The Hindu Business Line
Uber, taxis and transformations
The mobility revolution can serve societal goals better by aligning to local needs and urban planning requirements
The past two decades have seen the face of telecommunication change beyond recognition. In the next two decades, we predict that mobility will likewise see transformation to a new avatar that will bear little resemblance to what we use today.
There will be many dimensions to this change. Technology will offer electric and connected cars and even autonomous driving. Ever growing cities will require mobility to conform to a denser, more energy efficient urban architecture. Above all, social and cultural transformations will emphasise individually customised mobility within a digitised and sharing economy.
Among many, one manifestation of change will be triggered by the emergence of app-hailed cars like Uber, Lyft, Didi-Chuxing, Grab and Ola. Over the past week, this topic has seen heightened media interest following the visit of Uber’s CEO. These enterprises are disrupting a service — traditional taxis — that can trace their formal origins to 1654. Over the centuries, taxis have evolved to a predictable pattern across the world. Usually the services and their tariffs are regulated. The drivers usually are organised in some form of labour union and are in turn subject to screening for health, proficiency and often criminal record. Vehicles are often required to meet environmental, safety and user access regulations in response to societal concerns and priorities.
Into this regulated domain, Uber, Lyft, Didi, Ola, Grab and several others, have emerged as powerful forces of disruption. By creating an app-based mobility-as-a-service platform, they aspire to render car ownership as well as several forms of public transit obsolete within a few decades. These disruptors have a lot to offer to steamroll over incumbents. They leverage technology (smartphones, apps) and ubiquitous connectivity to endow considerable efficiency to a historically regulated and lethargic sector. They improve driver and asset utilisation by efficiently exploiting real-time information and entrepreneurial drive of individual operators. In the modern idiom, they harness a distributed enterprise leveraging dispersed capital. This renders their balance sheets asset light — a factor that their investors love.
This blend of affordable fares, low capital demands, and flexible, user-friendly service has caused these services to appeal not only to commuters but also to municipalities and local administrations that are under pressure around the world, to reduce the losses in their unprofitable local transit services. Centennial, a suburb of Denver in the US, offers to pay riders for use of Lyft to reach the municipality’s new Rapid Transit Light-rail services. Pinelas Park in Florida offers travellers in certain sectors a subsidy on their Uber fare, after factoring that this was cheaper than operating non-profitable bus routes. Such blurring of the public-private modal divide is accelerating as communities balance goals of mitigating congestion, relieving pressure on parking and balancing budgets for thinly used public transit routes.
Due for a correction
Many fear all this is too good to be true and the time will come to pay the piper. These rapid developments have brought in their wake many unresolved issues that span labour markets, fair and open competition, and consumer protection.
At the core, their business models are based on rapid scaling up, capture of significant market share and the hope of long-term profitability after a period of investor-financed, below-cost pricing to entice customers, as they drive traditional taxi companies out of business. At the same time, drivers are enticed to the franchise by the promise of better than par daily earnings which may be unsustainable as fleet size increases and profitability comes into focus. An analyst has observed that Uber’s current financials automated door-locks? Surely, there cannot be one set of rules for taxis and another for Uber/Ola/Didi. In such a fast-clockspeed environment, how frequently must the regulatory regime be re-tuned to maintain open and fair competition among a fast-growing diversity of public and private modes and services?
Support technology and business innovation: Variations like motorcycle taxis, Uber-pool and Ola-pool promise to further lower cost and congestion. But, if one can pool four riders, why not eight? Cities like Helsinki in Finland and San Francisco in the US have also experimented with app-hailed, crowdsourced, dynamically routed minivans that transport 10-15 people, complementing public transit – another innovation well suited to populous Indian cities. Yet, in India, share-autos and mini-buses operate with handcuffs. As the data processed by these organisations increase they are able to leverage analytics to deliver even better efficiencies and customer service. A city’s mobility architecture must remain open to evolving technologies and business innovations. Above all, it must ensure that user interests are protected.
Align to urban planning policies and “smart city” infrastructure: Mobility has emerged as one of the top three priorities as urban communities plan for the future. Data from around the world reveals that cities with efficient mobility can enjoy an advantage of over 10 per cent in local GDP over those burdened with tottering services. India faces a further opportunity to harvest economic efficiencies as it moulds a vibrant, future-ready urban mobility architecture by linking it to on-going “smart city” investments.
China had long ago learned to leverage the magnet of its market to secure favourable terms from foreign investors. Can India secure a favourable deal from global investors as it transforms its urban mobility?