On-demand car apps started the year in high gear, driving into one Indian city after another at breakneck speed. Drivers and customers loved them, and most city transport regulators who had only heard vaguely about Uber paid it no attention. Venture capitalists poured money into a business model that seemed like a win-win for everybody involved. Then it took a blind curve and stands teetering on the edge of a cliff as the year comes to a close.
Four Indian cities banned taxi apps following the rape of a young woman in Delhi by an Uber driver with a criminal record. Now the whole on-demand taxi and car service is in limbo. India’s transport authorities are insisting that Uber and others register with them. But the fact is that neither the Motor Vehicles Act nor the transport department’s commercial licensing system has rules or regulations on using taxi apps. This is a new business model connecting customers with vehicles they want to hire. Until the rape in Delhi, the transport regulators had ignored it. Now they’re scratching their heads to figure out if even their bans will stand up in court.
For regulators and users of on-demand car apps, the billion-dollar question is whether the new year will bring a new license for the use of these services. Ideally, a multi-disciplinary committee of experts should thrash out this complex issue, which combines questions of legality, transportation problems, disruptive online services, and public safety.
See: How the Uber rape could’ve been prevented, but wasn’t
The funding bonanza
How different the scene looked at the start of 2014.
Local taxi aggregators like Ola and TaxiForSure had already been around for a couple of years, providing a cool alternative to traditional taxis. There was also radio-linked fleets like Meru. But it was the entry of Uber into India, right after its quarter billion dollar funding by Google Ventures and others in August last year that brought mobile apps to the fore and scaled the services up rapidly.
Tiger Global-backed Ola ramped up the most, bringing in Matrix Partners first in a US$20 million funding round in November 2013, and then Sequoia Capital and Steadview Capital for US$41.5 million in July. Its mobile app, which had been on the backburner until Uber arrived, got a push.
Ola launched a luxury service right after the entry of Uber, which began with liveried, high-end limos in India’s tech hub of Bangalore. But Uber had other ideas, especially after its big US$1.2 billion funding in June. The launch of the more affordable UberX with compact sedans signalled its intention to go after the mass market in India.
Within a year of Uber coming to India, it became the American company’s second largest market. Last month, an India-only service called UberGo was launched with small cars. Another US$1.2 billion funding round followed, and Uber looked poised to add more names to the list of 11 Indian cities on its roster. That’s when the rape in Delhi exposed its regulatory blindspot.
Ola, meanwhile, had joined the high stakes game, with a US$210 million infusion from Japan’s Softbank, making it the third highest funded taxi app in the world after Uber and Lyft, until Southeast Asia’s GrabTaxi and China’s Didi Dache overtook it. Still, more than a quarter of a billion dollars in total funding made it one of India’s hottest startups and the leading taxi app in the country.
But now it finds itself in a quandary because the tragic case in Delhi has put Uber in the spotlight and also taken Ola off the roads in three of India’s most populous cities – Delhi, Mumbai, and Bangalore. The original Olacabs service which owns a fleet of some 200 cars is not banned in Bangalore, but it has no permission to use its taxi app which connects the bulk of its cars.
The third Indian player, TaxiForSure, has also gone down with Uber, just when it was getting a move on with a US$30 million funding round in August, following the US$10 million it had raised earlier in the year. It tied up with Tata Motors, maker of Nano cars, for an even smaller and more affordable taxi service. Nothing is for sure, it now finds – least of all when it comes to taxis in India.
See: Uber is the biggest story for startups in 2014, period. Here’s why
Are taxi aggregators mere intermediaries or service providers?
So what will 2015 bring for these taxi apps in India – a new license or closure?
Currently, the taxi apps and state transport authorities are arguing it out in court. The state wants to retrofit them into existing rules for taxi services, which were last modified in 2006 after the advent of radio taxi services like Meru. The web-based taxi apps have a very different business model from that of radio taxis, they argue with some justification.
But to say that taxi aggregators are mere intermediaries connecting buyers with sellers is too simplistic. The consumer in this case has very little information on the cab or driver she is ‘buying’ – it is the taxi app that recruits drivers, gives them GPS-enabled smartphones, and tracks the cabs. So they do have to be accountable for safety measures and held liable if they don’t meet regulations for public safety. What this situation cries out for is new rules – just as in 2006, a Radio Taxi Scheme was formulated in India when Meru and others appeared on roads.
Uber, Ola, TaxiForSure and the whole web-based business model did not even exist then. To try and club them in with radio taxi fleets now would be disingenuous, to say the least.
It’s not just the taxi apps and transport authorities fighting it out. Two Indian ministers are at loggerheads over this. Home minister Rajnath Singh dashed off an advisory to states to ban taxi apps after the rape in Delhi, but transport minister Nitin Gadkari has opposed it, saying bans are no solution, and asking if buses or trains would be banned too.
These are questions with no clear-cut answers. But one thing is for sure. Most people in India would hope the new year brings taxi and car apps back, albeit with safety provisions.
See: Banning is easy. Now the question is, how can Uber be regulated?
This post After a year of amazing highs and terrible lows, will 2015 bring taxi apps a license to ride in India? appeared first on Tech in Asia.
After a year of amazing highs and terrible lows, will 2015 bring taxi apps a license to ride in India?
No comments:
Post a Comment