India considers commissions cap for Uber, Ola, unsettling industry
reuters.com
reuters.com
The argument can be that they’re technically taking home 40% if you take their debt payments that’s paying for an asset.
But a car is a depreciating asset, so after 5 years they’ll technically have lost 50% of that money.
The 10% decrease in fees would go a long way for these drivers. I’ve spoken to a lot of them and it’s really sad what’s happened.
You may ask why did they join in the first place ? They were attracted to these services by glamorous stories of cab drivers making 1500-2000$ a month on these apps. But all fo that income was funded by inorganic incentives that never fit into the unit economics. It was basically VC funding that was channelled into a few drivers income, which then brought in a lot more.
I feel strongly about this as I’ve spoken to multiple drivers who make very little money and work about 12-14 hours a day. You can see a lot of them just sleep in the car in the night to make sure they can make ends meet.
On the other side, they’ve stopped heavily discounting the rides at the consumers end, which means demand has decreased because they had artificially inflated demand by providing a service at discounted prices.
So that means drivers don’t get as many rides either.
It’s basically a double whammy for the driver.
Aggregators charging 20% of the ride costs is just unempathetic and stupid if they actually did the math.
But obviously they’ll have to recoup all the VC money they’ve invested. It baffled me for a long that the unit economic never made sense for the longest time.
They took no fees, they gave discounts and they attracted drivers by inspiring them of glamourous stories where cab drivers were making more than most employees in India.
Most cab drivers who saw this as a gold rush, took on a lot of debt to buy a car and drive people around. With time they’ve realised it’s all a sham but there’s nothing they can do about it. They’ve already committed to the debt, and if they stopped paying it, they’ll loose the car, which is all they have as assets.
The truth is that cab drivers are making a livelihood, in fact a much better livelihood than they were making without Uber and Ola.
Source please. Also can you quantify "much better"?
Nevertheless the source is my twice daily ride with Uber and talking to the drivers. Most of the drivers are youngsters from villages with no degrees and no skills now making a living. They also don’t own the car and drive for someone else. The fact that the Uber/Ola commission is able to support the driver and owner should tell you something.
What then ? You’ll give up 30% of the money just because you don’t like Uber and Ola anymore. If the bank takes the car back, the driver loses all the money he’s toiled to make.
If you speak to a lot of them, they’ll tell you that once they clear the car debt and sell the car, they’d most probably head back home to their villages and just go back to farming.
They work a few hours a day and make 100-200$ a month. Vs making almost the same by toiling 12 hours a day in a car and in some of the worst traffic conditions.
Or are you saying they’re underwater on the loans? If so, what can the bank do about it besides repossess the car? How exactly are they stuck in the city working for Uber?
> They’ve already committed to the debt, and if they stopped paying it, they’ll loose the car, which is all they have as assets.
Drivers can leave Uber/Ola only if the Consumers also do.
For those who say drivers can just quit, try quitting your job when you are an unskilled labourer from a low income background without any significant savings, burdened with loans, you are the only income earner in your family of 4-5 and you have to cover food, rent, kid's education etc.
Please, have some empathy.
The more time they spend in cities , the more they realise how much freedom and happiness they have
They’ve realised that even if they don’t make as much money in a farm, it keeps them happy and it gives them food.
Adding more anecdotes about the insanity, papers a few years ago were rife with stories about Engineers quitting their jobs and turning into cab drivers overnight and making more money as a result! All this when OlUber fares were essentially costing the same as an Autorickshaw! It's little wonder that all the magic didn't last; one also wonders how much of this slowing down led to the current lack of demand in the Automotive sector. Most taxis here appear to be Suzuki Swifts, and Maruti-Suzuki has seen a big slow down as of late (but so have VW and other "premium" brands).
The result of all this madness is that a large fraction of egregious cars that ply on roads in Bluru are taxis, which as a bicycle commuter, has become a nightmare to me personally due to their collective recklessness. Then again, they have helped tackle the annoyances from the lack of service and "extra" charges of the Auto unions and the insanely crowded public transport systems.
But there was no incentive, nothing to tell the city’s drivers to show up en-masse. They would just earn the same city base fare
Thousands of people either had to walk or wait in line at the crowded metro station
Looking at it from the systems level, I'm not at all convinced that when a mass event spikes the demand for taxis, having drivers go to that event chasing profit is a good idea. Imagine half the plasma in your body moving to your digestive tract the second you eat something. I think from the city's perspective, it's better to have taxis minimize variance than maximize profit.
Actually this is not too far from what really happens soon after you eat a big meal. The blood flow to the stomach-related arteries greatly increases soon after a meal (not sure on actual number for "greatly").
I tend to agree with your main point in any case.
