Coming Up : The Big Battle Between Funded Taxi Startups And The Rest.

This agreement is illegal and questions the authority of the transport department that issues the permit.

In the last 6 months, startups ended up raising big rounds.

UberGo Vs. Auto
UberGo Vs. Auto
TaxiForSure raised Series C  (amount not disclosed, but expected to be ~$40mn). Ola raised Series D ($210mn) recently.
The total funding (excluding Uber and Meru’s undisclosed numbers) surely stands at more than $350mn (close to ~INR 2200 crores).
And the biggest positive to this is great affordable service (people will pay anything to not-haggle-with-an-auto-rickshaw-guy) and availability of cabs (a better lifestyle).
The biggest negative impact? None to consumers, but the overall industry is suddenly seeing massive drops in the fare rate, similar to what Ecommerce has done to offline retailers.
Loaded with investors money, Ola/TaxiForSure/Uber are able to reduce the price in order to acquire customers while for the offline ones, it’s business-as-usual (they can’t think out-of-the-box, they were never forced to!)

Coming Up : The Big Battle.

Earlier, Ola became part of election campaign agenda and now that companies are positioning themseleves as ‘alternative to auto rickshaws’, an imminent battle is about to happen.
What’s really happening is that companies are poaching drivers (and cabs) from the competition by giving away monetary incentives which are unheard in this space. I spoke to few Ola drivers and they said why they moved away from other competitors (Reason # 1: incentives are better. Reason 2 : Ola doesn’t fine drivers, unlike others who fine drivers Rs. 500 for not keeping the cab clean).

“This move by private operators will prove suicidal for auto drivers. In the city some of the private operators have reached an agreement with auto drivers stating that operator would credit Rs 10,000 every month into drivers’ account, give them a mobile phone and other benefits.All the auto driver has to do is run the auto at the fare fixed by the operator, say Rs 10 per kilometer. This agreement is illegal and questions the authority of the transport department that issues the permit.
Though offers look fancy for auto drivers in the beginning they will be deceived by the operators.If the state government fails to take action we will definitely act against the injustice.” [President of auto association/source]

This is India’s version of what happened to Uber in other countries. We certainly hope that these battles don’t result in physical fights (which, I am sure will happen), but for sure these are defining times in the history of India’s transportation industry.
The winner will not be decided in the next 5 years, but in the next 10-15 years.
Who do you think will survive the next 15 years? Ola? TaxiForSure? Uber (India)? Meru ? Others?

  1. For sure they have changed the way we travel in Bangalore especially ola. Now their invitational fares are out and ride time and other charges have comrme up which works out to about 16 to 17 per km. Now that we are used to we still travel by ola per. Compared to black cabs in London these are less expensive and hats off to ola better technology in terms of booking.totally reliable on application without human interference.

  2. Change is always difficult. But, Let us get practical. Who are we defending here in the above comment? Is it the existing drivers who typically create these problems?
    a) Never going on a Meter [Over charging]
    b) Refusing to go to certain [i should say , Most] locations. [ refusal]
    c) Indulging in illegal behaviour in autos[smoking, being the least of them].
    The Fact is, this sector is desperate for disruption. You may say, that the common autodriver is suffering, but, the same auto driver will become anti-social the moment, you question.
    The Tragedy is, this sector has no reliability right now. Lack of reliable transport hurts growth massively at least in terms of loss of business.
    The thing is, we need more vehicles for hire. In peak hours, inspite of all the funding , one still does not get a cab. This is a problem that needs fixing.

  3. I too support the new radio taxi companies.. what is happening now is the absolute destruction of companies/models through predatory pricing and very questionable accounting practices.
    Who is to stop a terrorist entity to fund a start-up and then give pay-offs through unregistered prepaid cards to employees/contractors?
    Then when an event takes place the entire industry will get over-regulated (angel, vc, taxis) in an emotional backlash.
    Why go down this oft beaten path?
    It is this particular behavior that is concerning to me. If you can innovate and conquer.. all power to you… but to screw the public, tax authorities and eventually the entire eco-system – unacceptable.

