Traditional taxis struggle in the time of Uber, Ola

Traditional taxis struggle in the time of Uber, Ola

By Dipavali Hazra | NEW DELHI | 23 April, 2016
Jaswinder Singh, a taxi driver, stands outside the Crowne Plaza hotel in Mayur Vihar. Photo: Dipavali Hazra
The combined market share of Ola and TaxiForSure was 80%, while Meru was at 12% and Uber was at 4%. The rest was occupied by all other taxi companies.
App-based taxi aggregators are edging out traditional taxi services and other small time players from the business, especially shrinking the point-to-point services for which customers prefer the convenience of an Ola or Uber which is available at the click of a button at competitive prices.
Softbank Corp, an investor in Ola cabs, disclosed in its earnings presentation for its fiscal year on 11 May 2015 that the combined market share of Ola and TaxiForSure was 80%, while Meru was at 12% and Uber was at 4%. The rest was occupied by all other taxi companies.
“Our business for short distance travel has been shrinking since the arrival of radio taxis like Meru cabs, followed by the opening of metro services in Delhi and finally the entry of the taxi aggregators,” says Balwan Singh, who runs Shubham taxi services in Mayur Vihar. His cars usually take passengers to the airport and railway stations. For these and the occasional local travel bookings, the fare is charged on the basis of the number of hours the car is hired for. The number of kilometres travelled decides the fare for destinations out of station.
A few of Balwan Singh’s drivers too have occasionally switched over to the taxi aggregator services, drawn by the higher pay and flexible hours. They may be able to hike their average monthly salary of Rs 9,000-10,000 to Rs 25,000, according to Balwan Singh. Some others have also bought their own cars and are running their own business, “which is a good thing”, Singh says.
Business is not good, a taxi operator in North Delhi admits, due to the crushing competition. He has attached two of his boys with Ola cabs because his cars would stand idle otherwise. Operating on a non-commercial licence, his business has also received a blow from the second phase of the ongoing road rationing scheme in Delhi.
“We have five cars. Two can ply today and three tomorrow. In fact, I have to refuse clients although calls are pouring in for rides. We don’t have the appropriate number for today,” he says.
There are three types of cabs plying on roads — yellow top (AC and non-AC), radio cab, economy radio cab, and aggregators like Ola and Uber. Apart from these, there is a section of operators (like the one mentioned earlier) who use privately owned vehicles, which is illegal as per the Motor Vehicles Act.
Other operators have been luckier during this phase. Hardeep Singh, who runs Chandigarh Taxi service from GK 1, says there have been a greater number of booking requests for local travel during the period. However, for point-to-point services on a regular day, business has taken a beating for this operator who owns a fleet of 15 cars. He has mainly corporate clients with whom the fares are fixed on a one-on-one dealing and his drivers earn an average of Rs 15,000 to 20,000 per month.
“Ola, Uber distribute freebies to their drivers to lure them away from our businesses. But once they have monopoly, the incentives will also end. They will exploit the customers the way they did recently, increasing their prices at peak time once the odd and even rule was implemented,” says Hardeep.
Ola and Uber had come under fire from the Delhi government for hiking fares up to four-five times when the road rationing scheme was implemented. The companies suspended surge pricing — charging higher fares when the demand is high and supply is low — temporarily, while the odd-even scheme is underway.
While surge pricing itself is not illegal, the question is which category of vehicles do cabs associated with taxi aggregators come under.
Currently, the government-regulated prices for a non-AC yellow top cab is Rs 14 per km and for an air conditioned cab it is Rs 16 per km. Fares for radio taxis have been capped at Rs 23 per km, while for economy radio taxis, it is Rs 12.5 per km.
Time and again, the Delhi government has entered into litigation with Uber and Ola, trying to get them to agree to a certain amount of regulation that taxi operators in this city are governed by. The companies, however, argue that they are technology companies, and the regulations that the government frames for them should not throttle the innovation that their business model brings in. Aggregators like Uber face problems in all countries since they are not guided by the local Acts governing motor vehicles.
Yet they flourish because they attract people claiming a low base fare which often rises due to other levies. Both the taxi hailing services’ lowest fares are about Rs 6-7 per km, but add to this the variable “ride time rate”, which according to reports is an additional charge depending on the travel time, and other taxes (service tax, education cess), the effective price even without surge rates is sometimes comparable to the fare charged by other public transport services.
The ubiquitous yellow top cabs have not fared well either, but they too are pulling through on income from ferrying passengers to and from the airport or railway stations. Some, like Jaswinder Singh provide service to five-star hotels in the city. Stationed outside Crowne Plaza Hotel in Mayur Vihar, Jaswinder explains, “We pick up and drop guests at the hotel and charge them according to a fare chart that was prepared by the hotel’s chief. We also ferry the staff and charge Rs 10/km.”
Six men who have their own cars provide service to the hotel here. The hotel puts them up in its rooms, has arrangements for their meals and allows them to park their cars in the garage overnight, but their income comes solely from the passengers, who are guests at the hotel, and occasionally from the hotel staff.
Traditional radio cabs have meanwhile diversified their services. Carzonrent chief R.K. Vij says, “(Our company) operates in Corporate, Limo and Airport services and Myles is a self-drive service, besides point-to-point taxi services which are operated under Easy Cabs brand. We are a profitable company established over the last 15 years with market leadership in the car rental business and are building a very exciting self-drive/car sharing business which has huge growth potential in India.”
“Therefore, for larger part of our business, we do not compete with Ola/Uber,” he adds.
 

Add new comment

CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.