Bike taxi startups think out of the box to succeed in a tough regulatory environment, but for how long?
Bike taxi startups in India haven’t had it easy.
From a lack of clarity on laws governing bike taxis to occasional crackdowns by regional transport departments, amid rising competition, there has been no dearth of challenges for Indian startups offering bike-hailing services to sustain and scale their businesses.
And yet, bike taxi startups have found unique workarounds to address many of these challenges, from pivoting to a hybrid model that includes offering hyperlocal delivery services, to operating white-plated private vehicles in the face of regulatory uncertainty over the use of bikes for commercial use.
In particular, the rules governing private vehicles under Section 53(1) (b) of the Indian Motor Vehicle Act states that private vehicles – or vehicles with white board licence plates – can have their registration suspended if used for “hire or reward without a valid permit for being used as such”.
Earlier this year, regional government transport officials cracked down on bike-hailing services startups by seizing the vehicles of several bike taxis, accusing them of operating illegally. State traffic authorities of Karnataka, Maharashtra, Tamil Nadu, some parts of Andhra Pradesh, and even Madhya Pradesh have deemed bike-hailing as illegal.
But startups believe the service cannot be deemed illegal due to the absence of any specific legal prohibition within the Motor Vehicle Act against private bike owners sharing their pillion seat with customers.
For example, earlier this month, the Madras High Court stayed an earlier order that had banned the operations of bike-taxi operator Rapido, until the state government formulates legislation to regulate the service.
The Motor Vehicles Act mentions that other than government-registered yellow-plated vehicles, white-plated private vehicles cannot be used for plying passengers. While the provisions extend to bike rentals, there is no mention of bike-hailing, car-pooling, or delivery of goods via bikes.
Pivoting beyond bike taxi services
Many startups like Baxi and Mtaxi have unsuccessfully tried to break the legal Gordian knot.
Baxi has, in fact, moved into a hyperlocal delivery model and pivoted to become Baxi Fresh. Baxi was one of the first players to seek permission from the government to offer bike-hailing services, but when its vehicles were impounded, the company pivoted to a hyperlocal delivery model. Mtaxi, on the other hand, while running bike-taxi services, is believed to be doing so, haltingly.
“Baxi was the first company in India to get legal permissions to run bike-taxi services. At that stage, with two-wheeler driving being one of the most abundant skills in India, it seemed like the perfect match for the huge demand for cheap last-mile connectivity in the country,” Ashutosh Johari, Co-founder, Baxi Fresh told YourStory in a recent conversation.
However, it wasn’t long before Baxi ran into legal hurdles too. “Indian Motor Vehicle rules did not permit commercial use of bikes as taxis,” says Ashutosh.
Regulatory challenges for bike taxis
These regulatory hurdles are also one of the main concerns hampering funding and growth of these startups. So in order to survive, bike taxi startups find themselves having to work with both white- and yellow-coloured licence plates, based on the state they’re operating in.
For example, in states where bike-hailing services are deemed legal, startups register and use yellow-plated bikes; however, in other states like Tamil Nadu and Karnataka, where there are no clear regulations governing bike taxis, startups are operating private vehicles with white-coloured plates.
“Bike-hailing doesn’t fall under the Motor Vehicles Act. A regular consumer vehicle cannot ply as a transport service,” says an official in the Bengaluru RTO.
Even in cities like Jaipur, Hyderabad, Ghaziabad, and Gurugram that allow bike-hailing services, the legalities and ease of operating bike taxis are different. Getting the yellow-plated vehicles in legal states is a time-consuming process.
“While in Jaipur it is all done in 16 days, some other states take close to six months. The only way we can run operations is by working with what is available,” says a highly placed source in one of the top three bike-hailing services.
How bike taxis work
To be clear, bike-hailing services work like cab services. Customers can book a ride on the app, and a rider who is registered with the service comes to the pick-up location and drops the customer off at his/her destination point.
Bike taxis differ from the dockless and docked scooter-sharing startups like Bounce and Vogo, where a scooter is unlocked with an app and the customer rides the bike himself or herself.
While there are about five million taxis operating in India, a Credit Suisse report adds that there are about 155 million two-wheelers running in India. Many startups offering bike-taxi services have had to survive in a tough operating environment, with some like Zingo, Dot, TuWheelz, Headlyt, and Rideji forced to shut operations.
