Fall in incentives for drivers is causing headache for ride-hailing services Ola and Uber, who are now facing crunch in supply of cars. According to a report by RedSeer Management cab affiliation to their platforms have dropped by almost 25% in the March quarter from the preceding three months.
The cab supply went up in the December quarter since January 2016 to approximately 500,000 vehicles, before plummeting to about 380,000 vehicles in the March quarter, largely because of a fall in incentives for drivers, added report.
After adding a few lakh drivers and cars to their platforms, Ola and Uber tweaked their driver incentive, which has brought down driver income.
“This trend was precipitated largely by continuously dropping incentives and driver incomes. Drivers who left the online platforms either shifted into other (offline) driving jobs or changed professions entirely,” points out report.
Contrary to report, Ola and Uber claim to have about 5-6 million cabs each affiliated to their platforms. Hundreds of drivers in Bengaluru and Delhi, took to streets in February and March this year to protest against the sharp fall in incentives, which, they claimed, had taken a toll on their livelihood.
Earlier, both Ola and Uber had given the drivers money over and above the fares to build a large supply of cars and earn their loyalty. Now they have been cutting down on incentives after scaling up the businesses, as they aim for profitability. This has raised questions on their business models.
However, Uber India president Amit Jain justifying the decision had said in March that “There is this mix between organic and incentives. Incentives might have come down, but what a driver partner takes home is organic money plus incentives. When we go into a market, the reason we offer incentives is because the rider will not take a ride if there is no driver partner available. For a driver partner to be available when the demand is not there or just picking up, he or she has to make sustainable earnings then. You have to have an initial set of supply. Over time, when demand catches up, the organic earnings become sustainable for a driver partner,” Jain was quoted by Livemint.
Almost 80% of the drivers across India who are online for more than six hours a day, make Rs1,500-2,500 after paying Uber’s service fee, he added.
Both ride hailing companies have built car-leasing businesses, Ola Fleet Technologies Pvt. Ltd and Xchange Leasing India Pvt. Ltd, over the past one and half years to ensure consistent supply of cars.
Drivers to strike on Monday
Drivers of Ola and Uber have reportedly called a strike on Monday in the National Capital Region. The strike has been backed by estranged Aam Aadmi Party leader Kapil Mishra.
The strike has been called by Sarvodaya Drivers Association of Delhi (SDAD), which claims to represent over 20,000 taxi drivers in the NCR region, said sources.