Report: 30-50% revenue of radio cab market comes from airport transfers, availability of cabs still a challenge

Getting cabs for short-distances within city limits or to get to the airport was greatly inconvenient until recently. However, introduction of radio cabs in 2007 has changed all that. The 5 year old radio cab industry has grown to Rs. 1100 crore industry in 2012. According to a recent study conducted by Sunstone Business School, the radio cab market is 15,000+ cabs in size with three large multi-city operators (Meru, Easy, Mega Cabs) holding nearly 70% market share as well as several smaller operators mushrooming in different cities.

Despite growing tremendously over the last 5 years, radio cabs are a minuscule portion of the overall private taxi business in cities. For instance, in Mumbai the total strength of the radio cab offering is less than 3% of overall market share. However, demand for radio cabs, is set to grow with rising middle class as they seek better transport.

The report quotes Rajiv Vij, CEO, EasyCabs as saying

Over next 5 years, we expect to see 5-6 big cities each with a population of about 20,000 radio taxis with 3 large operators controlling 80% market share. We also see the rise of 20 tier-2 cities with a population of 5,000- 10,000 radio taxis each with 5-6 players controlling up to 70% market share

The radio cab market is also likely to witness a shift from largely catering to airport pickups and drops to providing point-to-point commuting services across big cities. Currently, operators earn between 30-50% of their revenue from the airport segment. However, with increasing demand for services within the city and rising tariffs for parking at airports, operators are thinking about new ways to cater to the non-airport demand.

For most operators, availability of cabs including recruitment and retention of drivers continue to be challenging.

On regulation front,  the lack of a clear cut laws and dealing with different state laws gets very tedious. For instance, Chennai and Pune still don’t have the requisite regulations in spite of significant demand for these services and top operators’ eagerness to cater to these cities. Similarly Kolkata has been very slow in adopting these regulations and has only recently opened the market allowing each operator to have a maximum of 200 cabs.

The report notes that as operators get over the teething stage, the market is slowly beginning to see the emergence of aggregation models from existing and new operators in point-to-point transportation market. Over the past one year industry has seen debut of players such as OlaCabs, Savaari, TaxiGuide and Taxiforsure. Over the past 6 months VC firms, including Tiger Global Management, Inventus Capital, Helion, Accel Partners and Blume, have invested in tech-startups operating in the online cab rental space.

In April this year, car rental service, Savaari secured Rs. 5 Crores ($1mn) in Series A from Inventus Capital, in the same month Olacabs had raised Series A funding from Tiger Global. Bangalore based TaxiForSure, had raised venture capital funding from Accel Partners, Helion Venture Partners and Blume Ventures in June.

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