  4. Definitely interesting times for cab companies. These discounts will again be justified in the name of customer acquisition. India has become a winner take all market. and it is the biggest market after China so one one wants to leave it out.
    Is it not ironic that Softbank which always prefers marketplace route for scalability has invested in Ola which to some extent has inventory model.
    However as an end user, I would welcome them for only one reason. Auto drivers have never been end user friendly which is why these cab companies felt the need to disrupt this space. Overcharging, refusing to ply shorter/uncommon routes, rudeness has meant end users want alternatives even though if it may hurt them in longer term. Auto associations may raise hue and cry of common man’s daily earnings but they themselves and their attitude (that there is no viable transport option besides buses and they have monopoly) has gained them public apathy. Some start-ups came in this space to be able to bridge the gap (assured earning to auto drives and hassle-free travel to commuters) but then too unions created obstacles so now is the time they face reality check. I will not support them.

  5. There is a difference between disruption and doling out discounts. Providing taxi service for 49 rupees is more of a commercial thing, not innovation. Disruption requires innovation.

  6. My family is an investor into a taxi booking company so let me be clear that we follow this space closely and we may or may not see higher values for the investment but what I have seen in this space in the last 6 months is disrupting the lives of many taxi drivers and fleet owners.
    Here are the major issues I see
    1. These cab companies are selling below cost… this is obvious when you take account of the recent strikes that hordes of drivers of the taxi-booking companies went on strike as they were out of fuel! The get the subsidized amount from the customer which is not enough to put fuel into the car and the “credit” or difference comes a week later. Are they supposed to physically push the car until then?
    See we invested into this space as taxi booking makes things easier for the riders and gives incremental revenue to the driver which they didnt have earlier. It is a pure win-win and net positive for society.
    “We will organize this unorganized market” – That is what the pitches used to say..
    But right now we have companies that are selling at unsustainable prices which will drive out all small players and leave the industry in the hands of a few.. this is exactly the opposite of what should be achieved.
    This era of free money will come to an end.. and we will be left poorer as a society especially the cab driver who right now is making spending decisions and investment decisions that he/she will not be able to complete.
    Isnt this what happened in the housing boom with free money and no controls? Will we ever learn?
    2. Rules are being flouted by unlicensed players that have scant regard for any of the laws in the country… what is very interesting (and sickening) is that it is our own local companies that are flouting the laws relating to taxation, KYC, labour, etc.
    In the name of adding supply some of them are paying off taxi drivers through pre-paid cards that are registered in the name of the company and not in the name of the user – is this what we want to call “fair” competition? Is this even legal?
    When foreign money is being doled out without KYC and without any trace on the money.. what stops that from being used for means that are anti-social?
    What happens when the ED. IT, FEMA, FERA, EOW, Service Tax authorities catch hold of these erring companies and shut the show?
    What if it is too late by then??
    The show is on right now.. and its all beautiful.
    Once the song stops.. you will see that we have destroyed whatever semblance of sanity there was in this space.

  7. “Please don’t portray these cab startups as demiGODs. Your demiGODs are simply muscled wallets that are simply untested” – that’s why there is an upcoming battle. there is a disruption happening and no one knows who the winner will be.
    These cab startups are not demi gods – i don’t know why you get that sense??? where is the bias? I guess your comment was more biased than the article 🙂

  8. An unresearched and a completely biased article. What’s more interesting is Ashish Sinha has blogged it.
    To what I understand the UBERgo fares are currently discounted (but for how long). What if the ride is during wee hours and you know who might offer comparably cheaper rides. Even during day time, I can’t be sure if I can find uber/ola/others (even in the heart of Bangalore) unlike an auto which could be found at the wink of my hand.
    “In case of Autos that are being paid Rs. 10000 and ….., thats illegal” – So be it. Such services are even part of startup world (simply not blogged by NBW). The scale of illegality is far low – we know. How about morality – firing drivers at will, poaching drivers, fining them, framing the tax albiet issues upon drivers…..
    Please don’t portray these cab startups as demiGODs. Your demiGODs are simply muscled wallets that are simply untested
    p.s. I am not a supporter of autos nor against the cab startups. Just want to point out your completely biased article. Cheers 🙂

  9. So, the VC and startup space “disrupts” – read “bulldozes through predatory pricing” – yet another real world industry? I do think startups and technology can be used to pry open real advantages and make real positive impacts, rather than use funding-muscle to create fake, unsustainable “disruption”. Not good for any of the stakeholders, including – eventually – consumers.

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