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Ride Sharing, Bus Shuttle, Auto Service to Fuel India's Homegrown Taxi-hailing App's Profits

Ola's founder Bhavish Aggarwal says company wil be profitable in the next two years.
Ride Sharing, Bus Shuttle, Auto Service to Fuel India's Homegrown Taxi-hailing App's Profits
Image credit: Bloomberg

SoftBank-backed India’s biggest cab hailing company Ola has claimed of nearing profitability on the back of improving market share in the intense $12 billion cab hailing market in which it has locked horns with much deep pocketed rival Uber. Bhavish Aggarwal, Ola’s co-founder and chief executive officer at the India Internet Day hosted by TiE Delhi NCR said, “We will continue to lead the market share. We have a clear path to profitability as we have managed to improve our market share and also the bottom line. We should be profitable in the next two years.”

He elaborated that Ola’s ride sharing, bus shuttle and auto booking are among the emerging revenue verticals even as it aims to increase the number of its driver ‘partners’ significantly. However, Aggarwal didn’t divulge the revenue contribution from each of the verticals. The major chunk of Ola’s revenue, between 70-80 per cent comes from its low-priced services including Micro and Mini.

“There will be few millions number of drivers partnering with us in around next two years from the current around five lakh. For next two-three years I am completely focused on increasing value for both - on the supply and the demand side of the business,” said Aggarwal

Aggarwal, in between, opined the four biggest trends globally that’s disrupting the way people commute locally which includes, ride sharing, electricity as the preferred fuel type, cars that are smart and connected and lastly moving towards autonomous vehicles. While the first three are starting to get some attention, the idea of self driving cars doesn’t sound convincing to Aggarwal.

“I think the concept of autonomous cars is the most overhyped and least important one. When it comes to ride sharing, people in India are increasingly using it but it is nothing when compared to other countries.” Aggarwal stated the use case of China as leading the electric mobility system in the world where 70 percent of the electric vehicles demand in 2017 will be driven by passenger cars. The company is planning to roll out electric cars in few Indian cities as a pilot this year after Masayoshi Son, SoftBank’s Chairman stated in December last year of Ola’s plans to add one million e-cars on its platform.

Six-year old Ola pitted against Uber (that failed to crack Chinese market and gave way for local player Didi Chuxing to emerge victorious) has raised $1.56 billion in nine rounds since April 2011 from 21 investors. Uber, on the other hand has $1 billion investment commitment in India with a headcount of around 1,500 which is around five times lesser than that of Ola’s around 7,000. Uber in less than three and a half years time since its India foray has given Ola a run for their money. Ola last raised $330 million raised in February this year from SoftBank and Ratan Tata’s investment vehicle RNT Capital, as per CrunchBase data.

The Local Guerillas

Over past few months, Ola along with Flipkart and Snapdeal’s early stage investor Vani Kola has faced severe criticism for their protectionist calls to the government against unbridled investments made by Amazon and Uber in their Indian units.

While critics have questioned the ‘Indian-ness’ of Ola and other companies like Flipkart and have blamed them as cry babies for their own business inefficiencies, the larger area of focus however has remained unanswered and neglected. It, too a decent extent, doesn’t sound grossly unjust in seeking level playing field as the point is about limiting money raised by these Indian units from their parent companies to fund their negative gross margin sales or cash burn instead of raising money from third party investors, much like Ola and other local players.

Of course there shouldn’t be barriers to stop it but keeping in check the money invested from the profits made in their home countries will go a long way in keeping at bay any bias between what’s being Indian and what’s being foreign.

Aggarwal, nonetheless, again took a dig at Uber after last month, comparing its fierce battle with US-based global cab aggregator to the Vietnam War of 1954-75 fought between North Vietnam and South Vietnam and itself to the guerilla army. North Vietnam guerilla army won the war using conventional means and sustained efforts. Uber’s rivalry with China’s Didi Chuxing was equated with Second World War.

“The analogy that I give India is that this is like Vietnam war. We are the local guerrillas. We have the Americans carpet bombing us,” said Aggarwal, however he pulled himself back from belittling the tragedy of the bloody war that killed over three million people including civilians and army men.

“With all due respect, I am not saying it's a war-type situation, but this is corporate war and the competition between us and Uber is very intense. After what has happened in China, ride share is a very intense industry globally. There is an irrational belief that it is a winner-takes-all-business situation and there will be one guy standing in the end.”

While Aggarwal minced his words on capital dumping, he cautiously passed on the charge of taking action against it to the government without categorically denying the impact of war chest built by its rival.

“You might either call this capital dumping or you might not. The fact is money is thrown where customers get lots of discounts and drivers get lots of subsidies. It is for the relevant government agencies to decide whether capital dumping is happening and if it is happening then should it be prevented. As an entrepreneur, I am focused on my business. I am sure the government will have a look at it and decide,” added Aggarwal along with a balancing statement towards the government calling entrepreneurs as “Sometimes we don’t understand the complexities of running the government.”