Ola pilots hourly rental service for cabs


Bengaluru: Cab-hailing service Ola (ANI Technologies Pvt. Ltd) is piloting a car rental service on an hourly basis, in a departure from its business of point-to-point travel, as its battle for market share with Uber intensifies.

“Need a car on a standby to take you around? Now rent a cab on an hourly package with the all new Rentals. Available for local travel in select cities,” said an update on Ola’s Google Play page.

Ola, a home-grown unicorn valued at $5 billion, and Uber, the world’s most valuable start-up, worth $68 billion, specialize in intra-city travel, picking and dropping customers from and to particular destinations. Both companies have so far stayed away from offering hourly packages, which have been the forte of other start-ups such as Google Capital-backed Savaari Car Rentals and My Taxi India Pvt. Ltd, besides car rental agencies.

In fact, the Indian unit of San Francisco-based Uber Technologies Inc., is an entirely on-demand service in India. Unlike Ola, where consumers can book a time slot for advance bookings during the day, Uber does not accept pre-bookings.

Ola did not respond to an email seeking comment. Mint could not independently ascertain the cities where Ola has launched the hourly rental service.

The move is expected to boost Ola’s bouquet of offerings and help the company evolve into a one-stop service provider for road transport solutions. The company has been entering categories that are yet to be explored by Uber to gain market share.

For instance, Ola started piloting an outstation service in Delhi, a move that will help the company boost revenue as well as use the diesel cars on its platform that are banned from plying in the city by the Supreme Court, Mint reported on 10 May. The service has since been expanded to most of its major markets, including Mumbai and Bangalore.

“Ola has become a large company and their core business is the on-demand cab business. A significant part of their resources will still be focused on the point-to-point drops, because that is where the volume is and that is where the real battle with Uber is,” said Rutvik Doshi, director at Inventus Capital Partners, a venture capital firm.

“I feel Ola will keep doing these experiments around shuttle, inter-city etc, because at some point in time they will have to differentiate with Uber and expand in that category. The challenge that Ola will face is that allocation of management bandwidth and focus,” Doshi added.

In March, Ola introduced its cheapest offering, Micro, at Rs.6 per km to take on Uber’s UberGo, which offers rides at Rs.7 per km.

Over the course of 2015, Uber significantly increased its market share by spending heavily on recruiting new cabs, paying huge subsidies to drivers, offering attractive low prices to customers and accepting cash payments from riders. Uber’s market share soared to roughly 40% at the beginning of this year from just 5% a year ago, according to Uber executives.

Micro has helped turn Ola’s fortunes, at least for now.

Since its launch in early March, Ola has reversed much of last year’s market share loss to Uber and opened up a big gap against its rival. While its market share has jumped since the launch of Micro, so has the company’s cash burn, Mintreported on 16 June.

In response to Micro, Uber has also slashed fares for UberGo to match Micro in Delhi, one of the top three markets in India along with Mumbai and Bengaluru.

The price competition underlines India’s importance for Uber as possibly the last frontier in Asia with lucrative market potential for cab-hailing services. In China, Uber is still a distant second to Didi Chuxing, which is an investor in Ola.

Didi Chuxing, valued at about $25 billion, last week completed a $7 billion funding round from Apple Inc., China Life Insurance Co. Ltd and China Merchants Bank Co. Ltd, among others. Didi’s fund raising will come as a shot in the arm for Ola, which has initiated talks with investors for a new round of investment to the tune of $300-400 million, Mint reported on 15 June.