Gujarat government will cap Uber & Ola fleet at 20,000 each, if a draft proposed by the state’s transport department gets a green signal. This is huge in context of the current market scenario where App-based taxi aggregators are already dominating in metros, Tier 1, and Tier 2 cities of the country. App-based Taxi Companies don’t have a long history. Uber started its operations in India five years ago in 2013. Ola – a Bengaluru-based start-up started its operation in 2010. Uber & Ola are the major names when it comes to app-based aggregators in India.
If this law comes in place then it would be interesting to see how would these giants cope with this situation? Moreover, what would be its impact on the market? And does this opens the gates for the new entrepreneurs to enter the market? In this article I’ll try my best to answer all those question and provide you with some vital insights.
Let’s have a look at the proposal. “The aggregator shall not attach more than 20,000 vehicles under one licence and only one licence shall be issued to a company or an aggregator,” this is the draft proposed by the State’s Transport Department. So, it clearly mentions that a company can’t have more than one licence and on one licence the upper limit for fleet size would be 20,000. Moreover, if any company wants their fleet size to be above 10,000 then they must pay a fee of 10 lakh and a deposit of 25 lakh Rupees.
Why Was This Draft Filed?
Uber & Ola both had to face a lot of controversies in recent past and their drivers have been involved in some heinous crimes. Shiv Kumar Yadav an Uber driver is serving life-imprisonment for raping a female passenger in Delhi in2014. Similarly, aOla driver was arrested in a molestation case in Bengaluru in 2018. And these are not the only crimes, there has been news of several such cases across the country. People often blame these companies for the selection process that they have for the drivers. There have been accusations that the drivers which they hire are not properly vetted. To introduce such draft can help the government to keep an eye on the total number employees of these companies. An official later gave a statement in which he said that this draft is proposed for the safety of the customers. The second reason could be that, with a fixed number of the drivers the company as well as the government could efficiently vet the drivers before and after recruiting them.
The other reason for the proposal of this draft could be that government wants to end the monopoly of Uber & Ola and give equal opportunities to the new entrepreneurs. There hasn’t been any statement on this and it is just a speculation. However, opening the market for everyone would mean more competitors and the competition will eventually serve the customers.
How Did Uber & Ola React to this Decision?
“We remain committed to engaging the government and working with relevant authorities to enable regulations that can enhance the future of urban mobility in Gujarat’s mega cities,” an Uber spokesperson said. There hasn’t been any reaction from the Ola so far. It would be interesting to see what new initiatives Uber & Ola takes to cope with the possible implementation of this draft. Uber & Ola are looking find a midway where it can maintain good relations with drivers as well as with the local authorities. And they have already taken some steps. Let’s look at these steps taken by both Uber & Ola.
Initiatives by Ola
Ola has launched a project named ‘Guardian’. It is a real-time monitoring system which would strengthen the rider’s safety on their platform. Ola has launched it in Bengaluru, Mumbai, and Pune as a pilot and it’s the part of their national programme on safety.
Another attempt to tighten their security came when they updated their app to include larger photos of the drivers. This would enable the users to verify the driver’s authenticity and to register complaint in case if anyone is impersonating.
To eradicate the driver impersonation further, Ola will conduct on-road audits at transport hubs such as bus stands, railway stations, and airports. Ola’s audit team will also inspect the cab’s condition along with checking the driver’s authenticity.
Initiatives by Uber
Uber introduced India’s first ridesharing insurance program in partnership with ICICI Lombard General Insurance in August 2017.
Recently, the top management of Uber Aviation Program: Eric Allison & Nikhil Goel had a chat with the Prime Minister in regards with the potentials of Uber Elevate. They discussed how new mobility platform can help to reduce pollution & congestion and thus contribute to the economy.
Impacts of the Draft on the Taxi Business
Loss for Uber & Ola?
This draft proposal must’ve been a shocker for Uber & Ola. And why not? For the past couple of years both the companies have made tremendous progress in the Metros and Tier 1 cities. If we see the numbers, then Ola & Uber has a combined fleet size of 8000-10,000 cabs in just the top four cities of Gujarat. And this number is growing at a rapid pace. In such scenario, this draft would limit their growth and profit opportunities. However, both the companies are well established and they can still stay at the top. If the draft is passed then they could keep only 20,000 cabs in the state and they already have 8k to 10k cabs together. Which means they can possibly expand 4 times the present fleet size. Moreover, it would be a herculean task to defeat these behemoths which have already won the trust of people by delivering their top-grade service.
What if Other States Adopt the Draft
If Gujarat Government rolls out this law then there’s a high possibility that the rest of the states might replicate their action. To think of it would be nightmare for both Ola & Uber, but it is quite possible due to several factors. The Gujarat State Transport has proposed this draft due to customer’s safety. And it is exactly what the government of other states would want for their people. Secondly, if Gujarat Government passes this law then there will be a huge uproar from the traditional taxi owners and they will pressurise their government to do the same as this decision can be a turning point for them.
Golden Opportunity for New Entrepreneur & Traditional Taxi Services
Introduction of this rule can be a boon for the new entrepreneurs who are trying their luck to set up their own app-based taxi system. Now, let’s see how is it possible? We discussed above that Uber & Ola can expand four times their fleet. However, we need to understand that it’s only Gujarat we’re considering. What about the states like Maharashtra which has mega cities such as Mumbai and Pune? If Maharashtra keeps a 20,000 cap then it would be a huge problem as the scope of growth in Maharashtra is way more than that of Gujarat. Continuing with Maharashtra, if this rule comes in place then there would be a void in the market which could be filled by two ways:
1. Rise of new app-based Services
Rise of new-app based services is exciting for both the entrepreneur as well as the customers. Entrepreneurs will get a better platform to launch their services. They’ve followed the Taxi Market for almost a decade and they know exactly what’s to be done. These insights could play as an advantage for the entrepreneurs and they can offer something unique to attract and retain customers.
2. Rise of Traditional Taxis
The other possibility which can fill this void is the rejuvenation of traditional taxis. If there was an entity that suffered the most due to the advent of Uber & Ola then it must be the Traditional Taxi Business. In case, this law is imposed in most of the states in India then Traditional taxis would be back in the game. And the reason is very simple, with limited amount of cabs, the behemoths like Uber & Ola won’t have a wider coverage and here’s where traditional taxis would come into the play. They can strategically identify the regions where there are less number of app-based cars and there they can provide services with competitive rates.
The draft hasn’t been passed as of now and the Gujarat Government would review and take suggestions to take the final decision. However, it is also true that since the advent of Uber & Ola in India, there’ve been a lot of uproar in the Taxi Business. From the app-based companies charging sky-high fares to strikes by traditional taxi owners against Uber & Ola, it has been a journey with lots of ups and downs.
The recent proposal could possibly an attempt to stabilise the chaos by appeasing these sections. However, if this decision is taken then it would be a huge blow for both Uber & Ola. But, both the companies especially, Uber has faced such situations many a times in different countries and have taken smart decisions to cope with it. It will be interesting to see what they do if this implementation of the law takes place.
But the most important thing would be to look out for the new entrepreneurs and services that would compete against Uber & Ola? To know that who would gain the maximum benefit of this rule and make their way to the centre stage of the Taxi Business in Gujarat as well as the India.