Taxi-aggregator apps launched by drivers’ unions to counter Ola and Uber in India sound like socialist utopia — by the drivers, for the drivers etc. But what is their long-term strategy to beat global giant Uber, or the local market leader Ola, with their deep, investor-funded pockets and global technology expertise? There isn’t much clarity on that. In fact, the union-backed apps seem to be basing their strategy on the assumption that local drivers will leave Ola/Uber service in droves in favour of the homegrown services, but this model hasn’t been tested in any market so far.
Protests by disgruntled Uber and Ola drivers in Delhi, Bengaluru and other cities over the past few months against “unfair practices” — reduced earnings, slashed incentives and bad working conditions — by cab aggregators have spawned a couple of new ride hailing apps with the aim of “protecting the interests of the drivers.”
One of them is HDK Cabs, a not-for-profit ride hailing app in which former Karnataka chief minister and JD(U) leader HD Kumaraswamy is making an initial investment (he made the announcement on Saturday). According to this Economic Times report, Kumaraswamy said he would make an initial investment of Rs two-three crore and may invest up to Rs 50 crore over the next two years. He is supported by Tanveer Pasha, president of Uber, TaxiForSure and Ola (UTO) Drivers and Owners Association.
Kumaraswamy-Pasha are playing the driver “injustice” card while exhorting them to join HDK
The other, an app called Taxi for Ride, is being developed by Kiran Gowda, a senior leader from Karunadu cabs owners and drivers association, with the help of his developer friends. The app is reportedly in the final stages of development and plans to take on HDK cabs.
Jai Bharath cab owners association led by Pradeep is also developing an app called BTS (Bharath Taxi Service). As per a driver who is aware of the development, the app is almost ready and is being operated by Pradeep himself.
But even before the these local apps can take off — HDK plans to launch before the festival of Ugadi on March 29 and Taxi for Ride is looking to launch in three-five months — politics and infighting within and among the taxi unions and the initiators of the apps threaten to dampen their ambition to take on Ola and Uber.
Riding high on politics?
When Kumarswamy on March 1 urged drivers to start their own cab aggregation app, he set off the spark of potential entrepreneurship, and a handful of leaders with different cab unions started harbouring ambitions of leading such an initiative.
Kiran Gowda was one such cab union leader who started developing an app — Taxi for Ride. He has roped in his friends to develop the app, which has features similar to Ola and Uber, and has joined them as cofounder of the company. He also has the support of drivers who’ve broken away from the Kumaraswamy-Pasha camp.
The union leader reportedly approached Kumarswamy to invest in the app, but the politician and other union leaders “did not entertain him” as Taxi for Ride is aimed at “making profit and not at serving drivers.” In fact, he was expelled from his union.
“Gowda had promised the app developers he would connect them with Kumar anna. But these guys want to make profits and are not concerned about drivers’ interests. So, leaders of all other cab unions in the state decided to turn him down,” said Pasha.
Kiran Gowda reportedly approached Kumarswamy to invest in the app, but the politician and other union leaders “did not entertain him”
However, while Kumaraswamy and Pasha claim that HDK has the sole interest of drivers at its core, several union leaders and drivers are of the opinion that the duo is looking to further their political ambitions, prompting them to withdraw allegiance from them.
Mohan Babu, the Ola driver with Ola who had attempted suicide in front of the company’s office in Bengaluru last month, told FactorDaily he’s keen on joining HDK but seems a bit sceptical. “I will join HDK if I see that they are fulfilling the promises they have made. In fact, wherever i get business, I will do it. Other drivers are very enthusiastic about it. I only hope that it is not a political gimmick,” he said.
Sridhar Pabbisetty, the CEO of advocacy and activist organisation Namma Bengaluru Foundation, said: “Kumaraswamy has been pretty open about the fact that the venture (HDK Cabs) will bring him benefits politically.”
Kumaraswamy even said on Saturday that he would consider group housing projects for drivers if his party comes to power next year.
This scepticism may very well turn out to the advantage of Taxi for Ride.
The expelled union leader said he doesn’t need the support of a political party to launch the ride hailing app. “Tanveer has political ambitions, so obviously he will support them. But, I am ok to start something on my own,” he said, adding, “We are just scapegoats to them before the election.”
This scepticism may very well turn out to the advantage of Taxi for Ride. The expelled union leader said he doesn’t need the support of a political party to launch the ride hailing app
He has decided to go ahead with building the app along with his developer friends and has joined their company as a co-founder. He is looking to raise funds to build a fully operational app. “We are not worried about HDK cabs. We are looking for investors who can help us build a good product and not bring in politics. As per my estimate, it will cost us about Rs 80 lakh in the next three to five months,” said the expelled leader.
The first prototype of the Taxi for Ride app is ready, he said, adding that the app is focused on ensuring the security of both drivers and passengers. The team is contemplating installing cameras in cabs. Tygrapp, a Kolkata-based multi-mode transport app platform had approached Taxi for Ride and wants to invest in the platform.
Can they take on Ola and Uber?
