Indian Cab Industry : Survival of the fittest

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Recent news on Softbank, writing off its investment in OLA; and change in revenue model by Uber; clearly validate the below hypothesis which was published in my previous article.

Hypothesis# 1: – Cab aggregators are not working towards answering the most important question of this industry

“Which side of the cab equation (drivers and consumers) should they subsidize and for how long?”

Neither Ola nor Uber is satisfying unit economics; but just burning cash to incentive either side of the equation.

In a market like India, where there is a need of on-demand, cost-effective, safe and reliable transportation, the real question becomes, which of the two business models: asset-heavy or asset-light will survive in the long run?

However, careful study of both models brings us to our next hypothesis.

Hypothesis #2: – Neither asset-light model (Uber/Ola) or asset-heavy model (Meru) will survive in the long run.

In association with IIM Bangalore, we did a focus group study with consumers who avail cab services in Bangalore, Faridabad, New Delhi, Gwalior, Mysore, Indore and Coimbatore.

This discussion was around following questions:

Question 1: – What are you expecting from an app based cab service?

Majority of the responses were around reliability, on-demand availability, affordability and safety.

Question 2: – What are your concerns regarding app based cab service?

Majority of the responses were around safety and reliability.

Looking closely at major cab providers in asset-light model, we concluded that while Ola is pro drivers, Uber is pro consumers. Hence, more drivers are turning to Ola and more consumers are turning to Uber; disrupting the entire equation of this industry.

Moreover, these asset-light cab providers can’t guarantee safety, as they don’t have tight control over drivers.

Now if we look closely at major cab providers in asset-heavy model, we conclude that though they have better control on safety aspect, they are unable to deliver on availability.

But, wait, is there a middle way? Can we use a hybrid model, which can give us the best from both the worlds?

Our research at IIM Bangalore led us to the following hybrid business model:

Asset – Medium Model: This allows cab providers to remain asset light, by not owning cab fleet but still ripping the benefits of asset-heavy by partnering with small cab operators. They can do so by coordinating and knowledge sharing with their partners. However, it is important to note that individual drivers can’t be coined as partners.

This smart-control approach involves six management techniques.

  • Embedding or collocating people in partner organizations.
  • Duplicating some partner activities.
  • Controlling inputs.
  • Controlling outputs
  • Controlling Systems.
  • Establishing true win-win relationships with critical partners.

Above smart-control techniques will allow companies to achieve benefits of asset ownership without the capital commitment.

Mantra is : Survival of the fittest

Stay tuned for detailed research work on this model: Asset – Medium Model

PS: Special thanks to co-author of this article, IIM Bangalore colleague, and my wife – Kritika Sharva.

Thoughts/Comments?

References: –

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Adds NextBigWhat team : A related piece: Ola Play : Does it make sense?

Meru Cabs Launches Ride-Share Feature In Delhi

Cab service Meru has announced the launch of its new Ride-Share for the Delhi region.

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Siddhartha Pahwa, Group CEO Meru Cabs, said, “Pollution and congestion are two major issues plaguing citizens of Delhi. We believe that the situation can be resolved through collaborative efforts by the government, private transport operators like Meru and citizens. As an environmentally responsible taxi operator, Meru endeavors to provide customers multiple transport options depending on their needs. By choosing to share your personal vehicle with the Carpool service or sharing a CNG fuel Meru Cab via Ride Share, citizens can now contribute to solving the city’s travel woes”.

Meru customers will be provided with an option of sharing their Meru Cabs ride with other co-passenger who intends to travel in the same direction. A fixed 30% discount on the estimated trip fare will be applicable and the customers will be charged a fixed fare which will be communicated to them before booking.

This feature will be applicable for bookings via Meru’s app and each rideshare trip can take a maximum of 2 bookings per ride with a maximum of 2 passengers per booking. The riders can share the location to the registered emergency contacts to ensure safety.

Earlier, the company had launched Carpool feature which allowed people to share their ‘personal car’ ride with people traveling in the same direction.

Meru Cabs To Allow ‘Personal Car Ride’ Sharing Using Integrated Carpool Feature

Meru Cabs today announced an exclusive partnership with Indian Oil Corporation Ltd, to allow people to share their ‘personal car’ ride with people traveling in the same direction—by using ‘Carpool By Meru’ integrated on ‘Meru Cabs’ mobile app.Meru launched their carpool service in India on September this year.

merucabsA recent survey by Regus, a leading global workplace solutions provider, brings to light that 26% of commuters in India spend over 90 minutes per day traveling to work and meetings.In addition around 67% of respondents in India drive to work in their own car, indicating the huge potential for carpooling among commuters.

 “Carpooling is an excellent way for people to save on traveling costs, as well as reduce carbon emissions. Through this campaign we hope to encourage more and more people to adopt this convenient as well as environment friendly travel methods through our trusted services and thus promote the concept of shared economy,” said, Mr. Siddhartha Pahwa, CEO Meru Cabs.

Meru Cabs Partners With Europe’s Taxis G7 to Launch eCab

Meru Cabs, today announced a global alliance with eCab— a mobile app by Europe’s leading taxi service provider Taxis G7, in order to provide high-quality cab services to foreign travelers in India and to Indian travelers going abroad with eCab mobile app.

Through this strategic partnership, Meru Cabs and Taxis G7 customers will be able to book cabs through a global network of selected taxi providers.

Meru Cabs will now offer international travelers and Indian people alike, with a single app eCab, wherever eCab is operational (Currently major cities in France, Belgium, Netherlands, Ireland, Canada, and now India).

International travelers can now use Meru Cabs services through their eCab mobile app while travelling to India. Also, when domestic travelers visit the above countries they can avail eCab partners cab service using eCab App.

With this global tie-up, the international travelers will be able to book taxis, track taxis and make cashless payments by using the Meru and eCab mobile App.

“We are proud to become the first Indian radio taxi player to forge a global alliance and become a part of eCab alliance, driven by prestigious Taxis G7 which enjoys strong presence across key international markets. With this alliance, Meru Cabs will now extend its array of services to international commuters visiting India through the eCab mobile app,”said Siddhartha Pahwa, CEO, Meru Cabs

 

Meru Cabs Launches CarPool Service

Meru has launched a new ride sharing service, named ‘CarPool’ for its customers across India. Integrated on to the ‘Meru Cabs’ mobile app, CarPool offers the ‘Personal Car’ ride sharing option for people traveling in the same direction or area. The feature connects people looking for a ride with people offering a ride.

CarPool by Meru also comes with Paytm wallet partnership. All you need to do is register on the app and Meru will do an elementary verification (driving license/PAN details) and once verified, you can look up other registered members traveling in same direction.

“The top 20 cities alone have over 12 million cars and the opportunity is to bring them on a popular and trusted platform like Meru. There is also a growing consciousness amongst people about the need to reduce congestion on roads, pollution/carbon foot print and stress associated with travel especially on daily traffic-heavy routes. The Carpool initiative aims to encourage a simple act of reducing the one-person per vehicle issue through a communal effort of sharing a ride with another person headed in the same direction while offering convenience and economy of travel.” Siddhartha Pahwa, CEO, Meru Cabs

26% of commuters in India spend over 90 minutes per day travelling to work and meetings. In addition, about 16% of all commuters drive to work on their own and on average 67% of respondents drive to work using their car, thus indicating the huge potential for carpooling among the commuters.