Uber vs Ola race in top gear: Who will win India's ride-hailing market?

2019 could be a year of intense corporate battles. This is the last of a four-part series and focuses on ride-hailing apps Uber and Ola

Last year, India’s two top transport aggregator companies, Uber and Ola, witnessed a slowdown in their ridership growth primarily because both cut back on rider discounts as well as huge marketing spends which goes into creating a new category of business. While this has helped both pare losses that were mounting in the initial years, 2019 will be all about increasing ridership. And it is here that Ola and Uber look set to get into a spectacular slugfest. 

The effort to increase ridership will not come only on the back of cab rides, the demand for which is limited to the big cities, but on a diversified portfolio of products such as two-wheelers, three-wheelers, cycles and experiments with new services like buses for both intra and inter-city transportation and e-vehicles.

A senior executive of one of the companies asserts that the growth will come from offering value to customers rather than unleashing a price war.  

Says Pradeep Parameswaran head, India and South Asia, Uber Technologies Inc: “We will not be offering cars at the price of auto rides, but offer them as a value preposition.”

However, this is not the only arena where the two rivals will compete. A more intense battle could be brewing in Uber and Ola’s food delivery business with Uber Eats adding 100 new restaurants to its roster every day and Ola having acquired Foodpanda last year. While it is a crowded market, analysts say that food delivery has caught on in Tier-1 and Tier-2 markets. And both sides are pumping in big bucks to develop this business in cities across the country.

When it comes to increasing ridership, the rivals have a common game plan. Both are looking to expand their foot print to more cities. 

Uber is planning to go from 34 cities to over 50 cities in India by the end of the year.

As for Ola, while it will continue to expand within the country, its founder Bhavish Aggarwal is also focussed on grabbing markets overseas. The company has already gone to the UK, New Zealand and Australia. The next stops will be cities in Europe, West Asia, South America and parts of Africa. In most of these areas, its main rival will be Uber. 

Some say that Ola’s strategy of expanding to other markets to increase its valuation with global investors while having only scratched the surface of the huge Indian transportation opportunity may backfire. But on the other hand, it could also turn Ola a major global player in the business. 

The company has, of course, streamlined its business last year by shutting down its bus service Shuttle and bike-sharing service Pedal and moving its focus away from its content and entertainment business Ola Play.

2019 could also see both companies experimenting with other modes of transportation such as intra-city bus services. 

“It all depends on the Motor Vehicles Act which is pending in the Rajya Sabha. There is hope that the Act will make it easier for these firms to get into the public transport domain. Ola and Uber are planning to either partner with major local bus transporters or make small multiple investments in these companies,” says a source. Those in the know also say that both companies have collectively kept aside more than $150 million to increase their reach through public transport. 

Electric vehicles could be the other area where both Ola and Uber may wish to foray into. Ola is already working on prototypes of electric two-wheelers which they might get OEMs (original Equipment manufacturers) to make. Uber, which has bought electric bike sharing company Jump, could also bring these two-wheelers into the country to push the e-vehicle side of their business.

Clearly, to sustain and grow their businesses, develop new technologies and push multi-modal transportation solutions, both Ola and Uber will need more investments. Uber is working on its global IPO and it is obvious that a substantial portion of the resources will be funnelled into India. Ola’s Aggarwal, too, has begun the year by announcing plans to raise $100 million from ex-Flipkart partner and close friend Sachin Bansal and will surely scout for more money.    

Last year there was speculation that Softbank, which is a common investor in Ola and Uber, could broker a merger between the two. However, the rumours have died down now that Uber is going for its IPO. 

Uber Chief Executive Officer Dara Khosrowshahi has made it clear that the company has a long term bet in India and that will not change.  With only 2 per cent of the urban transportation ridership market currently with the aggregators, the size of the potential market for the business in India is huge. It is safe to say that in the coming days, both Ola and Uber will go all out to corner as much of it as they can. 

Series concludes. Here are the remaining three parts of the series:
1. Jio vs Airtel vs Voda Idea: 2019 rings in a year of intense telecom battle

2. Corporate wars: Netflix, Prime in tussle to expand, show original content

3. Regulatory challenges in India bring Amazon, Walmart into unlikely alliance