Daily Management Review

As Driver Incomes Drop, Uber Reviews India Leasing Scheme – Reuters


03/24/2017




Since drivers have returned dozens of leased cars early after the company cut incentives, its car leasing strategy in India, its second-biggest market, is being rethought by global ride-hailing firm Uber Technologies, reported news agency Reuters.
 
Employing a strategy it has used in other markets, in a bid to attract more drivers, Uber had planned to buy 15,000 new cars last year and lease them. However, after leasing just a third of that total, it suspended the scheme for a while in December.
 
Uber has cut the incentives it gives to drivers and raised the fares it charges passengers, after burning through millions of dollars over three years in a battle for market share with local rival Ola, backed by Japan's Softbank.
 
Drivers could earn as much as 120,000 rupees ($1,838) a month by the incentives - from free smartphones to cash bonuses worth as much as double a day's fares.
 
In some cases, as little as 10 percent of fare income was what was given out as those incentive payments have been pared back. And fro 1 rupee, ride fares have risen to 1.5 rupees per minute of travel.
 
Uber was able to rapidly gain around 30 percent market share as the Uber's driver numbers were boosted by the incentives and, to an extent, the leasing scheme which were aimed at drivers without their own cars.
 
CEO Travis Kalanick has said it expects its India market operations to be profitable soon and the stakes are high in India's $12 billion taxi market, a key area after it exited China last year, even though Uber has faced challenges elsewhere in Asia.
 
Uber lags Ola, which says it operates in more than 100 cities with about 550,000 drivers while Uber has said its services are in 29 Indian cities and it has more than 250,000 drivers on its platform.
 
Especially with those making lease payments, Uber miscalculated the impact that the reduced incentives would have on drivers' earnings, reported Reuters, quoting two people with knowledge of the matter.
 
One of the sources said that Uber's India chief Amit Jain said the buying-for-lease scheme was being temporarily suspended while the company evaluated its leasing strategy at an open meeting for staff in December, around the time the incentives were being reduced.
 
The scheme was set up to help drivers without cars get on its platform and make money, said Raj Beri, business head for leasing in India. "We are very pleased with our progress toward this goal so far, and look forward to introducing the opportunity to more prospective driver partners this year," he said in a statement.
 
Jain defended the cuts to driver incentives and signaled a strategic shift for India in a recent blog post on Uber's website. "We can shift from start-up mode to a more sustainable business model," he wrote.
 
Leasing is seen as a way to lock drivers on to its platform for longer, and stop them switching to Ola even though in India, it is only a small part of Uber's overall supply.
 
(Source:www.reuters.com) 






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