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Tuesday / April 25.

Should private cars ply as cabs with Ola and Uber?

By Harsh Doshi

Radio taxicab services started in India in the year 2007 with Meru Cabs being the first mover in the space. This was soon followed by the advent of TabCab — its only major competitor at that time. Come 2010, the popular cab aggregator – OlaCabs – entered the Indian radio taxicab market. With a mobile app offering cab tracking and using GPS for fare pricing, Ola gave a brand new definition to the radio cab service in India. Ola was then followed by TaxiForSure in 2011, which Ola acquired in 2015. Today, the Indian radio cab market can be called a duopoly with Ola and Uber being the only major players.

What followed is a persistent battle between the two companies – both in the technology and price spectrums. As calling a cab became easier than ever, both companies eventually ventured into luxury cars, autos and hiring for travelling outstation (Ola only). Interestingly, a new trend emerged as the ride-sharing space entered the Indian markets. Ride sharing made cabs affordable, even in the face of surge pricing. It became an obvious choice for people who did not own vehicles to commute to work on a daily basis.

However, late in January 2017, both OlaShare and UberPool (the respective ride sharing segments) ran into a legal trouble in Bengaluru. This occurred due to the absence of a provision regarding the same in the Motor Vehicles Act, 1988.

Why are Ola and Uber seeking private cars for business?

For every nine light motor vehicles in Mumbai which have a non-commercial license plate, there is only one vehicle which has a commercial license plate. If we study this number in other major cities, it only becomes clearer that the proportion of taxicabs is very low. Take into consideration smaller cities, towns and villages and the proportion reduces further. This created supply glitches for the radio cab companies aspiring to capture a greater market share. Keeping this constraint in mind, Uber entered into lobbying with the Delhi Government to allow private cars in the sharing space, otherwise called peer-to-peer (P2P) sharing.

In order to attract both drivers and cabs, Uber is currently spending a lot of money on incentives and discounts respectively. This leads to an inflation of losses year on year making the business model unsustainable. A small dip in incentives will discourage new drivers from enrolling. This, as a result, has forced Uber to innovate with sharing and tapping of other resources.

The easiest way for Uber and other cab aggregators to add to their on-road presence without any extra capital investment was to tap private cars. Multiple car owners are most likely to hire out their second and third cars for this programme if it gets accepted. It also means more employment opportunities for potential drivers. The consumer gets an additional cab on the road. The authorities are happier with lesser congestion and pollution on city streets. This does create a win-win kind of situation for all stakeholders involved. However, the picture is not all that rosy.

Is it feasible already?

A primary concern that arises is one of security which goes both ways. The current model of ride-sharing poses a security issue for its passengers making them prone to unchecked co-passengers. If private cars start getting hired out, they will pose security issues to the car owners as well. Incidents like carjacking and theft are more probable given that these cars will be of superior quality compared to a taxi as they were primarily bought for personal use.

Moreover, the model itself creates a logistical loophole for its functioning. Under this, cab aggregators will directly be involved in a contract with car owners for sharing rents. Car owners will be responsible for recruiting and paying the drivers. This move poses a serious implementation challenge for the cab aggregating companies as they have to invest in technology and training of drivers they will neither hire nor call them employees.

The Motor Vehicles Act, 1988 may need to adapt to accommodate these new operating models.