Dec 20, 2016 04:38 PM IST IST | Source: Moneycontrol.com

Why Uber CEO is leaving no stone unturned to woo Indians

India is the second largest market for the over USD 60 billion firm, after it exited from China, early this year.

Priyanka Sahay
Moneycontrol

On a visit to India, Uber CEO Travis Kalanick met the ‘god’ of cricket Sachin Tendulkar, schmoozed Bollywood actor Salman Khan, praised Indian weddings, had tea with cab drivers and met with the country’s President.

In a nutshell, the 40-year old chief executive did everything he could to make Indians at ease with his San Francisco-based firm Uber. Playing the domestic card, rival Ola is asking the government for protectionist measures to prevent foreign companies like Uber ‘dumping capital’ and obliterating home grown entrepreneurship.

Uber CEO went ahead to the extent of remarking (in amusement) that he would apply for an Indian citizenship, just to get over the hump to operate in India, if needed.

Why India is important for Uber

India is the second largest market for the over USD 60 billion firm, after it exited from China, early this year.

"The battle in China had become global. We had sovereign wealth of China being invested in our competition globally. We had American tech companies that were being compelled to invest in our competitor in China,” said Kalanick adding that Uber was losing USD 200 million a month in China.

In contrast, about the Indian market, he said, “We are losing in India, but we see a path towards profitability. We are optimistic that we will be here for the long run.”

According to him, the bigger thing about India is car ownership. The aim is to ensure that Uber becomes so reliable that people stop owning cars to ride on Uber.

Uber was founded in 2009 in California. Its genesis lay in a snowy Paris evening in 2008, when Kalanick and his friend Garrett Camp had trouble finding a cab. They had a chat about a wishful app where one could just press a button to get a ride.

Back in California, the duo started turning their wish into a reality. The company started off as an app providing cabs across select metros in the US. It now operates across 500 cities globally.

The taxi hailing app entered India in August, 2013, at a time when the cab hailing market was fairly nascent, being largely operated by two startups - Ola and TaxiForSure (acquired by Ola in 2015).

However, India has now surpassed the US to become world’s second largest internet market after China, with over 277 million internet users, according to the Internet Trends report by Mary Meeker, partner at venture capital firm Kleiner Perkins Caufield & Byers.

As per transport research firm Valoriser Consultants, the Indian urban transportation market is worth over USD 10-12 billion. The size of this market is lucrative enough to stay put for both Uber and Ola.

Post its exit from China this year, the entire focus of the company has shifted to India. Didi Chuxing acquired Uber’s China business in August.

In the Indian market, Didi Chuxing invested in Ola last year in the USD 500 million Series F round.

Ola is the only major competitor for Uber in the country. Smaller and existing cab service providing players such as Meru Cabs, Easy Cabs, Mega Cabs,  AHA Taxis, WTi Cabs and Savaari have either been wiped off from the consumer market or finding hard to match prices with heavily funded Ola and Uber.


(Travis Kalanick with Law and IT Minister Ravi Shankar Prasad)

"We are very excited about the future of Uber in India. With hundreds-thousands of driver opportunity and jobs we have come here with, we couldn't be more excited to serve India and to work with sons and daughters of India who run Indian operations," Kalanick was quoted after his meeting with the Law and IT Minister.

At the TiE Global Summit held last week, Kalanick added that Uber's exit from China meant that Indian drivers and riders will be served far better. At another event, he had tea with cab drivers and signed a MoU with retired Indian armed forces personnel for an alternate career choice.                              

Regulatory challenges ahead

Uber was banned in the Indian capital in December, 2014, following a rape incident by an Uber driver. The Indian authorities had rejected Uber's licence application and had started impounding its vehicles that were still plying.

Later, the Delhi High Court revoked the ban imposed by the government in 2015.

It was also on the receiving end after the state transport department found the company operating diesel cabs for point to point transportation, which is banned in the city.

Uber subsequently converted its fleet into CNG-based clean fuel. It is yet to obtain a legal permit to operate in Delhi as well as most other Indian cities.


(Uber CEO Travis Kalanick with President Pranab Mukherjee)

According to Kalanick, the firm was okay with rules as long as they were bending towards people and products.

The company also announced Uber bike taxi service, UberMOTO in Hyderabad, last week.

Uber had to shut down its bike taxi service in Karnataka last year, since the state government had no provisions for granting permissions for the same.

The country also had issues with the cab hailing firms putting surcharge on their pricing.

According to the Centre's new guidelines for taxi operators the aggregators will be allowed to charge up 3-4x of the minimum fare.

Competitor in the cab services space, Meru has also expressed its discontent. “In relation to fares we believe that the new taxi guidelines are not consumer friendly.

This could push entire market to move out of government price control and rather controlled by one or two large corporations,” said Nilesh Sangoi, CEO, Meru Cabs.

Will Ola prove to be a worthy rival?

According to reports, Ola is in talks to raise about USD 600 million for some time now.

According to multiple people, who declined to be quoted, the market share of both the firms seem to be neck and neck, giving that a majority of the business for ride hailing firms currently comes from 25-30 cities only.

“For Ola, it will help them to further expand the market. The only challenge being if it is not able to raise the next round of funding,” said Jaspal Singh, a partner at Delhi-based transportation consultancy, Valoriser Consultants.

Another challenge in the Uber versus Ola story will be the level of maturity of the business structure of a domestic firm as compared to a global player.

At a time, when an Indian player is still crystallising this model and innovating on their products, international players are customising their models to suit India. A lot of senior management time will thus be available for customer strategy.

“India is a consumption market for future. It is part of the global strategy of every international company out there. There is no captive audience of such a large population elsewhere,” said Sreedhar Prasad, Partner, at consultancy firm KPMG.

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