These developments add a new dimension to Ola and Uber’s high-pitched battle for the $10 billion cab aggregation market in India. The stakes are high with both companies having pumped in hundreds of millions of dollars. Uber has committed over $1.5 billion in India in the next few years. Ola, which is backed by most one of the most cash-rich venture capital firms in world — Softbank — has already invested $1.56 billion in nine rounds from 20 investors.
Kumaraswamy-Pasha are playing the driver “injustice” card while exhorting them to join HDK. “The companies and the government have failed the drivers. In the interest of the drivers, I have decided to extend all cooperation to introduce a new app-based platform by Ugadi which will be run by the drivers themselves,” Kumaraswamy had said earlier.
As many as 13 drivers’ unions in the city reportedly came together to form a core committee to enlist drivers on the new platform and nearly 40,000 drivers were keen to join the new company.
Pasha had told the media that their focus would be service and driver interests. “All drivers will exit from Uber and Ola platforms and join our network… We will ensure that drivers are not harassed and unrealistic targets for incentives are not set,” Pasha had said.
But, if the new apps want to take on the likes of Ola and Uber, they will need clear differentiators. From the looks of it, HDK’s business model is quite different from that of these cab aggregators. The company is planning a flat fare structure with no surge pricing and no incentives for drivers, on the lines of a traditional cab aggregator, and completely contradictory to the Ola / Uber model.
HDK plans to take just 5% commission, compared to the 25-30% taken by Uber and Ola, and the company says its not looking to make profits, unlike the market leaders. The commission will be used to run the backend team and any profits will be deposited in a driver welfare scheme.
HDK plans to take just 5% commission, compared to the 25-30% taken by Uber and Ola, and the company says its not looking to make profits
One of the features drivers have asked for is “spot booking” (kerbside booking) which allows any passenger, even without the app, to approach parked cabs and ask for a ride. The entire user data will be hosted on a cloud. This feature, if included in the app, will buck the fundamental cab aggregation demand-supply model, which doesn’t allow drivers to pick up passengers from the roadside.
Also, surprisingly, HDK’s fare structure is not very competitive. In fact, at a minimum fare of Rs 88 per four km plus Rs 10 per km for a hatchback and Rs 99 for four km plus Rs 12 per km for a sedan, a customer could end up paying more than Ola and Uber here. However, one must keep in mind that HDK doesn’t have surge pricing.
Here’s how it compares to Uber Go (the equivalent of hatchback): Base fare is Rs 35 (just to hop into the cab) plus Rs 7 per additional km, plus Re 1 waiting charge per minute equals total fare.
Compared with Ola Mini (Ola’s hatchback offering): Base fare is Rs 100 for the first four km plus Rs 8 per additional km plus Re 1 waiting charge per minute equals total fare.
A driver with Uber, Somashekar, feels that companies like Ola and Uber are too well established for local apps to compete with them. “Uber and Ola have established businesses and people associate ride hailing with their brands. They have deep pockets and come up with innovative, lucrative offers for customers. Local apps will not be able to provide such low prices and such offers as they won’t have such funds. It will be tough for them to scale,” he said.
Taxi for Ride hasn’t finalised its business model and fare structure yet as the app is still in development stage.
Whether or not HDK and Taxi for Ride can become direct competitors of Uber / Ola in terms of their business models and pricing, if a large number of drivers leave these platforms to join either of the local apps, the former will be left high and dry.
“I am confident that Ola and Uber will not able to compete against us. Most drivers are upset with them and they will join us as we have driver-oriented policies. And with what Ola and Uber did to drivers, this will be a lesson to these companies,” a confident Pasha said earlier.
Whether or not HDK and Taxi for Ride can become direct competitors of Uber / Ola in terms of their business models and pricing, if a large number of drivers leave these platforms to join either of the local apps, the former will be left high and dry
Civil society members and activists feel that new, local cab aggregators creating healthy competition in the market augurs well for the industry, drivers as well as customers. “Ola and Uber don’t have any coercive bonding with the service providers (drivers). This is where localised cab services will differentiate themselves. Also, they will have better employee benefits etc, “ he said.
R K Mishra, a member of Bengaluru Vision Group, a civil society-led task force set up by the state government, said the new apps are welcome as they will provide cab drivers alternatives other than Ola and Uber. “Any marketplace needs competition and the better service will succeed. It’s too early to comment on the outcome, but it’s a good move, provided it is not a political gimmick,” Mishra said.
“Ola and Uber have grown in the city because of us. If all drivers decide to quit these platforms, then how will they operate here? They can’t bring outsiders to operate taxis in the city,” Pasha signed off.
Uber refused to comment on the developments. FactorDaily has written to Ola for comments and is awaiting its reply.
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Lead visual: Angela Anthony Pereira Updated at 2.15pm on March 21 with information about HD Kumaraswamy's investment plans in HDK Cabs. Disclosure: FactorDaily is owned by SourceCode Media, which counts Accel Partners, Blume Ventures and Vijay Shekhar Sharma among its investors. Accel Partners is an early investor in Flipkart. Vijay Shekhar Sharma is the founder of Paytm. None of FactorDaily’s investors have any influence on its reporting about India’s technology and startup ecosystem.