Daybreak - Rapido is taking on the Ola-Uber duopoly by being everything they are not

Episode Date: October 29, 2024

For a whole decade, Ola and Uber dominated the cab-hailing market. But cut to 2024 and that scenario is shifting. Both these companies are drifting. And a third contender – Rapido – is making the most of it. Both homegrown Ola and US-based Uber are dealing with a unique set of problems. The whole ride-hailing business seems to have taken a backseat for Ola, which is now knee deep in the electric vehicles business. Meanwhile, for Uber, the problem is stagnation. And those factors combined have taken a toll on their combined marketshare. The big two’s combined dominance has come down to around 60-70 per cent from over 90 per cent three years ago. But there’s a huge opportunity here for nine-year-old Rapido. Which the cab aggregation newbie is making the most of. Tune in. Daybreak is now on WhatsApp at [phone]. Text us and tell us what you thought of the episode!Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

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And now, on to the episode. For a whole decade, Ola and Uber dominated the cab hailing market. But cut to 2024 and things look different. You see, that scenario is now shipping. And that's because these two companies have been drifting for a while now. But that's created room for a third contender, Rapido, which has been making the most of this moment. You see, both homegrown OLA and US-based Uber

have been dealing with a very unique set of problems. The whole ride-hailing business seems to have taken a backseat for Ola, which of course now is knee-deep in the electric vehicles business. And meanwhile, for Uber, the biggest problem has been stagnation. stagnation. Now, those factors have taken a toll on their combined market share, which has come down to around 60 to 70% from over 90% just three years ago. But there's a huge opportunity here, and 9-year-old Rapido is making the most of it. Despite having merely 10 months of experience in cab hailing, it's already clear that Ola and Uber cannot take this new competition lightly,

especially now. I mean, the growing customer dissatisfaction with both Ola and Uber is a very well-known fact by now. It also doesn't help that taking a cab has just become a lot more expensive in the last year and a half or so. Fares have gone up by a whole 30 to 40 percent and then to make matters worse, cancellations and wait times have also been going up considerably.

Basically, hailing a cab just isn't much fun for anyone involved. including the drivers, the main service providers in the ecosystem. People in the space say that drivers have been particularly unhappy with their earnings off late. And Uber and Ola obviously have a big role to play here. A fleet operations executive said that they've both been cutting drivers incentives and at the same time they've doubled the commission on each trip to 25 to 30% of the Fed. Now, of course, drivers are frustrated, which is why we've seen a lot more strikes and posters from cameras.

drivers' unions off late. But Rapido has come in and is targeting these very frustrated drivers. It's actually taking a page out of the auto-haling platform Namayatri's playbook by borrowing from its subscription-based model. And drivers are finding that system far more favourable. It seems to be working. And that means just one thing. Now that their dominance is starting to slip,

Uber and Ola can't afford to ignore Rapido's ambition. Welcome to Daybreak, a business podcast from the Ken. I'm your host Rahal Philippos, and I'll be joining my colleagues, Nickda Sharma, every day of the week to bring you one business story that is worth understanding and worth your time. Today is Wednesday, the 30th of October. After being a bike hailing app, RAPTOS decision to enter the cab hailing space

does make sense. Like I mentioned before, there's been a great deal of discontent among users of Ola and Uber. In fact, a recent survey of 3,0005,000, 500 users found that over 8 out of 10 Uber customers and 9 in 10 who use OLA face issues while using these apps. Now, Rapido is making the most of that discontent. In fact, it looks like it wants to become the next OLA. You see, OLA is no longer Uber's biggest competitor.

Its ride volumes are down to two-thirds of what they were five years ago. And of course, it isn't extinct yet, but the level of competition has considerably declined. Plus, it has shifted its focus to. TV manufacturing and reining its AI technology. For the longest time, OLA was the go-to choice for budget-conscious users, but now even that seems to be changing. You see, given Rapido's origins in the bike taxi space, more price-sensitive customers are naturally getting inclined towards it.

So what's happening is that a lot of OLA users are now migrating to Rapido. Uber, of course, still has an advantage here because it claims a slightly more premium user base. But the real challenge it's facing has been retaining drivers. You see, when it comes to fleet, Rapido is becoming an incredibly popular option among drivers,

most of whom so far have used Uber. This is just one of the many reasons entering the cab hailing business makes complete sense for Rapido. But first and foremost, it means higher ticket size and better margins for the company.

