ola, uber

Cab hailing services Ola and Uber are suffering from almost a 25% drop in the number of cars since the previous quarter. This information comes from a report made by RedSeer Management Consultants Pvt. Ltd.

According to the report, this fall in the number of vehicles associated with the two services is mainly because of the decline in incentives provided to the drivers. It was seen that those who left the platform did one of two things: either join a company which offered them an offline driving job, or change professions altogether.

Statistically, the report indicated a steady rise in the number of cabs last year from January 2016 with a final peak in December 2016 at 500,000 vehicles. However, within the next few months, there has been a decline by almost 120,000 cars because drivers have been looking for other, more lucrative job opportunities.

Both Ola and Uber claim to have more cabs in service than what RedSeer has stated and not by a small margin. According to both companies, they have 5-6 million cabs each affiliated with them. But, neither of them mentioned how many were regularly working every day.

Initially, drivers were satisfied at their jobs because both companies would constantly shower them with money in order to win their loyalty. They would be incentivised well over the amount of each fare and this kept the drivers happy. However, after having established a substantial number of drivers in the business, Ola and Uber started cutting down on their incentives in order to increase their profits.

This deeply affected the livelihood of so many drivers and they took to protesting. Both Bengaluru and Delhi, which are two of Ola and Uber’s biggest markets along with Mumbai, saw hundred of drivers take to striking on the roads of the cities in February and March.

Their main reason for protesting was that the constantly changing inventive patterns of the companies were affecting their livelihood negatively and they were not able to provide for their families anymore.

Uber India President Amit Jain claimed that the strike by drivers in March was only the work of “small number of individuals who do not represent the majority of the driver community”.

He also said,

There is this mix between organic and incentives. Incentives might have come down, but what a driver partner takes home is organic money plus incentives. When we go into a market, the reason we offer incentives is because the rider will not take a ride if there is no driver partner available. For a driver partner to be available when the demand is not there or just picking up, he or she has to make sustainable earnings then. You have to have an initial set of supply. Over time, when demand catches up, the organic earnings become sustainable for a driver partner

While the asset-light model that both companies have been following so far have their own advantages, incentives given to the drivers was one of their biggest advantages. If Ola and Uber scale back on these and upset car owners and fleet owners, they will suffer much like they are now.

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