxiety because the fares are cheaper than autos would charge. A 10km ride on a bike taxi could be 48% cheaper compared to an autorickshaw and about 60% cheaper versus a cab, a cursory comparison on ride-hailing apps show.

The autorickshaw lobby also has considerable clout with local governments in some states. And like the autorickshaw driver in the viral video points out, bike taxi companies operate in a grey zone in some cities—the policy framework isn’t clear and the bikes are not commercially registered. As of now, bike taxis are temporarily banned in Maharashtra and Delhi where a policy is being formulated. It has been called illegal in Karnataka. The southern state, however, is open to permits when it comes to electric two-wheelers as taxis. Delhi is also likely to do the same.

Will the policy quagmire, eventually, slowdown Rapido’s bike taxi business, and make it unviable?

Rapid Rise

Rapido was co-founded by Aravind Sanka, Pavan Guntupalli and Rishikesh SR in 2015. They had started a mini truck aggregator platform—Karrier—but pivoted to two-wheelers.

The idea wasn’t exactly novel. Many countries in South East Asia have fledgling bike taxi operators. But their timing was spot on. Around the time the service was conceptualized, Ola and Uber were busy scaling up their cab aggregation business. The bike taxi space was up for grabs.

“We are underdogs trying to build and create a category. Back in 2014-15, when the entire country was going gaga over the ride-sharing revolution, we realized that the problem for a majority of Indians was still unsolved," says Guntupalli. “Outside the Bengalurus and Delhis of the world, the ride-sharing revolution hardly existed."

On paper, it was a no brainer. The low cost of owning and operating a two-wheeler coupled with high penetration—half of India’s households own a two-wheeler as against just 8% for cars—meant an asset light model could be easily built. “Even in the smallest towns, people have two-wheelers. So, we could leverage this infrastructure to build a convenient and affordable transport solution," says Sanka. “We did not have to ask people to buy new vehicles and take on the liability (unlike cars). We only had to monetize their free time and asset."

The service not only provided low-cost connectivity, it also solved the problem of congestion in big cities. In smaller cities and towns, where lack of public transport is an issue, bike taxis gained popularity.

Rapido received a shot in the arm when the chairman of Hero MotoCorp, Pawan Munjal, invested in the startup, in 2016. Munjal also gave the founders a useful nugget of advice—to not delay entry into tier II and III cities.

From just a handful of cities and about 1,000 rides per day in 2016, Rapido expanded to 60 cities, clocking 10,000 rides per day by the end of 2018. The breakout year was 2019. Helped by two tailwinds—shared cabs became expensive and mobile data became cheaper—Rapido hit an average 300,000 rides per day. By the time the pandemic hit in February 2020, the startup had begun to clock 400,000 rides per day.

Rapido, meanwhile, also ventured into the delivery business and interestingly, into autorickshaw aggregation as well. The pandemic paused its momentum but as offices started opening up in 2021, its business recovered quickly. Currently, the company is clocking a million rides everyday across verticals. Bike taxis generate over 75% of the business today.

How much do drivers on its platform make?

About 70 per hour. On an average, many part-time drivers end up making 6,000 per month. The full-timers, who operate 10-12 hours a day, earn up to 20,000 a month. In contrast, in large cities, an autorickshaw driver earns up to 18,000 a month on an average. But then, as we have explained before, his earnings may take a hit if Rapido’s services become even popular and legal.

Sanka played down the earnings hit for autorickshaw drivers. “As per our study, the disruption is not beyond 15-16% of their earnings and livelihood. Bike taxis have specific use case—it’s mostly commute that is solo with less luggage. Also, the average distance of trips for an autorickshaw is 1.7 times that of a bike," he says.

Rapido claims there are 750,000 drivers on its platform today, mostly part-timers.

Like many startups, Rapido is loss-making, too. In 2021-22, it made a loss of 439 crore on revenue of 158 crore. At a time when the company needs to further scale up its business and work on improving its bottom line, the shadow boxing with autorickshaw unions and the haggling with state governments on policies, is proving to be a costly distraction.

