1Q17 witnesses cab industry's tug of war between growth and profitability: report


The year has been an interesting one for the cab industry, both in the domestic and international markets. On the domestic front, the year started with the Karnataka government raising objection to Ola Share and Uber Pool, and labelling them illegal. After the cab aggregators crossed that hurdle, they were left to deal with the pushback from the drivers on their incentives.

The driver strikes and pushbacks have cost the cab aggregators their supply. A report published by consulting firm RedSeer states that there was a five-percent decrease in the overall cab bookings in the first quarter of the year.

The quarter witnessed a marked stagnation in consumer demand as well.

The report suggests the reason for this decline to be:

  • A crunch in supply caused by the driver strikes across major cities in January and February – the report marks a 10-percent drop in the number of working days and months, especially from the fourth quarter of last year.
  • Interestingly, there also was a marked stagnation in consumer demand as well.
  • While there was a drop and decline the report also points out that there was an improvement in terms of unit economics due to the drop in driver incentives.
  • Delhi and Bengaluru were the cities with the lowest working days.
  • The report notes that the drivers who left the platforms shifted to other driving jobs or changed their professions entirely.
  • But due to lower fares and better convenience, car pooling showed grew by nine percent in the first quarter of the year.

However, despite the supply crunch and a stagnation in customer demand, and even a reported increase in ETA (Estimated Time of Arrival), the customer satisfaction index remained high. It is a good thing that the cab aggregators have chosen this year to strengthen their positioning in terms of unit economics.

The regulatory war is something both Ola and Uber are still handling, and the driver unions continue to lobby against the cab aggregators, while both the taxi giants themselves are fighting each other. Adding to the mix, many believe that the need for a 'transportation solution' in India is high.

Indonesia-based Gojek and Grab Taxi have already ramped up their India R&D centres. Neither intends to start operations in India at the moment, but only time will tell if Asia has a different battle to fight. Additionally, there are speculations of Didi and Gojek entering global markets with their recent rounds of funding.