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With low-cost and luxury-ride categories, Ola gives fresh competition to Uber

At least 75% of ‘Micro’ customers are first-time users of air-conditioned taxis, the spokesperson said. ‘Micro’ is cheaper than Ola’s previous lowest-fare service, Mini.

Updated: Jun 16, 2016, 03.32 AM IST
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At least 75% of ‘Micro’ customers are first-time users of air-conditioned taxis, the spokesperson said. ‘Micro’ is cheaper than Ola’s previous lowest-fare service, Mini.
At least 75% of ‘Micro’ customers are first-time users of air-conditioned taxis, the spokesperson said. ‘Micro’ is cheaper than Ola’s previous lowest-fare service, Mini.
BENGALURU: Ola spent much of the last six months strengthening its core, adding a breadth of services and forging ties with an Uber-beating giant. And, according to investors and consultants tracking the sector, it’s working.

Ola has been able to extend its lead over a fast-gaining Uber by adding both low-cost and luxury ride categories, increasing focus on customer experience as well as onboarding China’s largest taxi-hailing service Didi Chuxing as an investor, they said.

Ola’s aggressive push to win back customers became pronounced in February with the launch of a new lower-fare category, Micro, and expanding to another 75 cities, further heating up its war with Uber that was rapidly closing in with its own ride-sharing and low-fare services.

“Micro has proved the need for a pocket-friendly economical AC cab ride in small and large markets alike,” a spokesperson for Ola said in an email. “Ola’s higher-end categories Ola Prime and Ola Lux have also seen phenomenal response from discerning users.”

At least 75% of ‘Micro’ customers are first-time users of air-conditioned taxis, the spokesperson said. ‘Micro’ is cheaper than Ola’s previous lowest-fare service, Mini.

Between them, Ola and Uber handle an estimated 1 million-1.2 million rides a day, leaving little room for other taxi operators. Ola, with 550,000 drivers registered on its platform, says it commands 70% of the market; Uber says it has a 50% share. Both the companies are basing this on rides completed but haven’t been able to corroborate their market-share claims. Enough data isn’t publicly available to independently verify the numbers.

“A few months ago the gap (between Ola and Uber) was closer, but Ola has stepped up focus on its supply and customer experience, maintaining its lead,” said an investor in Ola, declining to be identified.

In March, ET reported that SoftBank-backed Ola was restructuring its business to step up focus and investment in its core taxi service after pulling down the shutters on experiments such as food and grocery delivery. Since then, it has not just launched new categories to widen its scope of offerings but also paid attention to improving customer experience, such as by providing free WiFi for customers of its premium Prime service.

It also has been aggressively investing in its taxi leasing business, a key area of focus for CEO Bhavish Aggarwal.

“Leasing is becoming important over the long term because that’s how one can lock in supply without giving incentives (to drivers),” said a person familiar with the development. Both Ola and Uber use up a significant portion of the money raised from investors on offering large incentives to drivers much above the fares they earn.

Ola is taking lessons from Didi on how to battle Uber, the world’s largest taxi service. Didi not just dominates over Uber in its home market but is also leading a global alliance against it. Ola is a part of this alliance and its founders Aggarwal and Ankit Bhati visited Didi in China in February to formulate a strategy to take on Uber, according to people aware of the development.

Uber’s strategy in price-sensitive India has been to go low-cost. “We have shut down (the premium) Uber Black and Uber XL in many cities,” Uber India head Amit Jain told ET in an earlier interaction.

Uber declined to comment for this story. The BCCL Group, which publishes The Economic Times, holds a minority stake in Uber.

“Ola is fully aware that it can’t afford to lose market share,” said Jaspal Singh, founder of transport-focused Valoriser Consultants. “It will be difficult for them to get it back. Uber has a strong financial platform and is putting money (into India) aggressively.

Uber, which is worth an estimated $62.5 billion, is also investing heavily in India to outrun its competition. The company has said it will invest in India a substantial portion of the $3.5 billion it recently raised from Saudi Arabia’s sovereign wealth fund to increase its pool of drivers, improve technology and add categories such as bike taxis.

While Ola has cash to sustain another 24 months, according to two sources who chose to be unnamed, the company has initiated internal discussions to raise a fresh round of funds. “Ola is back in the market to raise money at a $4.5 billion valuation (unchanged from its current pre-money valuation),” one of them said. “Didi will participate in this round. The amount (being raised) maybe between $500 million and $700 million.”

Ola did not reply to ET’s query on this.
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