HOW THEY COMPARE
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
NA Ola gets e-rickshaws on the platform