NEW DELHI: Pragya Kapoor, 25, a New Delhi resident currently studying in Hong Kong, uses the city’s robust transportation system usually. However, when he hops to mainland China, he prefers taking an Uber or Didi Chuxing to commute. But now, Kapoor says that app-based taxi services have become expensive than before.
Echoing the problem, China’s official news agency Xinhua has already slammed Didi for “capricious” price rises, suggesting that its acquisition of Uber in 2016 has resulted in a monopoly of the market, as well as making charges more opaque.
Back in India, cut-throat competition between home-grown Ola and Uber has made taxi rides cheaper than ever. Oftentimes consumers end up paying less for an air conditioned taxi than they would for an auto-rickshaw ride. The high competition also prevents players from raising prices too high. But, when there’s only one option around, that won’t be the case.
If recent reports are to be believed, the joy ride for Indian consumers might be over soon with a possible merger between Ola and Uber underway, mediated by common investor SoftBank. The Ola-Uber merger rumours gathered momentum when Uber announced its exit from Southeast Asia, after selling its local unit to competitor Grab for a 27.5 per cent stake in the rival firm.
It is worth noting that SoftBank is the single largest investor in Didi, Ola and Grab, and has played a major role in mediating the last two deals, which were also seen as an exercise by Uber to cut down losses and focus on core markets. Rajiv Misra, CEO of SoftBank Vision Fund has stated recently that Uber should focus on recovering its market share in the US and growing in key European markets, to have a faster path to profitability.
The Silicon Valley firm reported a 61 per cent increase in losses at $4.5 billion last year, up from $2.8 billion in 2016.
And until now, India remains a huge loss-making market for both Uber and Ola. For consumers, any merger will create an effective monopoly in the market — meaning that even if the fares are hiked, they won’t have many options but to pay up. While a section of section of consumers might abandon services and move back to cheaper options, a large number of driver partners could also leave the platform with an over-supply of cabs in metro cities currently.
Even if the two firms don’t merge, a fare hike should not come as a surprise as the duo have already taken down driver’s benefits to such a level that protests have begun erupting regularly. While drivers are demanding fare hikes, it is not their struggle that would impact consumer rates.
A leading investor says that businesses run on the principle of making profits and the two firms have reached a point where they can afford to increase fares separately (if they form a cartel) or jointly, and not lose many consumers.
However, neither firm has confirmed merger reports yet and Uber chief executive Dara Khosrowshahi has even said that the company would like to control its destiny in India rather than the other way round.