In India drive, Uber bets on ride-shares

Uber’s exit from China has made India the company’s focus, with ride-sharing as the primary tool.

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Three years since it started operations in India, the taxi-hailing app is betting big on UberPOOL, which connects riders with drivers going in the same direction via a mobile app.

UberPOOL is almost one-third cheaper than regular rides. But the bet is audacious, and perhaps more social than economical. “When you first introduce something like car-pooling, it is a behavioural change,” says Amit Jain, head of Uber in India.

With the growth of the internet (India is the world’s fastest growing internet economy with over 300 million users) things are changing. For many, smartphones — 250 million people own them — have become a one-stop gateway. They are used for booking cabs and hotels, ordering food and paying bills.

Ride-share has just begun to catch up in most parts of the world. India, however, is slightly behind.

“In most developed countries, passenger pays $1 for a mile of shared ride. That will go down to 35-40 cents as volume grows. India will follow the same trend,” says Kumar Kandaswami, partner at Deloitte Touche Tohmatsu.

UberPOOL, launched in October, has already been rolled out in five cities of Bangalore, Delhi, Mumbai, Kolkata and Hyderabad. It contributes to over 25% of all Uber trips in these cities (Delhi is the highest with 35%).

The competitor, therefore, is changing for Uber — from Ola to anyone who owns a car.

“Ola is not our competition, car ownership is,” says Jain. “Uber is for everyone who doesn’t want to rely on the private car… or on public transport, because Uber is cheaper, safer and reliable.”

There is also a social aspect to the POOL — reducing traffic and pollution.

“Ride-share is the closest we can do to decongest the city,” says Jain.

A LONG ROAD

The picture, however, was different three years ago.

Most of Uber’s fleet in Bangalore, its launch pad in India, and 43rd globally, was of Toyota Camrys and Corollas.

But soon Allen Penn, head of Uber’s Asia operations, realised that the company needed to become more Indian than it already was. The result: The number of Camrys and Corollas reduced, giving way to a large fleet of hatchbacks and compact cars. The rides, a tad more expensive than radio taxis, became cheaper.

Then came the autos and bikes taxis. Everywhere else in the world, Uber accepted only credit cards. It changed its rules for India, partnered with m-wallet Paytm, and allowed riders to pay by cash.

But the ride-sharing stretch on the taxi highway is congested. There’s Ola Share, BlaBlaCar, Let’s Ride and Hopon. Uber, though, is used to competition – Lyft in the US, Didi Chuxing in China, Hailo in London. Different countries, same strategy — huge investments, subsidised trips and incentives for drivers.

The company has $11 billion on its balance sheet. It has also taken a few steps to splurge less. It will save a billion dollar it spends in China every year, as a result of merging its operations there with rival Didi Chuxing. (Didi is an investor in Ola).

THE POSITIVES

After exiting China, India is Uber’s second-largest market by the number of trips.

“We will do whatever it takes to grow in India,” says Jain. The company is reportedly planning to invest its second tranche of a billion dollar in India. But it’s not only about money. “The idea and market potential dictate money. Uber may have deep pockets, but success depends on how good the idea is and how well it is executed,” says London-based Deepesh Rathore, co-founder of Emerging Markets Automotive Advisors.

Jain, too, knows that. “It is about increasing the efficiency of the cars. As the number of trips increase, match-rate (in POOL) will increase. This will lead to more people taking rides on any route,” he says.

Ride-share will also reduce drivers’ incentives in the long run. As more people use POOL, the driver will make more money per trip.

Uber has reduced the estimated-time-of-arrival (ETA) of cabs from 12 minutes to less than five in the past 18 months. It will further go down to less than three minutes with the induction of more cabs. It has added around 1,50,000 cabs in the last one year.

Then there is UberCommute, pooled rides in private vehicles, which allows anyone to list his car on the app and share the cost of the journey. Laws do not allow Uber to charge commission on such rides, like it does in the UK, the US and China.

“Conversations with authorities in most parts of the world are increasingly starting from a place where they realise that ride-sharing brings important benefits,” says Jain.

If that happens with the new Motor Vehicles’ Act, Uber will have millions of cars and people sharing rides, and even a small commission will mean a lot of money.