Uber and rival Ola drivers under pressure in India as battle heats up
Rivalry has driven fares down and means fewer customers for each driver, hurting their earnings
Travelling in Mumbai for commuters proved more difficult than usual in the overcrowded city last week, as disgruntled drivers for the ride hailing app Uber went on strike.
The drivers for the San Francisco-based company argue that they are not making enough money, and protested on the streets with placards bearing slogans such as “fuel rates are rising, your fares are sliding”.
The strike was called off by the end of the week but it highlighted the major challenges Uber is facing in India, as competition has intensified with its homegrown Indian rival Ola, which dominates the market. The rivalry has driven fares down and means fewer customers for each driver, hurting their earnings. A group of drivers from Ola also went on strike in Mumbai.
“I think there are several challenges that India showcases in this particular industry and one of them is that the prime constituents, the drivers, are perhaps the most dissatisfied in the ride hailing segment,” says N Chandramouli, the chief executive of TRA Research, a business advisory firm based in Mumbai. “It doesn't matter if it's Ola or Uber. They all started a few years ago with a huge amount of incentives. Many of them took the bait.”
One such example is Raja Naidu. He started working for Uber a couple of years ago, taking a loan of about $10,000 to buy a car. But he says steep commissions and increased competition mean that he's struggling to pay off his loan.
“If unpaid, the bank will come and take away my car,” he says. “I wish that someone would come and buy my car and I can be done with it. I thought I'd be earning a lot of money with Uber, but I have to drive long hours to pay my debts.”
Uber, which launched in India in 2013, has hit back against the complaints.
“We are committed to ensuring that driver partners are able to use the Uber app to have a rewarding entrepreneurial experience with over 80 per cent who are online for eight hours a day, making between 1,500 and 2,500 rupees net daily after deducting Uber’s 20 per cent service fee,” a spokesperson for the company said.
“We met with a delegation of driver partners and continue to engage with driver partners on a one-on-one basis,” Uber said. “We have heard their concerns and taken note of the feedback.”
The firm added that some of its drivers in Mumbai and Pune “have reached out to us after they were forcefully asked to go offline by a small group of protestors”.
There has been speculation that Uber might look at exiting the Indian market or merge with its rival Ola, after Uber hooked up with competitor Didi Chuxing in China. Softbank, which has invested in Ola, is Uber's largest shareholder. With more than a million drivers, Ola has more than double the number of drivers Uber has.
But during his first visit to India last month, Uber's chief executive Dara Khosrowshahi seemed committed to the Indian market. The potential is enormous, given the country's population of 1.3 billion and rising internet use. India is the second-largest smartphone market in the world behind China.
“I can tell you that our operations are not profitable today and if they were profitable then we would not be investing enough,” Mr Khosrowshahi said in New Delhi during his visit. “That's the potential of India as far as our business goes. India accounts for more than 10 per cent of our trips and I expect it to account for a higher and higher percentage of our trips going forward.”
It is not only India that is proving challenging for the company.
Globally, Uber's losses rose more than 60 per cent last year to $4.5 billion.
The company is also grappling with legacy issues, after its co-founder and former boss Travis Kalanick stepped down last year, following a string of scandals.
These included a case in India where the medical records of a woman who had accused an Uber driver of rape were allegedly obtained by the company.
Suhail Nathani, the managing partner at Economic Laws Practice, based in Mumbai, thinks it unlikely Uber would sell off its business in India.
“Uber has invested a lot, they've built a great brand in India, but stranger things have happened,” he says.
If Uber were to exit the country, another company would be likely to step in to meet the demand and the “market need”, he says,
“This is the new normal, to have all the benefits that Uber or a taxi service of this nature brings. The model is here to stay.”
But there are certainly issues that need to be addressed, Mr Nathani says.
“You can't lose sight of the fact that the employment opportunities have to be sustainable and viable, so if there is a certain cost associated with provision of a certain service, that needs to be met. The consumer who's now used to frequent availability at low prices, somebody's going to bear the burden in this situation.”
He says that ultimately comes down to creating the right regulatory regime.
“The drivers need jobs, the consumers need the convenience and, quite honestly, the government needs to have a robust environment for this business. I'm sure they'll find a solution because many stakeholders have a lot of skin in the game.”
India's ministry of transport did not respond to a request for comment.
There are drivers with Uber and Ola who say they are very happy with their job.
One of them is Sajid Shaikh who has been driving for Uber for about a year.
“I earn better money with Uber than I did when I was a private driver,” he says, adding that some months he makes about 40,000 rupees – more than double what he would earn in his previous role. He often works 12 hour days, he says.
“Some other drivers are lazy and they don't want to work long hours. That's why they're not making good money.”
The employment opportunities ride-hailing apps such as Uber generate in India are clearly critical to people like Mr Shaikh, despite the fact that many drivers remain disgruntled. And customers in India look set to continue to benefit, as fares are kept low by the fierce competition.
Updated: March 24, 2018 02:21 PM