Ola, Uber focus on profitability, cut drivers pay and incentives

Three years ago, I met an Ola driver. During the ride, being an inquisitive journalist, I began a conversation with him and started enquiring about “how he was holding up the new mobile-based business”.

Amidst the pleasant conversation, the driver caught me off-guard when he suddenly asked me my salary. I dithered and in an attempt to avoid a straight reply, I reported my salary as “a few thousand rupees”. He retorted and told me on my face that his monthly income goes beyond Rs 1 lakh. That was in 2014.

Since then, the situation of Ola and Uber drivers has changed a lot, as the monthly incomes of the drivers has taken a hit, owing to cost-cutting and subsidy reduction by the parent companies.

According to research consultancy Redseer's report, the take-home pay for drivers dropped 33 per cent in the last one year.

The report added that the average income of these drivers, which includes incentives but excludes EMIs on their vehicles, has come down to Rs 21,000 per month in the second quarter of 2017 compared to Rs 31,000-32,000 made during the same quarter in 2016.

As incentives sharply reduced, drivers missed payment deadlines for the monthly installments of their vehicle loans. Top lenders in the country have been highlighting the rising number of defaults on loans taken by the drivers of these ride-hailing apps. Some of the banks even stopped disbursing new loans because of the defaults.

Earlier this year, drivers of these cab-hailing companies sat on a protest, demanding more benefits and perks.

Ola, Uber reap benefits

The main reason behind the falling incomes of drivers is the rising margins by Ola and Uber. Earlier, drivers would draw huge incentives, but these have witnessed a 60 per cent drop since last year.

The cut on drivers has immensely help cab-hailing companies reduce their burn rates. While Ola has seen its monthly burn come down by almost half compared to the previous year at $20-25 million, Uber's is estimated at $30 million, which is a sharp drop from a year ago, according to an ET report.

In terms of market share, Ola is still ahead of Uber but both companies have dismissed each other's claims of being in the pole position. Ola is estimated to be clocking about 1.5 million rides daily, while Uber recently said it completed 9.4 million rides in a week in July.