Uber Looks to Dominate Indian Ride-hailing Market

Uber steps up investments in India, aims to recruit a million drivers by 2018

u1San Francisco-based Uber Technologies Inc., a popular ride-hailing service that connects passengers and drivers globally, is looking to dominate the $10-billion Indian ride-hailing market by closing the gap with homegrown rival ANI Technologies Pvt. Ltd.’s Ola. As part of these plans, Uber is stepping up investments in India and aiming to recruit a million drivers by 2018. Uber, which entered the Indian market in 2013, has expanded to 28 cities in India and handled about 5.5 million rides per week in August 2016, more than thrice the amount at the start of 2016.

India has become Uber’s largest market after the U.S. after it agreed to sell its China business to Didi Chuxing. Uber is also looking to up the ante by diverting to India a significant portion of the $1 billion investment it had originally planned in China. It also plans to increase the size of the team at its Bengaluru engineering center. India accounts for 12% of all rides on Uber’s platform globally and remains a key focus area for the Company.

Uber readies for an IPO

As Uber gears up for its IPO, the Company is stepping up operations in Asia, Europe, and Latin America to justify a valuation that’s already at $69 billion, the most for any venture-backed startup in the world. India will be crucial in terms of both demonstrating success in large international markets and long-term growth potential. The ride-hailing market in India is projected to grow at a rapid pace as people look for alternatives to the poor public transport systems and the pricey options for buying cars.u2

In June 2016, Saudi Arabia’s Public Investment Fund invested $3.5 billion in Uber in return for approximately 5% stake. The PIF investment is expected to help Uber, which has been operating in Saudi Arabia since early 2014, to expand its global operations.

Ola versus Uber

u3Uber’s rival Ola has raised around $1.3 billion in funding and is valued at over $5 billion, and has a deeper understanding of the Indian market than Uber. Ola, backed by Japan’s SoftBank Group, has stayed ahead of its rivals with innovations like letting customers pay with cash rather than credit cards, introducing multiple language apps, and launching a “ride-later” feature that Uber has also copied recently. Ola provides a broader range of ride options too, from three-wheeler autorickshaws to luxury Jaguars and Mercedes.

Founded in December 2010 by current CEO Bhavish Aggarwal, and current CTO Ankit Bhati, Ola has more than 350,000 vehicles registered under its network and operates in 102 cities across India. The company claims that it is currently handling over a million trip requests per day and has served more than 25 million customers since its launch, making it possibly the largest mobile transportation and ride-hailing service company in India. Ola claims that total rides in just its cheapest-category “Micro” car service exceed Uber’s entire business in the country.

u4Meanwhile, Uber is investing heavily to harness technology to broaden and customize its services by building its engineering and support teams in Bangalore and Delhi. Uber is in talks with the Government of India to allow employees to book rides through the official procurement portal. Uber is also customizing its services for the Indian customer like accepting cash payments and letting users book a ride without having to download its app. For instance, Uber launched a Help button on its app that triggers an emergency alert. In India, Uber aims to provide a service so reliable, affordable, and convenient that people would rethink owing a car. Uber recently launched UberPITCH, a service that lets entrepreneurs chat with potential investors during a car ride arranged by the company in India.

Growing competition between Ola and Uber

In recent months, competition is seen to be heating up between Ola and Uber, with both rivals sparring to outdo the other. After Uber’s app-less service started in August 2016, Ola started letting users book rides through text messaging. In a move to recruit drivers, Ola struck a deal with automaker Mahindra & Mahindra Limited to make it more affordable for thousands of people to buy their own cars. Not to be outdone, Uber negotiated similar agreements with Maruti Suzuki and Tata Motors.

u5In a bid to outdo its rival, Uber has been piloting a ride-hailing service for buses and mini-vans under a new service named Uber Everything, similar to its UberHop, a scheduled bus service that it has piloted in several other markets. UberHop offers scheduled services with designated pick-up and drop-off points for a flat fee. The pooled ride-sharing service for buses will start as a pilot and be overseen by Uber’s India technical center in Bangalore. Like its ride-sharing taxi service, the move is likely to pose a challenge for local administrations that currently regulate both private and state-owned bus services that offer rides within cities. The Company has also launched UberMoto in Bengaluru and Gurgaon, enabling users to tap a button and get a motorbike ride in minutes. This service was also later introduced in Jakarta, Indonesia.

Challenges

Uber has faced resistance from local taxis and has had several run-ins with the government over pricing and permits. The Company has also faced challenges to show regulators and policymakers the benefits of the use of technology for the riders, drivers and the cities at a time when increasing urbanization is pushing up demand for infrastructure and mobility requirements. In its India operations, Uber has also faced roadblocks in terms of technical glitches in its app, low internet coverage in some parts of the country, and safety concerns for women travellers.

It remains to be seen how Uber channels its investments and makes use of technology to gain a leg-up in the highly competitive ride-hailing market.

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