Uber is free for you if you pay via the Uber wallet (T&C: 5 FREE rides up to Rs. 300 per ride).
This is of course a great way to increase wallet usage (something which Ola has cracked very well), though such ‘predatory pricing’ activities are bound to attract wrath from the auto and taxi industry.
My family is an investor into a taxi booking company so let me be clear that we follow this space closely and we may or may not see higher values for the investment but what I have seen in this space in the last 6 months is disrupting the lives of many taxi drivers and fleet owners.
Here are the major issues I see:
1. These cab companies are selling below cost… this is obvious when you take account of the recent strikes that hordes of drivers of the taxi-booking companies went on strike as they were out of fuel! They get the subsidized amount from the customer which is not enough to put fuel into the car and the “credit” or difference comes a week later. Are they supposed to physically push the car until then?
We invested in this space as booking a taxi simply by a click makes things easier for the riders and gives incremental revenue to the driver which they didn’t have earlier. It is a pure win-win and net positive for society.
“We will organize this unorganized market” – That is what the pitches used to say…
But right now, we have companies that are selling at unsustainable prices which will drive out all small players and leave the industry in the hands of a few.. this is exactly the opposite of what should be achieved.
This era of free money will come to an end.. and we will be left poorer as a society especially a cab driver who right now is making spending decisions and investment decisions that he/she will not be able to complete.
Isn’t this what happened in the housing boom with free money and no controls? Will we ever learn?
2. Rules are being flouted by unlicensed players that have scant regard for any of the laws in the country… what is very interesting (and sickening) is that it is our own local companies that are flouting the laws relating to taxation, KYC, labour, etc.
In the name of adding supply some of them are paying off taxi drivers through pre-paid cards that are registered in the name of the company and not in the name of the user – is this what we want to call “fair” competition? Is this even legal?
When foreign money is being doled out without KYC and without any trace on the money.. what stops that from being used for means that are anti-social?
What happens when the ED. IT, FEMA, FERA, EOW, Service Tax authorities catch hold of these erring companies and shut the show?
What if it is too late by then?
The show is on right now.. and it’s all beautiful.
Once the song stops.. you will see that we have destroyed whatever semblance of sanity there was in this space.”
Good for consumers. But what about the industry?
Are parts becoming greater than the sum? Think about it while you enjoy the ride.
(Article published by NextBigWhat on 27/11/2014, containing excerpts from a comment I left on a previously published article on the same platform titled The Big Battle Between Funded Taxi Startups And The Rest.)