Uber’s new rival in Australia: an Indian upstart [Video]

Cristian WorthingtonFeedToPost, MediaVidi Twitter

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Ola"s move into a wealthy developed country like Australia, where fares and customer expectations are much higher than in India, is a calculated bet by the company that it can adjust its model to the needs of global customers.India is home to a raft of start-ups in e-commerce, mobile apps and...

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Ola’s move into a wealthy developed country like Australia, where fares and customer expectations are much higher than in India, is a calculated bet by the company that it can adjust its model to the needs of global customers.

India is home to a raft of start-ups in e-commerce, mobile apps and other consumer internet businesses. But few of them have ventured beyond their home market successfully.

If its drivers also drive for other services, Uber could more easily argue that they are free agents instead.

If its drivers also drive for other services, Uber could more easily argue that they are free agents instead.

Photo: AAP

Zomato, a restaurant review site similar to Yelp of the United States, expanded aggressively overseas a few years ago, only to scale back and focus more on India and a few countries like the United Arab Emirates. Paytm, India’s leading digital-payments company, has targeted its services to Indian immigrants in Canada, primarily as an experiment geared toward learning how to operate in developed countries.

International opportunity

For Ola, Australia could be a compelling international opportunity.

For starters, the country offers room to grow. Fewer than 1 in 5 Australians who regularly buy things online used a ride-hailing service in the past year, according to June survey data analysed by eMarketer, an American research firm. And the typical fares are much higher than in India, meaning Ola could potentially make more money per ride.

“In the ride-sharing market currently, there are no real enemies,” said Satish Meena, a senior forecast analyst with Forrester, a technology research firm. “Everyone is willing to share the pie.”

Australian laws also make it generally easy to set up a ride-share business. Taxify, an Estonian company, arrived in December.

“We welcome competition because it keeps us focused on delivering the very best product,” said David Rohrsheim, Uber’s general manager for Australia and New Zealand.

Experts say Uber has another incentive: Australia has tough labour laws that could require the company to treat drivers as employees deserving of retirement and other benefits. If its drivers also drive for other services, Uber could more easily argue that they are free agents instead.

Better deal

Ola is mostly trying to win drivers over with a better deal.

The company takes only 7.5 per cent of drivers’ fares, with plans to increase that figure to 15 per cent. Uber collects 20-25 per cent. Drivers said that with Ola they could make $50 an hour compared with only $30 an hour with Uber.

“It’s a dramatic difference,” said Cheri Gristwood, an Uber driver in Perth, who was an early adopter of Ola. “I work my butt off, and with Ola I come home with a lot more.”

Rohrsheim said Uber had added incentives of its own last year, including paid wait time and a “no thanks” button that lets drivers refuse up to three rides in a row.

We welcome competition because it keeps us focused on delivering the very best product.

David Rohrsheim, Uber’s general manager for Australia and NZ

“Uber isn’t Uber without driver partners,” he said, “and our success depends on their success.”

Ola’s discounted commission has helped the company sign up 7000 drivers so far. That is nowhere near the roughly 82,000 who drive for Uber, but more than double what Taxify started with in Sydney in December. Taxify did not respond to requests for comment.

Many of the new Ola drivers help spread the word about the company. Cecilia Cornu, an Ola customer in Perth, first heard about the service when she asked an Uber driver about the two cellphones he had. One, he said, was for Ola.

“He told me my ride would have been cheaper if I had booked it through Ola, as they were running a promotion with free rides,” she said.

“As soon as I got to work,” she added, “I downloaded the Ola app.”

Indian connection

Ola has not explicitly marketed itself to drivers or riders of Indian origin, but the company does expect that the awareness of its brand among Indians will help. About 1.9 per cent of Australia’s population of 24 million was born in India, according to 2016 census data; many more are the children of Indian immigrants.

The Ola app still signals that connection: India sometimes shows up as the default country when someone in Australia signs up and adds his mobile phone number.

Ola’s effort to shift from local to global remains imperfect. Some customers have reported problems with the app continuing to calculate rides after trips have ended. Ward, one of the Ola drivers in Sydney, said the company’s registration process was less streamlined than Uber’s.

Takeover protection

Ola’s expansion into Australia may also have a strategic goal beyond higher fares: protection against an unwanted takeover.

The Japanese conglomerate SoftBank is Ola’s largest outside shareholder, and one of the largest shareholders in Uber. It has also invested in other ride-hailing companies around the world.

SoftBank executives have made it clear that they would like to see Uber’s operations in some developing countries merge with local players to avoid a competitive bloodbath, allowing the company to focus more intensively on higher-profit, developed markets.

Ola recently changed its articles of incorporation to defend against any large investor from forcing a sale of the company. Bhavish Aggarwal, a founder of Ola and its chief executive, is busy trying to raise money from other investors to reduce SoftBank’s influence over his company’s destiny.

Aggarwal declined several interview requests. “We are very excited about launching Ola in Australia and see immense potential for the ride-sharing ecosystem in a country which embraces new technology and innovation,” he said in a statement.

At times, Uber has been a seller. It has left the ride-hailing business in China and Russia, selling its operations in those countries in exchange for stakes in the dominant local competitors.

Meena predicted that Ola and Uber would eventually reach a similar arrangement in India, with the Australian operations of each company possibly added to the mix. Developing a robust Australian business could give Ola a bargaining chip in negotiations.

“Everyone is looking at capturing market share,” he said, “and then doing a deal with Uber.”

The New York Times

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