Uber To Invest Rs 6,400 Crore As It Takes On Ola, Targets 1 Million Trips Every Day

31/07/2015 12:47 PM IST | Updated 15/07/2016 8:25 AM IST
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Uber is pouring in $1 billion (Rs 6,400 crore) into its indian operations to beef up its operations in the face of stiff competition from homegrown rival Ola.

Uber has also set itself an ambitious target. "With this investment and the strong rate of growth we are seeing, we expect to hit over 1 million trips per day in the next six to nine months," said Amit Jain, President, Uber India. Uber's drivers in China are already closing in on this target. The taxi-hailing app currently offers around 2,00,000 daily rides and the service is growing 40 percent month-on-month.

Uber's investment in India follows the same in China, where it put in $1 billion to grab marketshare away from market leader Didi Kuaidi, which is funded by Alibaba and Tencent.

"We are extremely bullish on the Indian market and see tremendous potential here. India is one of Uber's big priorities, along with China and uberPOOL," said Jain. Uber, valued at $50 billion, is now present in eighteen cities in India, making its coverage larger than in China and the UK, and second only to the U.S. And India is the only country where Uber allows customers to pay by cash in certain cities.

Much of the funding will go into expanding into more cities, developing new products and payment solutions, and establishing a wider support network. Part of the funding will also be spent in subsidies to cover the discounts it offers passengers, and incentives for new drivers to sign up with the service.

The lowest fare is down to Rs 7 per kilometre in Delhi, which makes cabs a viable alternative to three-wheeler autorickshaws, and a cheaper means of transport than owning a car. The opportunity in India is huge, because most cities have unorganised cab services and not enough cars to meet demand.

Ola, which raised $400 million in April from investors such as Japan's Softbank and U.S. investment group Tiger Global, is also planning a fresh funding round worth $500 million. It acquired Bangalore-based rival TaxiForSure in March this year, and is now present in 100 cities.

While both players have plans to grow aggressively, laws might put a spanner in the works. This week a Delhi court ruled that the local government should strictly enforce the ban on Ola, in a setback to the company.

Uber finds itself in a slightly better position for a change, after a Delhi court revoked a government ban order. That allowed the service to keep operating in Delhi, where it was banned following allegations of rape against an Uber driver who remains in jail awaiting trial.

The ban on taxi-hailing cabs in Delhi has anyway not been effective. Both Ola and Uber have continued to operate despite the ban, except for brief interruptions in service following sporadic police action. In all such instances, Ola and Uber cabs were back in service in a few days despite the ban order.

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