Ola Vs Uber And The Battle Of Dominance In India

by Sohini Bagchi    Oct 11, 2017

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Cab aggregators or ride-hailing services are growing big in India. What makes it exciting however is the constant battle between the two key players - Ola (ANI Technologies Pvt. Ltd) and Uber Technologies - both trying to assert their dominance in the otherwise highly fragmented market. 

The latest is that India-born Ola is finally raising a big round, and joining the billion-dollar club now by announcing that it has closed $1.1 billion in fresh financing. That’s the largest funding round in the company’s six-year history and its first major raise since November 2015 when it closed $500 million from investors, according to company statement - a vital step to thwart its archrival Uber in India.

The rivalry between Uber and Ola is much like the ecommerce battle in India, primarily between the two giants, Amazon and Flipkart. Indeed, Ola, a brainchild of IIT-Bombay graduates Bhavish Aggarwal and Ankit Bhati, has emerged among the handful of esteemed Indian start-ups [pegged over $1 billion], and has become a key player in the broader coalition against Uber. It has become part of a larger campaign against Uber’s growing global dominance. With a valuation of $68 billion, Uber is the world’s most valuable start-up.

Ola’s backers include SoftBank Group Corp. has invested in two of Uber’s biggest rivals, Didi Chuxing in China and GrabTaxi in South-East Asia. The company’s growth [starting 2010] has hurt traditional taxi businesses such as Meru Cabs [started in 2006] and Mega Cabs [started in 2001], which were slow to respond to the Indian customers and relied heavily on phone bookings. Ola’s app-based cab-hailing services took customers to a new high, as the latter surpassed its predecessors both in popularity and revenues. Ola’s big moment came in October 2014, when it raised $210 million from SoftBank.

Read more: Ola’s CMO, CFO Quit; Company Hires Data Scientist

Meanwhile, Uber was struggling in India until last year, with just about 5% of the market share in January 2016. Having launched in India amid much fanfare nearly four years ago, with high-end cars, Uber soon changed track to low-cost offerings suited to the local market. It was already coping with challenges, trying to first cope with the Reserve Bank of India’s directive mandating two-factor authentication for credit card payments, a major blow to its feted cashless payments, and then driver misbehavior, followed by the rape of a woman by a driver affiliated to Uber in Delhi – All of which triggered a regulatory backlash.

In the meantime, Ola acquired smaller rival TaxiForSure in March 2015, effectively paving way for a greater share in the ride hailing market. While many thought that the tide was in Ola’s favour, the narrative was to change soon.

In June last year, Uber appointed Amit Jain, former president of US-based housing rental site Rent.com, as its India head. The following month, Uber committed an investment of $1 billion in India, giving a tough time to Ola. By then, Ola had raised about $675 million, a significant amount, but no match for Uber’s huge capital show.

Uber also introduced cash payments in India for the first time in Hyderabad and extended it to Bengaluru and Delhi, two of its biggest markets, by September. Currently, it allows cash payments in 30 cities where it operates.

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While Ola continued to raise smaller, undisclosed amounts provided by existing investors, the new round of funding was much needed. According to a Techcrunch report, the company didn’t say too much about how it plans to spend this new money, other than the usual favorites of increasing supply of drivers — so more efforts on leasing and affordable car finance — and developing technology, such as the use of artificial intelligence and machine learning to automate its driving services.

Read more: Uber Organizes ‘Tech Day’; Showcases India-Centric Technology

Until now Ola has not actively invested in self-driving cars, but it has made progress with a fleet of electric cars and rickshaws which have operated in the city of Nagpur since earlier this year. That’s a model the company is hopeful it can replace in other parts of the country with the right support from government agencies and other stakeholders.

In other words, the rivalry between Uber and Ola is unlikely to end anytime soon. Those who benefit at least in the short term are drivers and consumers and not to forget technology and service providers, in the massive war chest.

India’s nearly 300 million Internet users, that were reluctant consumers in the cab aggregator market, in the first quarter of 2014 has come a long way. In terms of ride hailing services, India grew into the third biggest market after China and North America in the first quarter of 2016, according to the Internet Trends-2016 report by Mary Meeker, partner at Silicon Valley venture capital firm Kleiner Perkins Caufield and Byers. 

The trend is here to stay and we will see more money and muscles in the months to come. India’s cab business, according to SoftBank Group, is likely to reach $7 billion by 2020. And going by the estimates, both Uber and Ola will continue to grab a majority of the pie leaving the others far behind.