Win For Customers as Taxi Companies Like Olacabs, Uber Cut Fares In Delhi, Others May Follow
Sep 15, 2014, 09:52 IST
BANGALORE: The fight to win over the Indian taxi passenger has intensified with aggregator Olacabs and cab hailing app Uber slashing prices by a fourth in Delhi—a development that is likely to force rivals to follow suit.
While Ola has cut rates in its lowerend car business—Ola mini—to Rs 10 /km, Uber has cut prices for its premium segment Uber BLACK. Separately, the San Francisco-based taxi hailing app also announced that it will be launching its affordable ride service UberX in three more Indian cities: Mumbai, Chennai and Pune. “We are pushing our efficiency system to the maximum,” said Shailesh Sawlani, general manager of Uber in Mumbai. "We see this as a daily commute option for our riders and plan to maintain these prices if customers ride with us as much as we anticipate."
UberX Mumbai fares are Rs 15/km with a minimum base fare of Rs 50 and total minimum fare of Rs 125. The latest moves come after Uber cut its prices in Bangalore by 25% last month. Ola also reduced fares to Rs10/km for its Ola Mini service in the Garden City. “We have been able to optimise our inventory,” said Pranay Jivrajka, vice president of operations at Olacabs.
According to industry estimates, taxi companies are struggling to keep pace with the rising demand and on average cannot accommodate a fifth of the bookings. To address this problem Ola said it will increase the number of cabs available on its mobile app by about 35% to 3,200 in Delhi alone. Ola’s total fleet size is about 15,000.
“These price cuts are just a starting point to acquire customers and establishing the brand image till the time you hit a critical mass,” said Arvind Singhal, chairman of Technopak. “At Rs 10/km Ola is making losses on each Ola Mini ride,” said a source directly familiar with the matter. Same is the case with Uber, according to another source. Uber’s price drop in Bangalore is, however, for a limited duration.
The company has not specified the timeframe. Other competitors like TaxiFor-Sure are focussing on discount codes to expand the customer base instead of cutting prices. “We keep doing event-related promotions and offer discount vouchers from time to time,” said Aprameya Radhakrishna, founder and chief executive of TaxiForSure.
“Till the time, taxi aggregators will not face pressure to turn profitable, the freebies will continue,” said Jaspal Singh, cofounder of Valoriser Consultants, which provides market research services for transportation companies. “These companies are looking to build valuation by expanding geographic reach, recruiting more number of drivers and attracting bookings to increase revenue.”
However other aggregators like Meru Cabs and Savaari cabs feel that price cuts is not sustainable long-term. “Meru does not believe in price wars,” said Siddhartha Pahwa, CEO of MERU Cabs. “Consumers will not take a cab because it’s cheap but for its reliability, safety and professional service.”
Advertisement
While Ola has cut rates in its lowerend car business—Ola mini—to Rs 10 /km, Uber has cut prices for its premium segment Uber BLACK. Separately, the San Francisco-based taxi hailing app also announced that it will be launching its affordable ride service UberX in three more Indian cities: Mumbai, Chennai and Pune. “We are pushing our efficiency system to the maximum,” said Shailesh Sawlani, general manager of Uber in Mumbai. "We see this as a daily commute option for our riders and plan to maintain these prices if customers ride with us as much as we anticipate."
UberX Mumbai fares are Rs 15/km with a minimum base fare of Rs 50 and total minimum fare of Rs 125. The latest moves come after Uber cut its prices in Bangalore by 25% last month. Ola also reduced fares to Rs10/km for its Ola Mini service in the Garden City. “We have been able to optimise our inventory,” said Pranay Jivrajka, vice president of operations at Olacabs.
According to industry estimates, taxi companies are struggling to keep pace with the rising demand and on average cannot accommodate a fifth of the bookings. To address this problem Ola said it will increase the number of cabs available on its mobile app by about 35% to 3,200 in Delhi alone. Ola’s total fleet size is about 15,000.
“These price cuts are just a starting point to acquire customers and establishing the brand image till the time you hit a critical mass,” said Arvind Singhal, chairman of Technopak. “At Rs 10/km Ola is making losses on each Ola Mini ride,” said a source directly familiar with the matter. Same is the case with Uber, according to another source. Uber’s price drop in Bangalore is, however, for a limited duration.
Advertisement
“Till the time, taxi aggregators will not face pressure to turn profitable, the freebies will continue,” said Jaspal Singh, cofounder of Valoriser Consultants, which provides market research services for transportation companies. “These companies are looking to build valuation by expanding geographic reach, recruiting more number of drivers and attracting bookings to increase revenue.”
However other aggregators like Meru Cabs and Savaari cabs feel that price cuts is not sustainable long-term. “Meru does not believe in price wars,” said Siddhartha Pahwa, CEO of MERU Cabs. “Consumers will not take a cab because it’s cheap but for its reliability, safety and professional service.”