“There is little choice. In order to survive, many of the well-funded players and startups chose to push out the white-plated vehicles and get the everyday consumers and scale. There is a genuine need of bike-hailing with growing congestion and traffic problems,” says the founder of a bike-taxi service, speaking on the condition of anonymity.
Traffic congestion in the metro cities alone – i.e., Delhi, Bengaluru, Mumbai, and Kolkata – costs the Indian economy nearly Rs 1.5 lakh crores annually, according to a study conducted by a global consultancy firm.
With two-wheelers accounting for the majority of vehicles produced in India, accessibility and affordability of these vehicles are easiest, providing greater opportunities to scale. Over 20 million two-wheeler units were sold in the country in the year ended March 2018.
The bike taxi startups
By far, the largest player in the bike taxi space is Rapido.
“Rapido has been able to create a Uber-like habit-forming behaviour. That is possible by consistency of service. When Uber was started, the idea was that people need to stop owning cars, while Rapido is about using easier commute for shorter distance. There is a need, and hence, the average of booking a ride is higher with Rapido,” says Aman Kumar, Co-founder, Kalagato.
According to the data analytic firm Kalagato’s report, Rapido’s daily average ride value was Rs 36 as of March this year. Uber, which includes even cars, was at Rs 207, and Ola’s was at Rs 200. Interestingly, the ride-hailing frequency of Rapido was 2.59 times in a month, close to Uber’s 3.42 times a month.
In the three years since its launch, Rapido has recorded two million app downloads on iOS and Android, and is operational in 16 cities from metros like Bengaluru and Gurugram to smaller towns and cities like Mysore, Patna, Madurai, and Indore. It has 5,000 daily drivers and 10,000 monthly drivers or “captains”, including women.
For any private bike owners looking to register themselves as a Rapido Captain, all they need is a two-wheeler licence, a bike above 100 cc (any model introduced after 2004), a vehicle registration certificate, and bike insurance.
In an earlier conversation with YourStory, Aravind Sanka, Co-founder of Rapido, says, “It definitely isn’t an easy job. Operating and convincing regulators of the workings and benefits of bike taxis is a continuous process. But there have been shifts and changes since the beginning of this year. Since the central government has requested the state governments to legalise bike-taxis, the task is becoming easier.”
Navigating the regulatory hurdles
To be clear, the tussle with the regulators has been on since March 2016. The two market leaders - Ola and Uber - had both launched their bike-taxi services, uberMOTO and Ola Bikes, but had to shut the bike-hailing operations with immediate effect.
Regulators in Karnataka had deemed bike-hailing services as illegal. But the two unicorns, nevertheless, started operations in Hyderabad in 2016, where bike-hailing was made legal by the government.
They also launched in Jaipur, Chandigarh, and Gurugram, where the governments have made it easier for bike-taxi startups to operate in.
However, cities like Bengaluru have made it tough for scooter and bike-sharing startups to operate. In 2018, when Ola Bikes tried to launch its services in Bengaluru, the government again called the services illegal and halted its operations immediately. Despite this, Ola still has plans of launching its services in Bengaluru.
To be clear, bike-hailing services startups believe they should not be treated any differently from hyperlocal logistics firms.
One source at a bike taxi startup argues, “If you take the official argument, even food and goods shouldn’t be delivered with bikes, but then the food delivery players and ecommerce players did it. That market grew and became big, and the authorities didn’t have much of a problem. In bike-hailing, the segment is just picking up and hot. There is little understanding and hence the need to control it.”
Indeed, while bike taxis may be the solution to urban India’s last-mile connectivity woes amid rising traffic congestion levels, there’s much work to be done on the regulations governing bike-hailing services before these firms are able to scale and grow to their full potential.
As a lawyer, who works for a bike-hailing service company, said on the condition of anonymity, “While the law does talk about the use of a yellow board for commercial purposes, bikes aren’t yet a part of the Motor Vehicle Acts. We are hoping the shift will happen (in regulations), making it easier (for bike-taxi startups) to do business.”
(Edited by Tenzin Pema and Teja Lele Desai)