Uber Plans To Move Out Of Discount Space In India

HIGHLIGHTS

• Uber will be focussing on winning the Indian market by leveraging technology to cut costs

• It hands out Rs 125 as incentive to drivers per trip across most Indian cities

• The game of discounting was triggered when Uber entered India two years ago

Taxi-hailing app Uber, which holds India as its largest market outside the US, said it will focus on winning the Indian market by leveraging technology to cut costs instead of falling back on discounts and subsidies.

“This is not a game of renting market share,” said Asia head Eric Alexander.

“You do subsidies when you are growing and to build awareness for both drivers and riders. But the funding will dry out and discounting cannot go on forever. And that’s where tech comes into play. For example, with carpool, Uber can do more trips per hour and keep the utilization numbers high for drivers, then you can afford to drop prices,” he added.

Currently, Uber hands out Rs 125 as incentive to drivers per trip across most Indian cities, and the cost per ride to customers is also discounted. Its larger rival in the local market, Ola, too is aggressively discounting to acquire customers.

Ola chief executive Bhavish Aggarwal said in a conference in August that the company offers incentives to drivers and customers only in the early stages of it entering a city.

“As we go along, we put a lot more value of services for our drivers, like car loans and house loans; we build a lot of community services,” he had said.

In Bengaluru, Uber charges a base fare of Rs 35, a per-km charge of Rs 7 and a per-minute charge of Rs 1 for its lowest category UberGo. Ola’s budget brand TaxiForSure, on the other hand, charges Rs 49 for the first 2 kms, Rs 6 per km thereafter and Rs 1.50 per minute.

In a bid to grab a larger piece of the taxi market — banking on deep-pocketed investors — companies including Ola, Meru, TaxiForSure and Uber are racing to be as cheap as an auto rickshaw ride, benefiting both customer and driver.

The game of discounting, which is being played in the name of acquiring more customers and expanding the reach faster, was triggered when Uber entered India two years ago. Right after all, Indian aggregators started rapidly scaling up operations to fight the taxi-hailing app at the cost of profitability. The company said, unlike Ola, which is present in more than 100 cities, Uber will focus on winning the big cities, including Delhi, Bengaluru and Mumbai.

“We are razor focused on the top cities,” said Alexander.

“It is hard to deliver high-quality service and building deep supply in existing cities and our top priority is execution in those markets and then expand.”

Alexander said Uber is open to acquihiring in India and has a dedicated tech team to deal with the Indian ecosystem. Acquihiring is acquiring a company for the skills and expertise of its employees.