Global taxi hailing app Uber recently shut down its UberAuto business it launched seven months back thus raising questions on the viability of the auto aggregation model. However, leading auto aggregators Jugnoo and AutonCab have a different story to share.

According to these two players, also the early movers in this segment, the auto-aggregation model is here to stay and things are only going to improve.

 Samar Singla, founder of Chandigarh-based Jugnoo, “It’s a victory for us that a global player couldn’t succeed in the game that we have been leading for months now. It also validates the fact that the company (Uber) was unable to understand the regulated auto market. They are good at taxi business and auto is a very local business and is unique to India.”

 Singla is very optimistic about the auto market, which is pegged at $12 billion with about 30 million vehicles and is growing at 10 per cent annually. Compared to this the taxi market is at $6 billion with a mere 2 million cabs.

Auto is a very low ticket size but volume driven market, Singla said adding that an average ride would cost Rs 60-70 compared to Rs 150 for a taxi ride.

Jugnoo’s founder said it has understood the problems and challenges that exist in this segment. His company is planning to double its presence in about 40 cities by mid next year.

Aaditya Goyal, Co-founder at AutonCab said that though many have dubbed auto aggregation as an unviable model, they have not realised the volumes it generates.

Jugnoo, a year old start-up with a 40-member team consisting of IITians and IIMs, has so far aggregated about 3000 autos. It claims that an auto driver is doing 20 rides on its platform at present as against 5 rides a year back. The company has so far raised $9 million and is in process of raising a Series A round soon.

Similarly Delhi-based AutonCab, which also launched around the same time as Jugnoo, does about 15 rides a day per auto. The company has already aggregated about 2500 autos in about 5 cities including Jaipur and Gurgaon. 

The margins are also high in the auto business, Goyal said adding that they charge 10 per cent commission from the auto drivers per ride. Ditto for Jugnoo.

Singla of Jugnoo meanwhile said that the company has started making money per auto. He, however, refused to share the margin numbers. But as per market experts, each auto will start fetching money in about 3-4 months after getting on the platform.

However, not everyone is reaping benefits out of this segment.

In the last one year, many other startups such as  mGaadi, Telerickshaw, autowale alongwith taxi-hailing app Ola entered this fairly new segment. According to sources, mGaadi and Autowaale are on verge of shutting down while Ola is struggling with the same.

Many have argued that there are regulatory hurdles in aggregating autos, and fundamental flaws from the customer point of view.

Harish HV, Partner, Grant Thornton, said, “Aggregating autos is a challenge, as they are mostly regulated by the State government and are limited in numbers. This poses a big difficulty in scaling up as everybody is trying to aggregate the same auto.”

But Goyal of AutonCab is of the view that autos are regulated mostly in metros where they run on meters but the opportunity is vast in smaller tier 2 cities where there are lakhs of autos and they do not run on meters. Thus aggregation model provides a standardized pricing for consumers and also they get rid of rejection, a phenomenon now bothering consumers both in metros and smaller towns.

"We are witnessing a huge demand in the small towns where taxis are yet to make their presence. We are doing about 1 lakh rides a month in a city like Jaipur. It’s a great volume," Goyal added.

The plan is to tap the large middle class section of the society who would prefer auto over cab as they are cheaper, he said.

Ola, which launched its auto service this year, has already aggregated about 60,000 autos across 5 cities, but according to sources it does one or two rides a day.

"There is also a problem from a brand perception point of view. An Ola or Uber user will always go for a taxi. We are an auto company," Singla said adding that the company has a very miniscule burn rate that is helping the company to make money.

According to industry sources, Ola is spending $1 million a day to incentivise the auto and taxi drivers.

Launched as a cash-only service based on government approved metered fare, Uber had not extended its service beyond Delhi, whereas Jugnoo, and AutonCab are taking payments through mobile wallets thus making it easy for the drivers to transact

The auto aggregators are targeting the students, working professionals and masses that are dependent on public transport for their daily conveyance. 

 

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