Ola and Uber: Win – Win For Everyone

by Manshu on April 29, 2015

in Personal Technology

I’m a fairly heavy user of Ola Cabs and Uber; I really like their service, and often feel that they are currently under pricing and making a loss to gain a lead on each other in the taxi aggregator business.

This is a very interesting business where Ola or Uber don’t own taxis on their own, but partner with other individuals who own taxis and register with them.

You can hail a taxi using their app, and the taxi drivers logged into the app get a request that they can accept and come and get you. You can load the Ola app with money using your credit card so you don’t have the hassle of using cash to pay the driver. Uber allows you to link the account to Paytm and avoids the hassle.

Uber is a San Francisco based company which was recently valued at over $40 billion dollars and Ola is a home grown company based out of Mumbai  which is estimated to have a staggering valuation of over $2.5 billion (Rs. 15,000 crores). This valuation is very recent as it just took funding of about $400 million a couple of weeks ago.

Although the latest round of funding gives them a very high valuation; that they were doing so well is nothing new because this is not the first time they have gotten funding, and earlier this year they had reported that they are doing about 200,000 rides per day.  

So, the company is doing well (as least in terms of valuation), it’s a good service for customers, but I often wondered how the taxi drivers fared?

On a recent trip to Delhi, I used Taxi For Sure, which is a similar service, and has been recently acquired by Ola Cabs, and the man driving the taxi told me that he was actually the owner of a fleet of cars but his drivers made more money than him on a regular basis due to the salaries Ola and Uber pay.

I didn’t really take him seriously but this article today in the ET about Ola Drivers protesting a pay cut caught my attention due to that conversation. Apparently, Ola has an agreement of paying Rs. 38,000 per month to hatchback drivers, and Rs. 46,000 per month to sedan drivers, but they want to cut that by Rs. 8,000 and increase the working hours for the sedan drivers. The drivers are protesting and rightly so because this was not in their contracts and no company should be allowed to change the rules like this.

I don’t know the details of the contract but I certainly hope that the company doesn’t get away with any high handedness like this. It will be a shame if that happens because this is a great service for everyone involved, and it is very heart warming to see that a start up has created such great livelihood opportunities for so many people who till only a few years ago could have never dreamed of owning their own small business.

{ 13 comments… read them below or add one }

Sam April 30, 2015 at 9:45 AM

Hola,

Your views are rather naïve for a capitalist. Here’s why.

None of the cab drivers have any sense of service or gratitude towards the customers. You may have been happy hitherto, but it wont be long before you start having bad experiences with both the companies. That happens to everybody. Period. The moot cause being that the cab drivers are merely interested in filling up their own pockets (at any cost) and not interested in serving customers. Just hail a cab in Singapore and compare. You’ll know instantly what I’m talking about.

Further, reduction in wages will likely be passed on to the customers. So you stand to benefit. Why crib?

Most important point is that entrepreneurs should have the lee way to conduct business the way they want to. That is real ease in doing business. Even if that means reduction in wages! Am surprised you’re missing this point. If they’re not allowed to reduce wages, they’ll cut the workforce. ALL corporations do that. Simple as that.

Best,
S

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Manshu May 5, 2015 at 4:44 PM

Thank you for the comment Sam, it has been quite a while since I’ve been called naive, and comments such as this certainly make me feel like a blogger again 🙂

The assumption I make and perhaps incorrectly is that the agreement for their wages and working hours goes out to some time period in the future because how do you convince people to invest money in taxis if you don’t guarantee that they will be making a certain set amount for say 24 months or so. That’s why I say it is high handedness if they can just renege on that.

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Sam May 7, 2015 at 7:18 PM

Hi Manshu,

Blogging would be such a drab activity if there were no serious counter viewpoints, isn’t it 😉

Have you ever got into a “new” Ola or Uber cab? There goes your answer. Hardly any of the cabs are new and so there are no fresh investments being made by the cab drivers. Most cabs are of mediocre quality at best (atleast in Mumbai) which were anyways owned and were anyways being used by car leasing companies. Agree with you that it would not have been acceptable if the cabbies were lured into making fresh investments, forcing them to use leverage, and then the companies were going back on their word. But that’s not the case.

In absolute terms, the amounts being paid are huge, specially when you compare them to median wages in India. So 30k or 38k, even after factoring the proposed cuts is still quite a lot of money and is excellent money in absolute terms. Don’t think the drivers have any legitimate grounds to complain.

Best,
S

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Manshu May 8, 2015 at 5:35 PM

Just curious what the source of this info is S, if there is an article about it could you please share the link. I’d like to read it as well. Thanks!

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Sam May 8, 2015 at 6:13 PM

Hey there, which info source are you referring to? Median wages?

Best,
S

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Manshu May 8, 2015 at 6:48 PM

Sorry, should have specified, the contract. I was referring to the fact that their salaries are not fixed for say a period of twelve or fifteen months.

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Sam May 8, 2015 at 7:02 PM

Hey no sweat. Don’t have detailed insights on how the contracts are structured in India. Believe this aspect would actually get classified as “proprietary trade secrets” given the nature of the business.

However, in the US, Uber drivers consider an assignment with Uber as a stop gap arrangement. As a corollary, the duration would be short. Don’t think India would be different. Refer this article from the Time magazine (section “What kind of jobs is Uber….”.

http://time.com/money/3678389/uber-drivers-wages/

Enjoy your weekend.

Cheers,
S

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Manshu May 8, 2015 at 8:43 PM

Okay thanks, you have a nice weekend as well!

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Vibhor Goyal April 30, 2015 at 3:38 PM

Hi Manshu,

I have also been regularly using these Taxi services. And i have confirmed with many drivers that Uber is paying upwards of Rs 90,000 per month to them. And currently they charge Rs 7 per km for hatchback which is seriously under priced. I don’t know if this model of severe discounting to attract customers will work in India, as Indian customer is driven more by value than by Brand loyalty.

Vibhor

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Manshu May 5, 2015 at 4:40 PM

That’s a lot of money Vibhor and it will be interesting to see how far out in the future are they willing to take these losses to build the market, maybe they have a very long term view of the situation which goes out into several years.

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santonu May 2, 2015 at 10:52 AM

I heard that many youth lend their fleets to these CAB network and earns around Rs.80,000/ per month though cost of fuel has to be borne by them

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Manshu May 5, 2015 at 4:36 PM

Didn’t hear about this but based on how much a taxi driver is clearing off in an area, it might just be feasible to owe 80 thousand a month for an year or so and still make money long term.

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harinee May 6, 2015 at 4:43 PM

I seriously don’t understand the valuations being done on startups of recent. Without actual profit the valuations are mere speculations. The expectation that customers will stick with them when they stop these huge discounts is unreasonable.I cant see Flipkart or Snapdeal running for long with this heavily discounted model. Same goes for OLA or Uber.
One a sidenote I have taken cabs in SG and found some quite rude.They have this poor image of India and almost every second cabbie was telling me how I should move there to improve my condition.
And all Indian cabbies are not bad please dont paint all black with a single stroke.

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