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Ola and Uber look beyond cab hailing to drive growth

Both mobility platforms are expected to bank on bike taxis and rentals to shore up ride numbers.

, ET Bureau|
Updated: Nov 06, 2019, 05.03 PM IST
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About 70% of the customers of two-wheeler taxis and rentals have switched from cab usage, according to data shared by PGA Labs.
Bengaluru: The two largest players in the cab hailing space — Ola and Uber — are expected to bank on bike taxis and rentals, autos, corporate tie-ups and public transport collaborations to shore up ride numbers, at a time when the market has seen a year of slow single-digit growth, according to analysts, investors and industry executives.

This also comes in the backdrop of riders looking at cheaper and quicker travel options.

“The ride-hailing industry is at an inflection point and has witnessed slowdown globally. These companies are hunting for new opportunities of growth and expansion,” said Jaspal Singh, cofounder of transportation consulting firm Valoriser Consultants.

Mobility startups in India raised $1.17 billion across 56 rounds in the first nine months of the year, compared to $542 million across 61 rounds through all of last year, data shared by venture fund industry tracker Tracxn shows.

About 70% of the customers of two-wheeler taxis and rentals have switched from cab usage, according to data shared by PGA Labs.

“People are looking for affordable options of travel, 4-wheeler taxis are not affordable to a large part of the population,” said Aryaman Tandon, Director, Praxis Global Alliance Research.

In the last year alone, several companies, including Rapido, Quick Ride, Vogo, Bounce, and Yulu, among others, have raised capital.

In 2018, two-wheeler startups raised $2.6 billion across 67 rounds globally.

In 2019, that number is touching $2.1 billion across 52 rounds till date, Tracxn data indicates.

This number is exclusive of payments and financial inclusion businesses, which too have seen increased investor interest in the last one year. Ola is already present in the financial services business through its subsidiary Ola Money.

Investors also said that in the absence of these players moving fast to adopt new mobility, there is a threat of losing to smaller players who are addressing a much wider need.

“Some of these mobility businesses (now with smartphones and internet reach) have the depth to become larger than the cabs market,” said an investor, concurring with analysts’ numbers that in the core taxi market, both Ola and Uber India have been in the 4-5% range over the last one year and this likely to stagnate in the future.

Sequoia Capital has been the most active investor in the space, backing Bounce, LocoNav, Quick Ride, Shuttl and ZoomCar, data shared by Tracxn shows.

Last month, Bounce said it had crossed 10 million transacting rides in Bangalore.

To put that number in context, CEO Vivekananda Hallekere said that global players like Lime took 14 months to cross the milestone, while Bird took roughly 10 months. “The customer adoption rate for Bounce has been massive, which signals the fact that there is a large latent demand for affordable mobility in the country,” he said.

Moving beyond cabs
Over the last 18 months, Ola has expanded and scaled its product offering to electric, financial services, cloud kitchens, bike taxi, bike rentals, and self-drive options.

“Some of these new businesses are still in their early stage, but the sheer adoption of Ola Auto indicates that adjacent markets are far larger,” said a top company executive. Ola Auto already forms a bulk of Ola’s rides in Bengaluru and now the same team is launching the bike taxi product, this person added.

Uber, too, has acknowledged its move towards being a platform of services beyond cab-hailing, including betting big on Freight, Uber Postpaid, Uber Health platform and Uber Eats.

Last month, the company said it would start its public transport offerings with access to real-time information and end-to-end directions on its app, including the fastest and cheapest routes, on the Delhi Metro.

“India is a fundamental part of Uber’s growth going forward. It is a very important market for us, a top-10 market for us. We will continue to invest here. Profitability metrics across our business here are improving," Uber CEO Dara Khosrowshahi said during his recent India visit.

“We want Uber to be the operating system for your everyday life; however, you want to move around your city, and whatever you need, we want Uber to be your go-to app,” he had said.

Uber India, in its latest valuation report, disclosed that the rides business will grow at just 6%.

However, profitability across these new businesses will only come from cost discipline and high utilisation, investors pointed out.

“Unlike cabs, the base to make margins is very thin, and efficiency is key,” said an investor, admitting that none of the new models from bike rentals or bike taxis had cracked the unit economics as of now.

"Ola’s 12 plus categories to serve for a variety of mobility use cases across four, three and two-wheelers and tech innovations to solve for connectivity, infrastructural and congestion challenges, have made us market leaders in every category," the company said in a statement.

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