Ola, Uber see growing demand for auto-rickshaws as cab supply declines

Key highlights:

• Auto-rickshaw category has become now a crucial part of the online commute booking market
• Total auto-rickshaw rides delivered by online players has increased by a massive 250%
• It now makes up 10% of the online commute booking market

While driver strikes have crippled online cab aggregators such as Uber and Ola, the players are however seeing a greater demand for auto-rickshaws. The auto-rickshaw category has grown to become now a crucial part of the online commute booking market.

While the online auto-rickshaw market has historically operated in stops and starts, the crippling driver strikes at the beginning of 2017 provided the right tipping point for this nascent category to evolve, according to a RedSeer Consulting report.

The total auto-rickshaw rides delivered by online players has increased by a massive 250% in Q3 2017.

Source: RedSeer Consulting

While the total auto-rickshaw rides by online players was 5.5 million in Q3 2016 it has grown significantly to 18.5 million in Q3 2017.

In fact, auto-rickshaw bookings made on online taxi-hailing apps have now amounted to a significant 10% of the total rides, including cabs, car-pooling shuttle buses, etc.

While the auto-rickshaw segment was a mere 3% of the online commute booking market in Q3 2016, it now makes up 10% and the rest 90% is the booking of cabs, car-pooling and others.

Ola Cabs was one of the first to start with the auto-rickshaw booking service on their app and others followed.

One of the main reasons for the growth in auto-rickshaw online booking is due to the lucrative offers.

The report says that lucrative offers such as Rs 29 fare for less than 4 km travel distance for this category has resulted in a growth of 3 times in the last one year.

However, this may be a good option for Ola and Uber especially in the Northern suburbs of Mumbai and in other cities such as Delhi and Bengaluru as cab supply is expected to persist.

The registered cab supply in Q2 2017 has declined to nearly 3 lakh from nearly 5 lakh cabs in Q4 2016, said a recent RedSeer report.

The reason for this was the cutting of incentives, commission rates and higher working hours that were not rolled back even after the cab drivers went on strike several times.

Despite several driver strikes during the year, online cab aggregators seem focused on key profitability by way of reducing driver incentives. Driver incentives of online cab aggregators, such as Uber and Ola, have seen a large decline from Q1 2017 to Q2 2017.

Driver incentives have plummeted from nearly 80% in Q2 2016 to nearly 20% in Q2 2017. This is a drop of nearly 60% in driver incentives in the just a matter of 1 year.

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