Regulatory tangle

As part of the concurrent list of the constitution, both the Centre and states have the power to frame and enforce regulations on transport. The oldest state to allow bike taxis was Goa in 1981. The 1988 Motor Vehicles Act allows for commercial usage of vehicles with at least four wheels to ferry passengers. Two-wheelers are outside the ambit. In 2004, the Indian government allowed motorbikes to be used as transport vehicles. Motorbikes, therefore, could carry one pillion passenger on hire.

After Rapido burst on to the scene and the first murmurs of protest started doing the rounds, a committee set up by the ministry of road transport and highways, in 2016, stated that state governments should have the final say. However, the committee recommended that bike taxis operate since it was an economical and convenient last-mile connectivity solution.

Since then, a number of states like Mizoram, West Bengal, Haryana, Uttar Pradesh, Bihar, Assam, Punjab, Telangana and Rajasthan have come up with policies to permit them. Some of them have special clauses. In Mizoram, for example, yellow registration plates and helmets are mandated to differentiate them from other vehicles. Similarly, West Bengal has prescribed operational limits in terms of distance and area.

Like we mentioned earlier, three important states—Delhi, Karnataka and Maharashtra—are in no mood to budge. Delhi’s transport commissioner Ashish Kundra maintains that till such time the state comes up with a policy, bike taxis are illegal. The difference in interpretation of the law is stark. Rapido believes if a state does not have a policy, bike taxis are legit.

“Bike taxis are illegal (in Delhi) today. The drivers have not gone through background checks; they have not been issued separate licences as is the case with other commercial vehicles," Kundra said. “The tax and fitness regimes are different as well."

Plying an autorickshaw requires a permit from the transport authority, which adds to the government’s coffers. Right now, states without a policy make no money on a bike taxi.

A draft aggregator policy for Delhi stipulates that only electric two-wheelers be allowed as bike taxis. Bike taxi companies maintain it is unwise as there are not enough electric two-wheelers available to be used. They suggest it should be more staggered.

“It’s a surprise and has come out of the blue. It’s a clever way of delaying it," says Guntupalli. “Bike taxis are the lowest hanging fruit as far as electrification is concerned and we stand to gain the most from it. Why would we resist it? But most electric vehicles that are fit to ply as bike taxis cost 1.5-2 lakh and are in the premium segment. Also, without adequate number of electric two-wheelers on the road, asking us to go full electric is just not right."

Kundra is unfazed, insisting it is prudent to weave sustainability in an upcoming segment from the outset.

Future uncertain

The impact of the three states not playing ball is significant. Delhi and Bengaluru are the largest markets accounting for over four million of the 12 million weekly trips for the entire industry. Before the ban this year, Maharashtra accounted for another million trips.

“These four (Delhi, Mumbai, Bengaluru and Pune) are part of the nine biggest cities in India with population of four million plus and represent the largest market for bike taxis. This is a low margin high volume game and you cannot have a business model without these cities as the unit economics would simply not work," says Pawan Mulukutla, director—integrated transport, electric mobility & hydrogen, World Resources Institute, a think tank.

Rapido, however, played down the importance of the three states. The company said that only 30% of the 1.2 lakh daily rides in the national capital region is purely on account of Delhi. When Maharashtra and Bengaluru are accounted for, the overall impact is to the tune of 140,000 rides per day on an estimated one million bike taxi rides.

Then, there is an impact on the economic prospects of the drivers.

“Bike taxis have been used for a long time and riders operate on food delivery, e-commerce and rideshare platforms interchangeably throughout the day. Any restrictions on their ability to access one sector will negatively impact both their economic opportunities and the state’s electrification goals," says Prabhjeet Singh, president, Uber India and South Asia.

Now, there is fresh trouble brewing for Rapido.

In another business setback, the regional transport office at Pune, on 22 April, banned app-based autorickshaw platforms. This impacts all auto aggregators, including Rapido, Ola and Uber.

And barely four days later, a 30-year-old woman in Bengaluru had to jump off the bike after the Rapido rider allegedly groped her, snatched her phone, and tried to take her to a different destination.

The incident underlines the need for stringent background checks, a point Ashish Kundra, Delhi’s transport commissioner makes.

Rapido’s cup of woes is beginning to overflow.

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