Government to restrict carpool services to no-profit no-loss model

The carpooling Industry in India is in for a shocker as the government planning to allow only breakeven through carpooling services. 

The Union Ministry of Road Transport and Highways is in the process of framing new guidelines for regulating carpooling services in India, which will cap the maximum number of rides per day by private carpool riders among other rules.

The proposed framework will be designed in a way to prevent commercial activity through private vehicle owners by driving carpools. 

The maximum number of rides a carpool driver can take up in a day will be limited to four, and the payment structure shall be designed to ensure it is a no loss - no profit model, as per an ET report.

The government will also address security concerns regarding carpools and will mandate compulsory KYC of both the drivers and the riders and will only allow carpool services to run through an app-based model. 

With efforts to keep the model transparent, the platforms will have to share fare breakdown and ride details with the riders before the start of the trip.

The new policy will also account for state governments’ share in the revenue generated by these platforms, and a pure cost splitting model will be implemented. It is still unsure how the business will remain viable as the government is looking to curb the “commercial activity” while looking out to tax the revenue generated. 

The existing carpool platforms such as BlaBlacar, Quickride, and sRide will have to make necessary changes in their respective applications to account for new proposed rules and ensure they’re compliant with the new framework to ensure operations in India.

Carpool is championed as a cost-effective means of going through a daily commute while reducing congestion on the roads but it has seen a mixed response by customers in India. While the demand is spiking in metro cities, the model is yet to get accepted by most of the Indian population. 

However, the market perception is shifting. As per data provided by Statista, around 174 million people will use carpool services in India in 2019 which is a clear 24.1 % YoY increase as compared to last year. The revenues will amount to $30,360 million in 2019, and the segment is expected to show an annual growth rate (CAGR 2019-2023) of 15.5%.

The biggest hurdle faced by these ridesharing apps has been onboarding users throughout India. Applications such as Wunder Mobility, Tripda, Sharedcab and Lifto shut down after they failed to make a mark in the Indian market. The current market penetration rate stands at 12.7%, but it is expected to hit 20.3% by 2023. 

The numbers reflect that the market is clearly there, but it is still unsure how the new regulations will affect the business.