Customers' and riders’ woes throw light on the issues plaguing the two ride-hailing majors. Is the end near for their model?
Swati Singh, an advertising professional, starts booking her cab 15 minutes before leaving her house in New Delhi’s East Kailash for her workplace in Uttar Pradesh’s Noida. “Do I have a choice? At least 4 cabs cancel before one agrees (to drop her). I have to have ample time for all these cancellations. It is absolutely frustrating,” Singh says.
Singh is not alone. Social media platforms are full of posts from disgruntled customers who have been having horrendous experiences while booking cabs through OLA and Uber—two of the country’s biggest ride-hailing service providers.
There are complaints aplenty. There have been instances where some drivers have asked the customers the fare displayed on the app and left the latter with two options—the cancellation of the ride from the customers’ end with them riding in the same cab without the service provider’s knowledge or flat out refusal to go to the destination. There is another accusation that has left the customers sweating—drivers’ refusal to switch on the AC until they have agreed to pay additional charges for the service.
The drivers, in their defense, argue that fuel prices have gone up in the past one year but the cab aggregators have not increased the fare. It all boils down to a business model that seems to have failed the drivers.
Broken Business Model
In their initial days, both the cab aggregators wanted to capture the market by onboarding drivers who used to work for small taxi-stand owners. The two did so by promising them a monthly income of up to Rs 1 lakh, among other things. The attractive propositions made several people sell their farmlands and use their life savings to buy cars and become drivers. However, over the past few years, both Ola and Uber have faced several strikes and protests by their driver partners over the issue of falling incentives.
In a previous interview with Outlook Business, Tanveer Pasha, President, Ola Uber Drivers’ and Owners’ Association, had said, “Initially, a Rs 3,000 incentive was promised at the completion of 10 trips. So, a driver would earn about Rs 4,000-5,000 in a day. Then, the company came up with a minimum business guarantee scheme by which a driver was promised a specific sum after the completion of fixed hours of trips. This scheme was then tweaked by putting a fixed number of trips that had to be completed and the company said it would pay 'X' amount if the drivers could not generate it. Then they came up with absolutely next-to-impossible plans like completing 20 trips in a city like Bengaluru to earn Rs 3,000. When they managed to capture almost the whole of the market, they said they would no longer pay incentives.”
The ever-increasing fuel prices in India have not helped the cause either. In Delhi, the price of CNG has increased by 37 per cent over the last one year—from Rs 42.70 per kg in March 2021 to Rs 59.01 per kg today.
“Most of the cabs run on CNG and the prices have gone through the roof. As AC runs on fuel and it is so expensive, it gets difficult for us to run AC at this price. The companies have not increased fares despite the pressure of CNG prices. We are hardly left with any money for ourselves,” Sheikh Islam, a Delhi-based Uber driver, says.
Recently, the Telangana Gig and Platform Workers Union (TGPWU) announced a ‘No AC’ campaign in Hyderabad. “Aggregator companies are not ready to hear the concerns of the managers and solve the problem. The transport department must intervene. Currently, it (the fare) is less than Rs 12 to Rs 13 per km and the drivers want at least Rs 24 to Rs 25 per km to turn on the AC. We also understand the problems the customer faces in this hot weather when ACs are turned off. The government and the collector must sit together and resolve this issue. The government must realize there are law and order issues at stake here which places the onus on the government and collector. We deplore the inconvenience caused to the passengers,” said Shaik Salauddin, founder and state president of the TGPWU, in a press release this month.
Unresponsive Redressal Mechanisms
Salauddin says that these companies have no executives with whom the drivers can raise these issues. Problems with redressal, however, are not limited to drivers. Even customers face it while raising complaints, making one thing clear—the companies do not have responsive redressal mechanisms.
One can only raise issues through the app and complaints raised on Twitter elicit standard non-committal responses without any way of understanding if they have been addressed and how. A Uber spokesperson said, "Uber does not levy extra charges for switching on the AC during a ride, and any driver who is charging such a fee will face action from the company for violating our community guidelines."
"Uber expects drivers on its platform to keep the car AC switched on during a ride. In case of the driver’s refusal, riders have the option to reach Uber via in-app chat messages and post-trip feedback. Continued non-compliance by drivers may lead to them losing access to the Uber app," the spokesperson added.
Outlook Business also reached out to Ola but had not received any response at the time of publishing this story.
Aditya Somani, an independent investor, believes that the network monopoly created by the two players has resulted in these kinds of regular issues that the customers and drivers are dealing with. “These companies want more and more taxi drivers to work for them. What they do is distribute the orders across a larger number of drivers using tech. So, if you get five-six rides today, you would not get the seventh ride. But, in this process, the drivers lose their bargaining power with Ola and Uber. Drivers cancel because if they know that they will only get 10 trips, they will go for the longer ones. All of this—cancellation, charging extra for AC, canceling if payment is not in cash—is happening because of the greed of Ola and Uber,” Somani says.
The companies also charge a 30 to 33 per cent commission from drivers—which most drivers call exorbitant. To give a contrasting view, Somani gives the example of Coimbatore-based Red Taxi, a ride-hailing service in south India, which charges an 18 per cent commission and leaves the drivers with a lot more income.
“The market needs one such player to come in. I think even localized players make sense because generally, one uses ride-hailing services maximum in the city of residence. Smaller cities also have these kinds of players but in the larger cities, it is the monopoly of Uber and Ola. Asking for 33 per cent of the income just for broking is a lot. Had there been enough competition, these margins would have come down to five to seven per cent. Also, 10 years ago, making an app and the knowledge around it was probably rare but 10 years later, it has become easier. So, it makes no sense the same charges should still apply,” Somani explains.
Between rising fuel prices and opaque policies of the ride-hailing companies, drivers and customers have been caught off guard. Whether or not a third player would emerge and break the stranglehold of the two players, only time will tell.