Taxi hailing service Uber Technologies Inc. will invest as much as $1 billion in India within the next six to nine months, signalling its ambition to catch up with local rival Ola and become the dominant taxi service app in the country.
Since launching in India in August 2013, Uber has slashed prices, introduced low-cost services and even accepted cash payments to adapt its lean business model to India and Indians. Uber is the biggest threat to local rival Ola, run by ANI Technologies Pvt. Ltd.
Uber, an app-only service, said on Thursday that it is growing at a rate of 40% month-on-month in India. With the increased investment in product, hiring and payment solutions, the company expects to do more than one million daily rides in the next six-nine months, according to Amit Jain, who was appointed president of Uber India in June. The company declined to say how many rides it is doing currently.
"We are extremely bullish on the Indian market and see tremendous potential here. We have grown exponentially in India, a global priority market for us, that has also quickly become the largest market geographically for Uber outside the US. We're committing an additional $1 billion to India in the next six-nine months so we can expand and improve our operations, grow into newer cities, develop new products as well as payment solutions, and establish a great support network," Jain said in an emailed statement.
Uber's $1 billion cash infusion indicates the company will compete more aggressively with Ola, which boosted its leadership position by buying smaller rival TaxiForSure in a $200 million deal in March. Though Ola is currently the clear market leader, Uber's technology expertise and massive war chest may help the company cut the lead of its local rival and trigger another price war among taxi services.
Ola is close to raising $500 million at a valuation of $5 billion from existing investors that include SoftBank Group, Tiger Global Management Llc and Sequoia Capital, The Economic Times reported on 28 July. Mint reported the talks first on 21 May. Uber soft-launched in India in August 2013 and started a full-fledged service two months later with much fanfare, offering expensive rides in the Mercedes-Benz S-Class and other luxury cars, charged to customers through direct, automatic deductions on their credit cards stored in the app.
Taxi services led by Ola and Uber are experiencing a boom in demand in a country where transport infrastructure is still creaky, and safe public and private commuting options are few. A shift in consumer habits towards convenience and ondemand services and, most crucially, low prices, has fuelled the surging demand. Yet, cab services have also run into trouble with several regulators, including the Reserve Bank of India (RBI) and state regulators.
The Delhi government banned all mobile app-based cab-hailing services in the National Capital last December after a woman was allegedly raped by a driver contracted to Uber.