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Drivers get a rough ride as cab aggregators hit the brakes on incentives

Venkatesh Ganesh Bengaluru September 20 | Updated on January 10, 2018 Published on September 20, 2017

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Ola, Uber reduce driver incentives by 30-40 % in March quarter

For Seenu, 33, a taxi driver with cab aggregator Uber, who lives in an apartment in Huskur, almost 19 kilometres from the heart of Bengaluru, the last few days have been an ordeal. He has been struggling financially — trying to pay off his car loan as well as the ₹3,000 in rent. “The cost of the car is ₹8 lakh, and if I earn ₹1,000 a day, ₹300 is commission (to the ride-hailing companies), another ₹300 goes in fuel and the remaining is pointless,” he said.

Initially, when ride-hailing services started, drivers could earn at least ₹70,000 a month and get car loans at a time when they had a very less chance of obtaining a loan. So the higher the number of rides, more the money a driver made, which in turn ensured that drivers didn’t feel the pain. But now things have started changing.

Rides have come down to some extent and along with it, the incentives paid by the ride-hailing companies. Ask Ravinder Singh, a driver attached with Ola in Faridabad. “I upgraded my car from Indica to Swift Dzire, thinking I could earn ₹1.5 lakh. For six months, I got rides, after that...,” he said, leaving the apparent outcome unsaid.

Drivers like him and others are seeing their incentives cut 30-50 per cent as cab aggregators start to feel the pinch of subsidising rides and start looking at profitability. While there is no number available on driver attrition, industry watchers peg it at 15-20 per cent.

According to a recent report by research firm RedSeer Consulting, Ola and Uber have reduced driver incentives by 30-40 per cent in the quarter ended March 2017 and have simultaneously increased the minimum number of trips drivers need to complete to avail themselves of incentives.

To receive them, Ola drivers need to make in excess of 12 trips a day and Uber drivers at least 8, which does not include peak-time rides, according to sources.

After implementing the cuts, Uber India chief Amit Jain had written a blog post defending it and said the company can now shift from start-up mode to a more sustainable business model. “Incentives were the hook to catch drivers, but it can’t last forever,” said a former CEO of a ride-hailing company.

Ola officials did not respond to a request to comment. Uber disagreed with the stance. “There has been a 60 per cent year-on-year increase in driver sign-ups,” said a company spokesperson, adding that 80 per cent of drivers across India who are online for more than six hours a day make ₹1,500--2,500 net, after deducting service fee. These changes have aggravated the pain and angst in the system and a large number of cab drivers are surrendering their fleet or are unable to make monthly payments. Cab drivers say around 13,000 Ola and Uber cabs were repossessed in the outskirts of Bengaluru.

Lending on hold

Banks have reacted by putting lending on hold. “Earlier, we were set specific sales targets to lend to (cabs) entrepreneurs. Now, we are in the lookout to repossess these vehicles as payments have stopped,” said a senior official from Canara Bank. In May, SBI suspended car loans for Ola and Uber taxis across multiple cities, in response to increasing defaults by drivers.

It is learnt that Uber had planned to buy 15,000 new cars last year and lease them to driver entrepreneurs. Additionally, ride fares on an average have risen from ₹1 to ₹-1.5 per minute.

Published on September 20, 2017
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