It’s a great time to commute via cabs in India.
After focussing on discounts and cash-back offers for several years, India’s leading online cab aggregators, Ola and Uber, have in the last few weeks introduced new features to woo customers.
Earlier this month, San Francisco-based Uber launched a new version of its mobile app that now includes elements inspired by the Indian market. Among other things, it now globally allows commuters to find shortcuts and compare fares between the different cab categories on offer, such as UberGo, UberX, and Uber Pool.
Just a few weeks after Uber’s announcement, homegrown unicorn Ola launched an in-cab entertainment service called “Ola Play.” It lets commuters watch videos and control the music played in the vehicle through Ola’s mobile app. The company hopes to add more features such as temperature control and shopping.
“I believe this will completely transform the consumer’s ride experience… and usher in a new era in the ride-sharing industry,” Ola co-founder and CEO Bhavish Aggarwal said while launching Ola Play. “This will further propel ride-sharing as the first choice of mobility for many more millions,”
However, that may not really happen.
Price-sensitive Indians have so far embraced internet-based businesses like e-commerce and ride-hailing due to the deep discounts and cashbacks that companies offered. If discounts vanish, consumers may follow.
On an average, Uber and Ola currently lose around Rs 200-Rs 250 per ride because of discounts and driver incentives, according to Valoriser Consultants, a firm that provides research services for transport operators.
Cab aggregators will have to stick to this trend if they wish to stay in the market.
“Prima facie, it does not seem that customers will be able to differentiate between different players (just because of some new features),” said Jaspal Singh, co-founder, Valoriser Consultants. “The market is price-sensitive. There will be a definite decrease in the number of rides if prices are increased…currently, 85% of the taxi business is from the economy segment.”
Discounts versus affordability
Being affordable will remain a key factor in India, admitted Christian Freese, Uber general manager, Bengaluru.
“I don’t think launching new features alone will help. Price will always be a big, big part of what we are trying to do,” said Freese who recently moved from Germany to India, the company’s second-largest market after the US. “Being affordable is also a part of our vision.”
Ola did not respond to an email from Quartz.
Freese, however, believes taxi aggregators may not have to continue subsidising customers forever. “As utilisation of cabs improves, there will be no need to subsidise because the cars will start making money on their own,” he said.
This article first appeared on Quartz.