People in the space explain that cab rides cost around 150 to 200 rupees on average, while bike rides cost a third of that. So obviously that means more money for Rapid Oak. Plus there's also a lot more scope. Like for instance during bad weather,

most people opt for a cab rather than a bike. And of course there's the fact that it can also accommodate way more people. The cab segment unlocks a whole bunch of other lucrative opportunities as well, like airport and intercity rides. As these

tend to be over a longer distance, it brings down the driver's fuel costs and dead mileage. So it makes sense that Rapido started cab-hilling. But now that it's in the big leagues, it needs to break the decade-old monopoly of Ola and Uber. And it's doing that by following some very well-worn playbooks. More on that in the next segment. Back in 2022, Bangal-based Namay-A-3

introduced a one-of-its-kind subscription model for auto-drivers using the platform. Now, unlike Ola and Uber, RAPido has adopted this model too. So now it charges its drivers a fixed subscription fee for allowing them to access the platform. Initially, RAPido adopted the model for its auto services late last year. But then it eventually became the first to do so among cab aggregators as well. The fee here varies based on the subscription period, say daily, weekly or monthly. Everything else, the remaining earnings, the driver gets to keep.

Now, that is enough of an incentive for those frustrated with other aggregators to join Rapido. For context, a driver can earn 10 to 15% more on the commission-free platform compared to the same trip booked on Ola or Uber. What's more, the company doesn't deduct a 5% tax on each fare, as is the rule for cab service providers. It claims that under its subscription model, it is simply providing its software as a service tech to drivers and doesn't directly earn revenue from ride fares. Now, the upside of this, of course, is that it is a way better deal for drivers. But the downside is that there is some legal ambiguity here.

Rappato has also pulled another lever, streamlining driver onboarding. An executive from a fleet operator explained how exactly this works. You see, with Uber, drivers need to go to the office. There's a background verification that usually takes a few days. They check your criminal record, things like that. Meanwhile on Rapido, drivers can onboard even remotely. The Ken spoke to an investor who said acquiring supply is a strategy that has worked well for RAPido so far.

It has been able to keep its customer acquisition costs in control. While the overlap between bike taxi and cab users may be smaller, RAPido has a distinct advantage. They added that by tapping into the auto user base, it can more easily attract customers to its cab service. One founder said RAPA has also approached flea. fleet operators to partner with them. Say, if it collects 10% of a driver's earnings,

it has proposed sharing half of that with the fleet operator, given that they meet certain milestones in terms of number of trips or drivers being available for a certain number of hours. Indeed, a sweet deal for the operators and the drivers, but that also means Rapido is trading a considerable portion of its revenue for easier access to the market. Now, that may not be sustainable in the long term. Stay tuned.

tune. Dual apping is at an all-time high now. Back in the day, sure, OLA would have been the choice for drivers who did use multiple apps, but the probability of dual apping itself would have been considerably lower. Now that Rapido is in the picture, that has really changed. One ride-haling executive said in cities like Hyderabad, 60 to 70% of overdrivers who are dual-apping will be using Rapido. Even in terms of popularity, Rapido's cab's business has already gained team in cities like Bangalore and Hyderabad, where it has in fact outpaced Ola. The company

is now also picking up traction in Mumbai and Delhi. So now Uber is pushing its fleet partners to monitor and penalize dual apping. It's realized that it could lose big time. For drivers to get a decent take home, they need to be online for a certain number of hours and take

50 to 60 trips weekly. So if anyone has a considerably lower number of trips, the target is immediately on their back. Uber's free partner scrutinized cases where a driver might have taken only, say, 20 trips on the app, given that they wouldn't suffice to cover fuel and maintenance costs. Another giveaway is when the distance logged on the platform is lower than the actual mileage on the vehicle.

Now, in the middle of all of this, cab aggregators are realizing it's better to be safe than sorry, and they are doing that by going the no-commission way. Uber and Ola are also going down the same path as Rapido and Namay-R-R-3 by introducing subscription plans for autos in some markets. So it's quite clear that they are feeling the heat. It also doesn't help that Rapido isn't alone. Over the years, upstarts like Blue Smart and chauffeur have also popped up. They've recognised Uber and Ola's moment of weakness

and are being innovative with their strategies. But the thing is, sure, the Ola-Uber doopoly may be waning and things may be looking up for companies like Rapido, but reaching the same scale will be far from easy. This is only the beginning of a grueling trek. Daybreak is produced from the newsroom of the Ken India's first subscriber-focused business news platform. What you're listening to is just a small sample

of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted by Rahil Filippos and edited by Rajal. Jiv Sient.