In response to a pricing surge I expected more drivers to be incentivized to get out of bed at 11PM and make more money
But if that hour of work at 11pm is worth the same as waking up 8 the next day then they lose out on thousands of people willing to pay surge pricing
That's true. But they also may be incentivized by demand surge in itself - when the demand overwhelms supply, they can earn maximum effective hourly rate, which is not the case when the demand is roughly matching the supply.
Adding surge pricing on top of that means wealthy people get prioritized, which is a separate effect and one that can be considered a) unfair, and b) disrupting to the regular city life, especially if the attendees of a mass event that caused the demand spike are wealthier on average than the regular citizens.
But when demand spikes in their area they are also hurt because the taxi fleet won’t respond
I'm sure surge pricing attracts more drivers, but it's no panacea¹ so long as there's finite road capacity at any price - if you want to avoid waiting in line entirely, attending major sporting events is not for you :)
¹ Unless the price surged so high taxi drivers could afford to build extra road capacity - which to me seems unlikely.
That would increase the incentive for drivers because Uber wouldn't be able to take a larger cut during surge pricing.
Fleecing who? Natives would never pay more than a dollar or two for a short ride, and never more than 10-20% more than the “fair” value. It’s even better in places like Mumbai, where everyone uses a standard meter.
Tourists would pay 10x but in my experience they don’t even notice or care they’re getting fleeced because $10 for a short (5-6km) trip is a reasonable price to them.
EDIT: Removed rant
I have probably taken rickshaws as much as you have but I don’t share your contempt for them. They’re doing a difficult job and they’re charging very little for it. You complain so much about their attitude but do you complain about the customer who refuses to pay more than what they paid 5 years ago, as if inflation didn’t exist.
1) It’s not tourists or foreigners taking advantage of other Indians - it is Indians. Indian people disrespect and mistreat each other to an extend I have never seen anywhere else in the world. 2) It is not tourists who set the prices for taxi meters - it’s the Indian cities or governments; yet it is Indian cab drivers who often believe they stand above the Law and can take advantage of tourists because “they can afford it” 3) Nobody argues about rickshaws not doing a difficult job and I NEVER heard a tourist complain about the prices of rickshaw dwellers - only fellow Indians 4) It’s not tourists but Indians that pretend inflation doesn’t exist; tourists generally overpay
Yes, we “rich foreign tourists” can afford to pay 10USD for a ride across town; but it’s not the same deal as riding in an actually safe vehicle with seatbelts and a driver passing an actual driving license in Europe or the US; taking these aspects into account the 10 USD trips are a rip off
Yes, countries can continue to take advantage of tourists, squeeze them as much as they can and justify that with the “they can afford it”. I will never travel to India again unless I HAVE to for business purposes - because I am just tired of it. There are a million cleaner places on earth - with people being more honest. Yes, in other Asian countries people also haggle - but at least they take care of their environment.
You know, people that believe that “taking advantage of foreigners is ok because they have the money” aren’t exactly contributing to the reputation of a country. What’s left?
Treat everybody with respect - and good stuff will happen.
“taking advantage of foreigners is ok because they have the money” is not something most people believe. There is a large population that lives below the poverty line and will overcharge anyone who can and will take it.
Yes, we have a big cleanliness problem, but that's an extension of our poverty problem. We have a lot of people who's concern is providing for the family instead of fulfillment. It's not hard to see why that's not a priority for them.
We are stuck here because British colonization, theft, and messy departure left us poorer, with broken politics, and a corrupt bureaucracy. Still, that's an obstacle, not an excuse. We're improving. I see no country without problems.
We have quite a few pristine and beautiful places where the locals care about their surroundings. Did you visit anywhere beyond the city you had business in?
Pls don't blame the poor. I have seen the educated, the rich have complete disregard for public property and cleanliness.
> We are stuck here because British colonization.
Also, don't blame the political incompetence and failing governance on the imperialists. They gave Indians the freedom to change the system in any which way they wanted, and this is what they ended up with, for better or for worse. If history is any indicator, the powerful and the corrpupt always find ways to game the system, as it were.
In places without tourists people were generally honest. The street vendor living off a few rupees each day for bananas would not take a rupee too much. I wish I could believe the “the dumb tourist tax is helping the needy and poor” - but it only fills the pockets of the (relatively) wealthy. It’s their sense of “entitlement to the money of these wasteful Westerners”.
India and China (lived there for > 1 yr) were pretty much the same 25 yrs ago in terms of GDP and population. That was long after any British influence - yet both developed very differently.
If I had to make a guess, it would be: how people treat family and society. As a foreigner, it seemed to me that Indians never care about society or anybody except their own family. In China, people are very focused on society and less on family. In India, people were mainly interested in their own immediate gain - in China they had some “boundaries” at least.
