urban transport

How Uber had to fundamentally change itself to be a player in India

The way the cab-aggregator works in its fastest-growing market is very different from its model in the West.

Indian roads are not the same as those in the US in many senses, and Travis Kalanick knows it.

So Uber, Kalanick’s company, which is headquartered in San Fransciso and championed the “gig” or “sharing” economy in the West, has charted a different path in its fastest-growing market.

For one, drivers associated with this cab-aggregator don’t just perform gigs – short-term contracts – and assets aren’t literally shared peer-to-peer. After all, car-ownership patterns vary in India. Consumer perception of Uber and other ride-hailing services, too, is different in India. Kalanick’s dream of making car ownership a thing of the past, thus, may not materialise in Asia’s third-largest economy.

India is, however, key to Uber’s future, especially at a time when the firm is bleeding billions of dollars globally, and growth in the US is tapering. “India is a global priority market for Uber and our second-largest after the US in terms of [the number of] trips,” an Uber spokesperson told Quartz in an email.

Thus, to grow in the country, the world’s most-valued tech startup has also had to introduce a number of India-specific initiatives, making Uber India a very different animal.

The sharing economy

Uber in the US is part of the sharing economy, “an economic model in which individuals are able to borrow or rent assets owned by someone else,” as Investopedia defines it. This peer-to-peer sharing has been also adopted by many other new apps in the world, such as AirBnB, Lyft, Kickstarter, and Taskrabbit, among others.

But Uber India hardly conforms to this definition.

In the US, many Uber drivers – as also those associated with other cab-hailing apps –work part-time driving their private cars. “For instance with Lyft, I’d guess that some 85% are driving part-time,” explained Arun Sundararajan, a professor at New York University’s Stern School of Business.

In India, Uber drivers work full-time. And private vehicles cannot be used as Uber cabs unless they secure a transport vehicle permit (some cities in the US require this taxi registration, too.)

“I’d imagine that the feature ‘I am re-purposing an under-utilised asset to make a little extra money’ is more prevalent in the US and Western Europe than it is in South America or Asia,” Sundararajan, author of The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism, said. “Part of this has to do with the fact that the labour arbitrage opportunity in Asia and South America is less.”

Since most drivers in India typically don’t own cars, they must buy one or drive someone else’s vehicle. Now, buying a car implies substantial capital investment. Both Uber and Ola have tied up with banks and auto-companies to finance those looking to buy cars to join their platforms. This means the drivers don’t get to keep all the money they make; a significant chunk goes towards repaying loans. “It’s not a capital-light business (in India),” Bloomberg columnist Andy Mukherjee wrote on March 8.

On the other hand, Americans are more likely to be car owners in general, which means more of them can drive for Uber without having to spend on a new vehicle. They simply use an existing asset to earn, which is one definition of the “sharing economy.”

Who owns the car?

Often, drivers in India work for bigger transport contractors. A good number of Uber drivers in New Delhi do. Transport companies own the vehicles and the drivers associated with them use the Uber app.

Here’s how their incomes differ from those who own their vehicles.

According to the drivers Quartz interviewed (in 2014), when transporters own the vehicles, the driver is paid between Rs 8,000 ($130) and Rs 11,000 ($180), while the owner keeps the remaining earnings. An uberBLACK driver who owns his car earns between Rs 80,000 ($1,400) and Rs 120,000 ($2,000) in a month after paying 20% of his earnings to Uber as a technology and service fee.

In the US, such arrangements are rare and most Uber drivers only complement their main incomes, research has shown.

Another concern is that Uber’s leasing platform, Xchange, is aggressively leasing cars to drivers in India and abroad without focusing on their creditworthiness. In India, particularly, there’s no system to keep a credit score, which is worrisome. “To us, creditworthiness is not a criterion, our goal is to give out leases and give out cars to as many people as possible,” Uber India president Amit Jain told the Financial Times newspaper in August.

Cash culture

The biggest country-specific initiative Uber introduced in India, though, was to accept cash. It stemmed from the Reserve Bank of India’s two-step authentication process required for online transactions. While Uber tackled this by tying up with mobile-wallet Paytm in May 2015, it eventually found a better alternative: cash payments.

“As we look to expand operations in India, we have understood that cash payments will be a crucial factor in driving that growth,” an Uber spokesperson had told Quartz then.

This option was tested in Hyderabad – the first such experiment globally – and soon taken to other countries, like Kenya and Vietnam. The number of first-time Uber users spiked after the cash payment option was launched.

Only in India

Uber has also introduced other unique features in its India operations.

In February 2015, it rolled out security measures following instances of rape and sexual assault cases being filed against drivers associated with it. This included a panic button and a tracking feature, a global first for the company.

Last March, it set up a research and engineering unit in Bengaluru, its first in Asia. The centre focuses on innovation customised for the Indian market.

Uber launched the “Dial a Uber” feature in August 2016 for those not using the app. This feature lets customers register on the Uber website with their phone numbers and hail a cab. It also started a referral system called UberDost where individuals can refer Uber drivers and earn money, another India-first initiative.

Regulations, too, have forced Uber to tweak policies. For instance, it had to urge its Delhi National Capital Region drivers to switch to CNG fuel following a December 2015 supreme court directive. The company also had to control surge pricing during peak hours as per local laws. Fares are now always within the government-prescribed limits in Delhi and Bengaluru, yet dynamically priced, an Uber spokesperson said.

Finally, India’s aspirational society makes it a unique market. A research report released by Swiss investment bank UBS earlier this month said apps like Uber and Ola won’t deter Indians from buying their own, private cars. For, in India, the cost of these services is similar to that of owning a car, which is also strongly associated with social status.

Talk about different hemispheres.

This article first appeared on Quartz.

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Advice from an ex-robber on how to keep your home safe

Tips on a more hands-on approach of keeping your house secure.

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Here are the videos of 3 reformed robbers talking about their modus operandi and what discouraged them from robbing a house, to give you some ideas on reinforcing your home.


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