Ola, Uber drivers’ protest highlights tough biz model of cab-hailing firms

BENGALURU/NEW DELHI: A strike this week by drivers of Ola and Uber turned out to be a damp squib, but highlighted the tough business model of cab-hailing platforms that requires them to squeeze drivers to generate higher margins, analysts and drivers said.

On Monday, drivers at Ola and Uber went on an indefinite strike to protest against low incomes, but apart from Mumbai, cab drivers in other major cities didn’t participate in the strike in large numbers.

Until early 2017, Ola and Uber used to hand out many incentives to attract drivers, often from other professions. After luring hundreds of thousands of drivers, both Ola (ANI Technologies Pvt. Ltd) and Uber (Uber India Systems Pvt. Ltd) had to slash incentives over the past 15 months because of investor pressure to cut losses.

Despite protests by cab drivers, Ola and Uber continued to reduce incentives through last year. Incentives as a proportion of overall ride value fell to 17% in the September quarter of 2017 from as much as 62% in the yearago period, according to market research and consultancy firm RedSeer Consulting.

“When Uber and Ola came to India first, they assured drivers something like ₹100,000-150,000 per month. But now, drivers are earning just ₹20,000 every month, of which ₹5,000-10,000 goes for EMI,” said Tanveer Pasha, president of Ola, Taxiforsure and Uber drivers and owners association. Drivers on Ola and Uber aren’t employed by the companies.

Drivers either own their cabs or work for middlemen who own several cabs. Cab drivers want higher incomes but Ola and Uber are more interested in increasing their margins — this conflict at the heart of the aggregator model will become worse as Ola and Uber will have to further cut losses as they attempt to go public.

Indeed, for all internet marketplaces, this is a problem. Thirdparty sellers at Flipkart and Amazon have also complained about increasing commission rates and higher shipping and other charges.

For Ola and Uber, the drop in incentives, which accounted for a large chunk of the incomes earned by cab drivers, has led to lower cab supply. The last time cab drivers struck work in the March quarter of 2017, cab supply slumped by 25%, according to RedSeer.

Tens of thousands of drivers have left these platforms altogether last year and more may leave in the coming months, according to drivers and industry observers.

An Ola spokesperson said the “interest of our driver partners and customer convenience is of paramount importance to us”.