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Opportunity

Is India Ready To Vroom?

Even four years after its launch, the bike-taxi segment is still grappling with problems despite huge untapped market potential
Is India Ready To Vroom?
Image credit: Komar | Shutterstock.com
Former Feature Writer
7 min read

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Stuck in traffic gnarls, congested roundabout bottlenecks in the peak hours during time crunch is when people look for the fastest, alternative way of commuting. Reaching one’s destination in a cheaper and convenient manner is what matters the most. When Debvrat started his first job at a media house in Delhi-NCR area, he used to hire cabs whenever he was running late. “A major portion of my salary went on cab fares. Still,
the time taken to traverse the distance didn’t make much of a difference. I was usually late despite shelling so much money,” he says.

But with the entry of players like Rapido, Baxi, Bikxie and Pooltoo, the ride has become smoother, cheaper, convenient and faster for him. He is one of the many millennials who try to save money on their daily office travel in the era of bike-taxi. A new entrant in the ride-hailing segment, its USP of bringing the last-mile connectivity. Bike-taxis have been around in the Indian market since 2015, Rapido was the first player to launch its app. According to World Moto, the global auto-taxi market generates $500 million, accounting for 20 million bike-taxis plying on the roads. India has around 75 percent more two-wheelers than cars, which accounts for almost
300 million two-wheelers. There are 150 million onroad two-wheelers in India with 16 million growing on an annual basis. If only 10% of the running bike riders opt to ply as bike-taxis, then Indian market
could be estimated at a whopping $38 million.

This figure is accrued, considering that only 10 percent of the market potential is explored. The  existing infrastructure should be strong enough to tap the prospective consumers. But the scenario is fairly skewed in this respect. In other Asian countries, the concept was introduced two-three decades ago and is highly successful as opposed to India where it is still in its nascent stages. “The e-rickshaws ferrying four people at Rs 10 per person had already captured that area. The autos charge 60-70 bucks for places that are only 3 km away. We found a middle-ground, where a market could exist providing the last-mile connectivity solution to the citizens,” says Ashutosh Johri, co-founder of Gurugram-based Baxi.

Thriving despite Challenges

In India, the basic law that regulates the transport means is Motor Vehicles Act, 1988. The Act states laws governing all aspects related to motor vehicles pertaining to personal drives, vehicles being used for commercial use, licenses and permits required, liability in cases of accidents and adjudication of claims.

There was already a culture of bike renting in Goa, long before Rapido tried to deliver the concept across India. Subsequently, Haryana became the second state in India, after Goa, to allow motorcycles to be used as a mode of public transport. After seve zral states levied bans on the two-wheeler taxis plying on the road, the Union government stepped in and asked the state transport authorities to formulate rules as per convenience of the area.

The central government through a notification in October 2015 asked all states to follow an advisory on licensing, compliance and liabilities for bike-taxi aggregators. Thus, the regulatory aspects of this class of taxis have not been very clear in India. So far, only 14 states have framed the rules following the Union government directive. Any vehicle, therefore, running for any commercial purpose such as a taxi or as for deliveries will be first required to obtain clearances from the Transport Offices of the States that they want to run in. Thailand was the first country to introduce laws to regulate bike-taxis when framed them in 2005. “We persisted and persuaded the authorities in Haryana to allow the bike-taxis in Gurgaon. As a result the first bike-taxis in city were launched with yellow number plates,” says Ashutosh.

Aravind Sanka, co-founder of Bengaluru-based Rapido says that the laws are made for existing market and any disruption in the economy requires a new rulebook. “Any avant-garde concept won’t easily align with 40-50 years old regulations. That is why we have pitched three advantages  logistics, serving both people and packages with the promise of giving back to the environment and ensuring that we are not harming the environment.” Now, Rapido is already undertaking 75,000 trips a day — the number of trips were a mere 7,000 in May last year. “We have showcased 10x growth in the past year. We will raise $20 million in coming 2-3 months. For the past few months, the growth has been exponential, and promises a huge potential,” Sanka says. Rapido also acquired Getbike in May 2018.

Finding Sustenance

Many of these startups found that several passengers hail rides only during the peak office hours in the morning and evening, and they remain idle during the large part of the day. Thus, some of these entities started a trend of carrying out deliveries during the time of low tickets. Baxi entered into partnership with Mother Dairy and Patanjali Ayurveda while Rapido inked pacts with pharmacies and local supermarkets. Quick service restaurants like McDonald’s, Burger King, Subway and Swiggy have employed the services of Dot. “In the grocery delivery segment Amazon, Nature’s Basket, Big Basket and Grofers have also partnered with us while we have also made inroads in the e-commerce side, working with Bluedart, DHL, Amazon, Aramax and Walmart. These are some of our major customers,” says Mehra. While Johri does not align with the views of Bengaluru-based startup as he had witnessed a thriving market in the Middle East and Africa.

“It is only a part-time income source for people who want to cover their out-of-the-pocket daily expenses. It can never be a full-time job as doing 30 trips a day for making 1,000 bucks is back-breaking — unlikely but possible. Moreover, for a ticket size as small as Rs 20-25, you cannot give incentives to the associates,” stresses Johri. Many of the startups have not been able to achieve the breakeven but are operationally breakeven. Baxi had therefore partnered with Bajaj Finance and TVS Credit service to give 100 percent bike loans to the bike owners. “We earn a certain amount on the finance part and also on the Baxi kits that we provide to the riders. We are just aggregators,” Johri says.

Though, Pooltoo has over 10,000 registrations on its platform but only 10 percent of the associated fleet is active with an average of three trips per associate. While Rapido is the only one that has been able to garner a considerable amount of investment and generate profit.

Nitin Singhal, lead investor of Baxi while backing the prospects said, "Bike-taxis are here to stay in India because they are economical for single commuter in a price conscious age. We see them being plied widely as last-mile connectivity vehicles from railways and depots to nodal points. Earning small revenue per ride is difficult for riders to make good money. But fundamentally in a price sensitive market low-cost customer alternatives survive naturally."

(This article appears in the February 2019 issue of Entrepreneur Magazine. To subscribe, click here. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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