BENGALURU: Workers of the world unite was the clarion call of Karl Marx and Fredrick Engels in the Communist Manifesto against their oppressive industrial masters.
In Bengaluru, Uber and Ola cab drivers have sounded a similar war cry against big cab aggregators by making plans to launch their own aggregation app and organising themselves into a collective to work for their welfare. However, as noble as these measures may sound, will they work, at all?
Experts in the field are highly skeptical. First of all, the Olas and the Ubers have a war chest of billions of dollars and unparalleled technical knowhow. There is also the huge brand value that they already created in the market.
Much has been said and written about the numerous benefits that the drivers’ collective has recently announced. Similar to a regular company, benefits such as life insurance for drivers, medical insurance for their kin, car insurance and so on have been envisaged. Former Chief Minsiter H D Kumuraswamy has also announced an investment of up to `50 crore in this venture. The app is thus named 'HDK app' after him.
Insufficient Funding
Archana Priyadarshini, Venture Partner at Unicorn India Ventures, that invests in and consults early stage startups and businesses, says that the entire idea sounds very “utopian and unlikely” to work.
“The `50 crore investment is peanuts when starting anything of this sort. With this, they might even begin and function for some time but in the long run, it will be very difficult to sustain. They could manage a fleet of 500 to 1,500 cabs for one or two years but there are around close to 40,000 cabs according to new reports. This amount is highly insufficient for this number,” she says.
At least 10 per cent that will be charged from drivers as commission – that will, in turn, go into their welfare and the car’s maintenance. Archana says it will be difficult to ensure quality customer experience with this revenue model.
“With just 10 per cent commission, running the daily operations while ensuring quality also looks like a bit of a stretch,” she adds. Then there is also the heavy discounts and concessions that the big aggregators can dole out, Archana says.
This despite the fact that drivers have made it clear that the venture will not be for profit. Tanveer Pasha, president of the Ola, Taxi For Sure and Uber Cab Driver’s Association also points out that they are trying to find other sources of revenue from advertisements and tie-ups.
Prof Mukesh Hegde, dean (Entrepreneurship Development), Xavier’s Institute of Management Entrepreneurship and mentor at IIM Bangalore’s N S Raghavan Centre for Entrepreneurial Learning points out that by the time this driver’s collective brings out its app, the big aggregators would have attracted the drivers with big incentives just like in the early days.
“Despite the 25 per cent commission charged by aggregators from drivers, they still have not broken even. So for the drivers to make this to even work will require more money,” he says. He instead advised that the drivers association should team up with other cab services such as the KSTDC or Meru cabs to ensure more reach and benefits.
Pricing Most Crucial
Both of the above experts, however, agreed that pricing could be the biggest factor. Many people are already weary of the various charges such as surcharge amounts levied by the big aggregators. “For a start the charges of the drivers’ collective looks transparent,” says Mukesh.
The new app will have one fair depending on the kilometer traveled. Pasha says It will be between Rs 10 to Rs 14/ per kilometer depending on the vehicle. There will be no surcharge pricing.
Archan opines that if the prices are competitive then only will this work. “However with the limited finances they have, it looks unlikely that they can compete,” she says. Tanveer Pasha, president of the Ola, Taxi For Sure and Uber Cab Driver’s Association says that if one sits calculates the actual fares charged by the aggregators, they actually work out quite costly (see box)
Others like Srihari A, director of an investment consultancy company says that if all the drivers are united, this is a feat that can actually be pulled off. “Since the set up is not for profit, I think the 10 perc ent might just take care of the operations. Although the business model of this driver’s collective is still emerging as of now if 45,000 drivers go to this new platform as claimed, they might actually pose a threat to the big guys,” he says. There are as many as 1.2 lakh Ola and Uber drivers in the city of which as many as 45,000 are on the road at anytime in the day. Dr Ashish Verma, Associate Professor of Transport engineering, Indian Institute if Science and a mobility expert says that any move to better the condition of drivers and prevent exploitation is good but it should not affect customers. “It can be a win win situation,” he says.