HOW THEY COM­PARE

The Economic Times - - Special Feature -

both com­pa­nies have adopted a dif­fer­ent strat­egy to long-term growth. Ola is not con­tent with 102 cities — it wants to ex­pand to more cities. Uber is not ex­cited about a 100-plus cities; it prefers to go deeper in the cities in which it is present, ac­cord­ing to a spokes­woman.

As it hap­pens, the po­ten­tial for growth in In­dia is huge. So far, 80-90% of the busi­ness of the two com­pa­nies comes from top 10 cities. The In­dia mar­ket is also largely un­or­gan­ised, with just 10% of the $15 bil­lion be­ing the share of or­gan­ised play­ers such as Uber, Ola, EasyCabs, Meru and oth­ers. Over time, both com­pa­nies aim to be­come so pop­u­lar and ubiq­ui­tous that hun­dreds of peo­ple give up their cars hop onto their taxis.

“In tech­nol­ogy busi­ness the big­gest fear is win­ner takes all,” says San­deep Ag­gar­wal, founder Droom.in. “Five years back there were 100 plus com­pa­nies in group buy­ing busi­ness in the US. Today there’s only one — Groupon. When the busi­ness is just an app, you want to chase and win ev­ery penny. That’s what’s un­fold­ing in the cab busi­ness.” Droom.in, an au­to­mo­bile e-tailer, has in the past part­nered Uber for pro­mo­tional cam­paigns.

In In­dia, the bat­tle in the taxi busi­ness will ul­ti­mately be­tween Ola and Uber. All the other com­peti­tors are bleed­ing as a re­sult of their no-holds-barred bat­tle. Sid­dhartha Pawha, CEO, Meru Cabs, says the ob­jec­tive of deep dis­counts (of­fered by Uber and Ola) is to kill com­pe­ti­tion. “Their fight is sign of des­per­a­tion as bil­lions of dol­lars are at stake.”

Meru, once the lead­ing player in the cab busi­ness in In­dia, lost that po­si­tion to Ola in 2015. It also ap­proached anti-trust reg­u­la­tor Com­pe­ti­tion Com­mis­sion of In­dia in Ben­galuru against deep dis­count­ing by Ola and Uber, which was dis­missed. “It is ir­ra­tional pric­ing and un­sus­tain­able,” says Ra­jiv Vij, CEO, Car­zon­rent, which runs EasyCabs.

Car­zon­rent has put on hold part of its ex­pan­sion plans. Says Vij, “The taxi mar­ket has been im­pacted due to pric­ing com­pe­ti­tion be­tween Ola and Uber. We have not in­vested in growth for some time now. We be­lieve some san­ity will emerge in an­other one or two years as in­vestors look for prof­its.”

That seems a long way off. Uber and Ola will con­tinue to square off by match­ing sim­i­lar prod­ucts and deep dis­counts. In the end, as it is the case with other seg­ments of ecom­merce, it will de­pend on who has the deeper pock­ets. For now, money is not in short sup­ply. In Au­gust 2015. Uber an­nounced it will spend $1 bil­lion in In­dia, its third largest mar­ket af­ter the US and China, over 12 months. In the same month, Tata Op­por­tu­ni­ties Fund in­vested $100 mil­lion in Uber. In all, Uber has raised $10 bil­lion since its launch in 2009. In an in­ter­view to ET Now in Septem­ber 2015, Uber co-founder Kal­nick said In­dia has the po­ten­tial to be Uber’s big­gest mar­ket. “We are su­per ex­cited about In­dia,” said Kalan­ick.

Ola, for its part, has raised $1.3 bil­lion in all in the past four years. Ola is also part of a con­sor­tium formed in De­cem­ber that is fight­ing a com­mon en­emy in Uber. Be­sides Ola, that al­liance in­cludes Didi Kuaidi, Lyft and Sin­ga­pore-based GrabTaxi. Peo­ple trav­el­ling across coun­tries will be able to book rides via a sin­gle app. Pranay Jivra­jka, COO, Ola says the in­te­gra­tion will be avail­able this quar­ter.

Col­lec­tively, Ola, Didi Kuaidi, Lyft and GrabTaxi have raised around $7 bil­lion com­pared with Uber’s $10 bil­lion. Didi Kuaidi is also backed by on­line pow­er­houses Alibaba and Ten­cent. Both Ola and Uber plan to use the funds

In the last two years al­most

are cheaper than those from tra­di­tional

providers by for ex­pan­sion. For­tu­nately for them, a grow­ing num­ber of In­di­ans even in small towns are re­ly­ing on tech­nol­ogy for their daily needs. In cities like Rourkela, Ranchi, Dhar­wad, Bhubanesh­war, where Ola is present, the mar­ket may not be huge, but more and more peo­ple want to use tech­nol­ogy to con­nect with ba­sic needs like trans­port.

Both com­pa­nies are re­lent­lessly fo­cussed on growth for now. That means profitabil­ity will take a back seat for some time.

But there are lim­i­ta­tions to the growthonly strat­egy. Ab­dul Ma­jeed, part­ner, Price­wa­ter­house­Coop­ers, a con­sul­tancy, says there are only 60 cities with more than 10 lakh pop­u­la­tion in In­dia and be­yond that, busi­ness may not be vi­able. “Ola has the ad­van­tage of lo­cal knowl­edge and Uber has deep pock­ets. An­i­mos­ity be­tween the two will hurt over­all busi­ness and thought­less ex­pan­sion won’t do any good. They, par­tic­u­larly Ola, have to start mak­ing money soon.” Not that Ola needs any re­minder. In March 2015, it bought Taxi For Sure (TFS), a promis­ing startup that ran out of money due to deep dis­count­ing and was forced to sell to Ola. An in­vestor who wished not to be named says, “In its fight with Uber, it will be a pity if Ola for­gets how it ended up buy­ing TFS.”

Ola Uber 2011 2013 $5 bil­lion $60 bil­lion $1.16 bil­lion $1 bil­lion Soft­Bank, Tiger Google Ven­tures, Global, DST Baidu Tech plat­form App App No. of cities cov­ered 102 26 No. of ve­hi­cles on plat­form 450,000 250,000 Mar­ket share 70% 50% No. of em­ploy­ees 8,000 300 Launch Val­u­a­tion Funds raised Key in­vestors

2010

2011

2012

2013

2014

2015

2016

2

3

8

5

8

23

1

4.16

14.47

7.93

20.27

294.88

963.37

NA Ola gets e-rick­shaws on the plat­form

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