The Uber / Ola dream is crumbling. Earnings have dipped sharply for drivers as ride hailing companies adopt an aggressive pricing model, pump more cars on the roads and slash driver incentives, sparking protests in several states.
Cab aggregators are trying to get more drivers onboard by promising them lucrative incomes, hefty incentives and affordable loan schemes. Uber sent messages to its driver-partners, offering to buy them their dream car along with the opportunity to earn upto Rs 1 lakh a month. But that math doesn’t add up anymore.
The average driver income per month across aggregators in Q1 2016 was Rs 49,000 against Rs 53,000 in Q4 2015, according to RedSeer
FactorDaily spoke with dozens of drivers and car owners to arrive at a calculation regarding their actual earnings. Their earnings on an average peak at about Rs 50,000 per month these days. Our findings are corroborated by a report from consulting firm RedSeer which found that in Q1 2016, driver income decreased by 8% due to reduced incentives.
The average driver income per month across aggregators in Q1 2016 was Rs 49,000 against Rs 53,000 in Q4 2015, according to RedSeer.
Drivers are also wincing as cab aggregators ask them to “stay online most of the time”. With a mix of peak and non-peak hour rides, a driver could spend anything between 14-16 hours a day on the road.
“To make more than 90k a month, you have to work 20 hours a day, which means you can’t go home, sleep properly or have a normal life” — Uber driver Abhijeet Singh
“To make more than 90k a month, you have to work 20 hours a day, which means you can’t go home, sleep properly or have a normal life. Eat on the go and just park your car and sleep wherever you are,” said Uber driver Abhijeet Singh.
Here’s why a driver can’t make so much money.
Car price: A Tata Indica (one of the most common hatchbacks run as a cab in India) costs Rs 5 lakh. The minimum down payment is Rs 1.5 lakh and the owner would have to pay an EMI of Rs 15,000 a month for three years.
Distance covered per month: The average driver drives at least 8,000 km a month. Of this, about 1,500-2,000 km is lost in getting to the pick up location and the driver’s personal rides to and from home.
Fuel cost: The average running cost of a diesel car is Rs 3 per km. So that’s Rs 24,000 a month in diesel cost to drive 8,000 km per month.
Maintenance cost: A well-maintained car needs a tyre change every 10 months. A tyre costs about Rs 4,500, so four tyres will cost Rs 18,000. Averaged out, that’s an expense of Rs 1,500 a month. Other car maintenance and data costs drivers about 9% of their total earnings.
Insurance cost: For an insured declared value of Rs 1.6 lakh, the annual premium for a Tata Indica is Rs 7,637. That’s a cost of Rs 633 per month.
Taxes: If the car is driven in the Delhi/NCR region, the driver has to pay commercial tax Rs 1,650 for Delhi, Rs 1,500 for UP and Rs 1,900 for Haryana. The total is about Rs 4,000 a month.
Gross income: Aggregators pay Rs 11 per km to the driver, including incentives. So, as per the average distance covered, a driver’s gross earnings are Rs 88,000 per month.
To earn the minimum incentive — which varies as per the billing — for the day, a driver has to make at least eight trips during peak hours. Uber and Ola’s peak timings are between 5am and 12pm and from 5pm to 12am.
Net income: If you minus all the expenses that a driver incurs per month from Rs 88,000, the net income of Rs 30,470.
This comes to a net income of Rs 30,470
“Drivers are happy with Rs 15,000 to Rs 20,000 of income every month. That’s a fourth of what drivers in large cities want. Eighty percent of the cities are profitable because there is no uneconomical competition,” Pranay Jivrajka, chief operating officer of Ola, told Hindustan Times.
That doesn’t seem the case on the roads. During a recent ride I took in an Ola cab in Bangalore, the driver, Sajid, complained how his earnings have plummeted. “I used to earn around Rs 60,000-70,000 when I joined Ola last year. Now, I earn just about Rs 30,000 to Rs 40,000,” he said.
When FactorDaily tried contacting Ola, they refused to comment. However, Uber’s spokesperson (who did not want to be named) said that while a lot of drivers are protesting on roads, they do not realise that more cars on roads will only bring them more income.
*Driver names have been changed on request.
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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.