Evolution and Future of Cab Aggregators Industry in India

India is currently experiencing a revolution in urban road passenger transportation. The industry is relatively new and rapidly expanding. The online taxi services market in India was valued at INR 30.72 billion in FY 2020 and is predicted to increase at a CAGR of 12.93 percent between FY 2021 and FY 2025, reaching INR 55.15 billion by FY 2025. “When a cab is right outside your door, why own a car?" has become a popular notion in India. The taxicab industry is revolutionizing how we think about commuting in a short amount of time. Easy availability, rapid access, and cheap rates give end-users more flexibility and comfort while also generating revenue for auto/finance/taxicab companies and job possibilities. Players like Uber, Ola, and others are rapidly scaling their taxicab aggregator business.

According to Indian government laws, taxicabs must have a fare meter mounted. However, due to lax regulation by the authorities, many taxicabs operate without or with broken fare meters. In these cases, the taxi fare is negotiated between the driver and the customer. Auto rickshaws compete fiercely with taxicabs. However, taxicabs predominate in the central city districts of other cities, like as Mumbai, where auto-rickshaws are prohibited. Yellow number plates are used on taxis and other commercial vehicles. It is so easier for officials to collect taxes and tolls on highways. With the advancements in technology and entry of major players such as Uber and Ola, the market changed completely with regards to offering comfort, safety, and utmost conveniences to the customers. This added to the customers value creation and generated the need for other players to adopt similar models.

Customers can hire drivers through the company's app, which is available for iPhone, Android, and Windows devices. Riders receive an ETA (estimated time of arrival) from the driver once they submit a request. When a driver receives a request, the request shows on his iPhone, along with the rider's GPS coordinates. Riders can contact the driver at any time if they have any specific demands. Prior to requesting a car, customers must submit their payment details into the Company's app. Riders can assess their drivers on a scale of one to five stars, and if someone has a bad experience, the company can reprimand (or terminate) the offending driver. Uber pioneered the business concept, which has since been copied by other taxicab aggregators with localization. The Company's business strategy is that it is a Network Orchestrator that connects passengers with drivers, i.e., it administers a network of drivers and passengers via a phone app. It also offers a wide range of transit alternatives and options. This entails not owning a fleet or automobiles, matching passengers with drivers via technology, and splitting the cost of the ride.

Porter’s Five Forces Model

A company must respond strategically to competition in order to create and maintain profits. Aside from direct competitors, the company must understand four other competitive variables that affect profitability. Customers' bargaining power, suppliers' bargaining strength, substitutes' threat, and new entrants' threat are all factors to consider. A company can acquire a better knowledge of what influences profitability by examining all five competing factors.

Bargaining power of the customers

Customers have a lot of bargaining power because switching is free. In terms of taxicab aggregator providers, customers have the option of using Ola, Uber, or Meru. Customers are currently offered different incentives (such as discounts, coupons, and referrals) to migrate from radio taxis and other cabs to Ola or Uber's new taxicab aggregator model. Furthermore, the fierce competition between these two firms is benefiting the end customer with never-before-seen low pricing such as Rs 7/km, compared to the regular rates of Rs 20/km in the radio taxi market, and even auto-rickshaw fares. Ola is now catering to the needs of customers who want to move around town in auto-rickshaws. The convenient availability of an auto-rickshaw at the customer's doorstep with no hassles and no negotiation fares is the selling offer here. Ola and Uber are servicing customers at their doorstep for grocery delivery to satisfy the needs of growing client segment groups such as working professionals who are short on time. The pricing of peak costs to customers by taxicabs influences the bargaining power relationship during peak hours.

Bargaining power of the suppliers

The providers in the taxicab aggregator sector are the drivers. The driver earns 85-88 percent of the fare billed by the meter for the distance travelled. To put it another way, the aggregator keeps 12-15 percent of the fee for giving the service to the driver. The aggregator takes a 12 percent charge from compact hatchback car drivers, while a 15 percent commission is taken from sedan car drivers. At the moment, the aggregators are promising drivers an opportunity to earn a minimum of Rs 2000 per day by offering a reward of Rs 500 for 12 rides and Rs 750 for 14 rides and more. After paying for fuel, vehicle repairs and maintenance, insurance, and other expenses, the hardworking drivers anticipate making between Rs 2800 and Rs 3500 each day. Other expenses include the driver's monthly payment of Rs 5000 to the aggregator for locating ride possibilities. To be more specific, for the first three months, it is Rs 1000 per month, followed by Rs 5000 per month. This is less than the monthly cost of Rs 6000 charged by radio taxi operators.

Rivalry between companies

On one hand, there's the competition between cab aggregators (like Ola and Uber) and radio taxi companies (like Easy cabs, Fast track, Meru cabs etc.). Due to the shift in client demand to taxicab aggregators, radio taxi companies such as Meru have adopted a hybrid model. As a fresh start-up with a novel business plan aimed at disrupting the status quo, the priority is to achieve momentum by building a loyal client base with the help of venture capitalists. The aggregator would benefit from more cabs with more control in providing cars on time because to its dominant market share and economies of scale, resulting in a network effect. It is envisaged that by charging reasonable fees and earning through customer data and marketing in a non-fragmented industry environment, there will be an oligopoly and hence profitability.

Substitutes

The substitute for the cab aggregators is the public transport, autos, radio taxis etc.

New entrants

Ola Cabs is the first to enter this market in January 2011 followed by TaxiForSure six months later. Uber entered this market in July 2013. Ola acquired TaxiForSure in March 2015. Following this there have been a few more new entrants such as Rapido and other small players who offer services like 2-wheeler taxis.

The Future of Market

With a commitment of $ 1 billion for nine months in India, Uber now has the greatest investment of $ 10 billion globally, equating to a monthly spend of $111 million. While Ola has raised $652 million and is in the midst of raising another $500 million, this would be good firepower to maintain its lead of 0.75 million trips each day, according to the company. The funds will be used to expand and improve operations, extend into more cities, develop new products, including payment options, and construct a good support network, according to Uber India's President. He anticipates Uber India to attain a goal of 1 million trips per day by March 2016, up from the present level of 0.2 million journeys per day, with a healthy 40% month-on-month growth rate. Both Ola and Uber, continue to pursue market share with aggressive discounts for passengers and incentives for drivers. Developing a strategy for a new industry is a difficult task. When faced with uncertainty, imitation is common. Because they can't afford to make a mistake or fall behind, competitors will try to match all new offerings and investigate all new technology. Many companies may prosper at such times due to explosive growth, but profits will be fleeting because imitation will eventually erode industry profitability. Companies that begin to develop and embody a unique competitive position as early as feasible will be the ones that will become long-term winners. The one-of-a-kind actions will result in greater automobile availability, a better handle on operations (i.e., balancing demand and supply, and enhancing car utilization), and hence better customer service and profitability for the company.