🚕 Can the Uber-Ola Duopoly End?
First Uber and Ola stole market share from the yellow cabs. Now a similar fate could await them. Here's how.
“If they ride with us twice, we have them for life.”
That is the claim Uber founder Travis Kalanick made to Uber investors.
To be fair, the claim seems true. Most of us don’t even use the word taxi anymore. It's either let’s book an Uber or an Ola.
Yes, Uber has managed to find an equal in Ola but no other player has been able to challenge their duopoly.
Until now…
📈 The Rise of the Underdogs
Despite Uber and Ola’s dominance in the ride-share market, a lot of their competitors sprung up, trying to do the same thing.
Some survived and managed to take hold of a very small piece of the market share. Most were wiped out.
Until one startup entered the space to do what Ola and Uber were doing but differently.
The startup was Rapido.
Where Uber and Ola were providing users with taxis, Rapido was offering bikes.
Why bikes?
They are cheaper (not everyone can afford the ~Rs. 400 cost of a cab ride).
They are faster. Unlike cabs, bikes can manoeuvre through small lanes, taking you to your destination faster.
These reasons didn’t just appeal to users, they also appealed to a dozen more startups including Uber and Ola.
So, almost overnight Rapido faced insane competition because of which getting funding wasn’t easy.
What’s more, Rapido (and other startups) also faced legal issues: a lot of states banned bike taxis as they thought they were unsafe.
How did Rapido get out of this mess?
Unlike other companies that were burning cash, Rapido decided to save.
From 2015-2018, it burned only $2 million!
In comparison, Uber burnt over $5 billion in just one quarter in 2019.
Since Rapido had limited cash, it didn’t focus on expansion. It tried to establish itself in just two cities: Bengaluru and Hyderabad.
But it found success in Mysore. It then realised that cab giants had not been able to penetrate the narrow lanes of Tier-2, Tier-3 cities because of their high cab fares.
So, it doubled down in these cities.
What helped Rapido was that both Uber and Ola were distracted at the time focusing on their food delivery businesses.
And now with bike taxis legal, and Rapido introducing autos, it has managed to bag an 18% share of the ride-sharing market.
The other Uber-Ola competitor that has emerged is BluSmart Mobility, an electric taxi service.
Though it hasn't captured much of the market, it could poach a large number of Ola and Uber drivers.
Ola and Uber have increased the commissions that they take from drivers to make up for Covid losses.
This, the rising cost of fuel and the costs of maintaining cars, left drivers with little money. So, many had to resort to tactics like not turning on ACs during rides.
These drivers could turn to BluSmart, which provides drivers with EVs.
Though this increases its initial burn, it keeps drivers happy.
What’s more, this is also great for customers.
Because BluSmart takes away a major pain point for drivers, it adds a caveat – they can’t cancel rides.
If you’re anything like us, this must be music to your ears.
And as charging cars is cheaper than fuel, BluStar can also provide cheaper rides to customers.
In a time when Uber and Ola have massively ramped fares, this could be just the incentive for people to shift.
🗯 Other Problems for Uber and Ola
Though these companies currently look like Ola and Uber’s biggest competitors, they aren’t the only ones trying to chip away at the duo’s market share.
One of the major repeating customers for ride-sharing services is office-going people.
Companies like Lithium Urban are tying up with offices to provide reliable services to their employees.
The worst part? Despite being the betaaj badshahs of the ride-share business, Ola and Uber have not been able to become profitable.
Ola still managed to become operationally profitable in 2021, but with the company bleeding executives (at least 16 top executives left the company in 2022) and shifting focus mainly on Ola Electric, the future of the ride-share business could be in trouble.
Worse still, the two companies have tried out several ways to become profitable: Ola Dash, Ola Foods, and Uber Eats.
None of these experiments has worked out.
Meanwhile, its competitors have partnered up with Swiggy (Rapido), Mahindra Logistics (Meru Cabs), and other such companies to diversify their revenue streams.
So, Uber and Ola could be in serious trouble if they don't shore up finances to fight these rivals soon.
In fact, Uber already seems to be having second thoughts about the India market. It was reportedly planning on exiting the country.
But what would the ride-share market look like without the two companies that literally created it?
Would the others ever be able to fill in the gaps left by them?
⚡In a line: Uber and Ola have ruled the ride-sharing market for ages now but they could be replaced by smaller and more agile startups now.
💡Quick question: Do you think Uber and Ola will lose their market dominance?
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