Slicing incentives cost Ola, Uber cab supply; growth rate goes down by 80%

Since Ola and Uber cut down the driver incentives by 40%, their supply of drivers went down a chunk and hence the growth rates have slowed down significantly.

From 90% in 2016, 57% in 2017, and 20% in 2018, the growth rate wrt ride booking numbers have slumped to 4% in 2019. The figure that was 3.5 million in 2018, has now taken a small step up by a mere 0.65 million to 3.65 million. (This data is relating to the December-May six month period).

Where 66,683 cabs were registered in Maharashtra in the 2017-18 period, the number went down by 63.43% to 24,386 in 2018-19. People who had leased their vehicles from Ola and Uber also left their jobs when they couldn’t pay the loans due to sliced incentives. All resulting in a 25-30%  drop in the number of suppliers.

This has not only impacted drivers or the companies, but the customers themselves, who now have to wait for longer durations at pick up points from 3-4 minutes to 12-15 minutes, and pay 15-20% higher fares, even in non-peak hours. And that’s just not limited to two tiers. Customers in bigger cities have to go through the same deal.

In regards to this slow growth, Ola and Uber's spokespersons maintained that the core market growth is taking place, while conversing with ET. They are looking at complementing products as well as other avenues of growth markets in the auto sector itself to speed up their numbers in the coming future.

Both the Bhavish Aggarwal and Dara Khosrowshahi led firm are looking at bikes, scooters, and Electric Vehicles to take their auto businesses further. Uber, with its massive scale and a recent IPO, takes this a step further with its air and waterborne travel solutions plans. Khosrowshahi acknowledged the slow growth and stated to ET that the core ride-hailing will contribute less than 50% to the overall business in the future.

The recent multi-billion dollar Uber IPO was also an underwhelming affair and the recent 3-month report also showcased a mere 9% growth on a global scale.

This would not be concerning if the market potential in India was completely saturated. Yes, Tier I might be to some extent, but the rest of India still has an immense scope that remains to be capitalized.

However, for companies to be able to provide affordable rides in these areas is a tricky business as scale becomes a necessity for profitable operations.