Ola’s battle for ride hailing supremacy in India is quickly draining its bank account
AdvertisementAs of early 2018, Indian ride hailing company
However, Ola is in three times as many cities in
As the old saying goes, “uneasy lies the head that wears the crown”. Fending off Uber’s advances in the market has led to a significant drain on Ola’s finances, and will continue to eat into its funds in the near future.
The company posted a net loss of nearly ₹49 billion for the fiscal year ended March 2017, according to regulatory filings. That’s a significant jump from the ₹31.5 billion it lost in 2015-2016. It reported close to ₹52 billion in expenses in 2016-17 to increase its market share. This is roughly a quarter of the $3 billion it has raised in funding from its investors.
Uber is not going to back down anytime soon either. India is an important market for the company, comprising around 10% of its worldwide trips, according to CEO Dara Khosrowshahi.
Uber will continue expanding its operations in the country, targeting a five to ten-fold increase in weekly trips over the next decade. In order to do this, it will supplement the $1 billion investment it announced in 2015.
To increase its reach in India, Uber recently launched “Uber Lite”, a slimmed down version of its ride-hailing app targeted at people with limited space on their phones, as well as small data packages and slow internet speeds. Ola also boasts a Lite version of its app.
A possible merger
Achieving scale in India is hard. Operational costs are high and since both are trying to capture more customers, trip fares are low.
AdvertisementThere have been reports that Ola and Uber are considering a merger and Uber is no stranger to joining forces with rivals. In March, after years of intense competition with Singapore’s Grab in Southeast Asia, Uber decided to merge its business with Grab’s in a number of countries in the region, including Singapore, Indonesia, Thailand and Malaysia.
Both Ola and Uber share an investor - the Japanese technology conglomerate
This is something India’s antitrust regulators will be wary off, for the merged entity will effectively have a monopoly over the ride-sharing market.
The current scenario in India’s ride-sharing market is comparable to its e-commerce market. As two giants burn cash and duke it out for market leadership, consumers benefit from low prices. But the companies will need to make a profit sooner or later and in the medium term, someone will win. And then, perhaps, we lose.
For instance, both Ola and Uber have increased their commissions from trips, and reduced the incentive bonuses, over the past year or so. That leads to lesser income for drivers on the platform, who have often tried to protest against the moves as well. Since both riders and drivers are customers for these companies, the effects of them trying to maximise profits will eventually be felt by everyone.
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