Here’s why Uber and Ola are experiencing a decline in their daily ride growth

• While the total number of daily rides has increased this year, the growth in daily rides at Uber and Ola has declined to 20% on average so far in 2018, according to a report by ET.
  
• The average number of daily rides is 3.5 million in the year so far, compared to 2.8 million in 2017, 1.9 million in 2016 and around 1 million in 2015.
  
• The decline in the growth of daily rides is largely due to a reduction in driver incentives, higher fares and a subsequent drop in rider demand.

After exponential growth in the last few years, it seems that the Indian taxi-hailing market is slowing down. While the total number of daily rides has increased this year, the growth in daily rides at Uber and Ola has declined to 20% on average so far in 2018, according to a report by the Economic Times.

The average amount of daily rides stands at 3.5 million across three segments- cars, three-wheelers and motorcycles, compared to 2.8 million in 2017. The average number of daily rides rose 47% in 2017 and 90% in 2016, when the average number of rides was 1.9 million.

While this consistent decline in daily ride growth is likely a result of various factors, it seems that the problem has more to do with the supply of drivers and than consumer demand. Interestingly, these two seem to be interlinked.

In a bid to cut their operating losses, both Ola and Uber have dialled back the incentives they give to drivers and charged higher commissions, which has resulted in a decline of as much as 60% in driver incomes. In turn, a lot of drivers leaving the platform- with some estimates of a 25% reduction in drivers.

As a result of the decline in supply of drivers, surge pricing has become more frequent which has led to a hike in average fares. This has suppressed demand from riders, something that Uber and Ola have tried to counter through loyalty programmes.

In addition, the increase in fuel prices in the last year has also driven a rise in fares, exacerbating the decline in rider demand. Uber and Ola have also shifted focus slightly from their core ride-sharing operation and have been diversifying into other operations such as food delivery.

As rider demand in its home market declines, Ola has been expanding its overseas operations. The Indian cab hailing company recently launched operations in New Zealand, its third foreign market after the UK and Australia. Meanwhile, Uber has ramped up its investments in India after winding down its operations in Southeast Asia. The country reportedly accounts for 10% of Uber’s global rides on a daily basis.