Cleanliness is not “we can’t afford better” it is “people genuinely don’t care when it’s outside their house”. The slums in Mumbai were among the best organized and cleanest places I found in India. People cared because they had to and wanted to - not because they could afford.
In India whenever I asked an official (police) for help or advice, they would sell me off to some relative. In China I never experienced that.
I can’t generalize a couple of years abroad in different countries, but I would kind a take the guess that if you worked on actually “trying go make society work beyond immediate personal gain” things might look different in India.
I have a complex relationship with India - because of many positive and negative experiences. As you continue to rip us foreigners and tourists off - we will stop spending money in your country. I’m tired of being accused to “be too dumb to inform myself” when the police and society are just rigged to steal from me because I am white and “look rich”. I am tired of being accused that the entire world is just taking advantage of Indians when the trading balance tells otherwise and it’s Indian people that care so little about each other.
It was really sad and heartbreaking to see how in China pollution gets less and less whereas India really became “totally unbearable” in the recent years.
I understand that personal preferences may vary and people on HN probably enjoy a good portion of China bashing; but if I had to chose - it would always be China over India for me. Healthcare, education, social mobility, equality between men and women, legal system: I can’t think of any reason why I would prefer India over China.
I’m happy that thanks to Modi there now are toilets in India - but there is a lot to catch up still...
China has lifted more people out of poverty than the rest of the world combined.
In 2018, almost 1000 people got killed by police in the US. Not a great statistic either...
Well, governments deem progressive taxation to be fair, and is hailed by economists and general populace all around the world, so perhaps faulting people for doing the same is not quite fair in the large scheme of things.
However, it's just annoying, non-transparent and extremely frustrating.
Victim blaming much?
Most of the people who participated in that AND most of those who were affected by it are old and/or dead. Where we are right now is entirely on us, and even if it weren't, the people in the UK owe us nothing.
The prices in India is generally insanely low, because the tax payers subsidise it for the poor or the poor themselves take a hit at the margin because the consumers are simply too poor to pay.
An example of tax payer subsidy is when the entry to a museum is 10 or 20 cents or public transports where tickets have an upper limit around 40-50 cents. The poor subsidising the market price is when the street vendor or vegetable market works on a thin margin simply because they can not sell for any higher.
Westerner especially Europeans must realise that they are being ripped off everyday by their own government & businesses which are focused only on profit maximisation instead of value to the consumer.
Dumpster diving is not a big thing and it is simply incorrect that half the products are thrown away... People in Europe are generally very sensitive to food waste and the infrastructure we put in place to keep it fresh is pretty decent.
Democracy in Europe (and other places) decided that it is justified to “take money disproportionally from society” because “majority vote justifies that 20% of population need to pay for 80% of costs”. I may not like this aspect of democracy (e.g., majority gives always a justification over whatever you want to do) but well...
Indians might want to understand that Europe see taxes as a way to create a liveable and fair society. That the need and desire of the individual sometimes is not as important as “the greater good”.
In India, the rich are certainly not subsidizing the poor. If I am not mistaken, your “elite” keeps 2x India’s GDP hidden away in Switzerland still? The Swiss offered help - but your government refused and felt the money better stays where it is.
The society you see in India is the society Indians created. I would not trade it for Europe ever.
To your point above, I do appreciate the quality of life in Europe. However, even the most conscientious among the Europeans - the Nordics are not anymore greener than the american, it is largely a feel good window dressing.
Prices for museums etc. ARE in fact much higher for tourists (factor 5-10x usually if I recall). In a sense the tourists probably subsidize many cultural sites for the Indian population (which is fair).
The energy consumption in the US is twice as high as in Europe per capita - eyeballing the numbers I believe India is not exactly green either (rural areas without any access to electricity etc. distort the numbers unless you want to keep those people “in the dark”...)
But it’s not only energy consumption - it’s also the passionate “trashing and burning of trash” that doesn’t do the Indian environment any good.
Delhi, Mumbai etc. - the air has become more and more toxic over the years.
I don’t want to start a “who is better who is worse” - but the “I only care for myself and nobody else” mentality affects all aspects from tourism to environment and harms the people themselves. That was the entire point.
If a potential visitor accurately hears that taxi drivers in Country X will double or triple their prices for foreigners, and they're used to paying $60 for a taxi to the airport, a portion of them will infer they might be charged $180.
How many of those do you suppose will visit at all, and if they do how many do you think will take taxis?
Please. Autowallahs have their own versions of "surge pricing", which is even more frustrating and non-transparent. Night time ? Triple rate. Going to a residential area ? Double rate, because the vehicle need to return empty.
Source: I'm a resident.
Little wonder everyone is advised to use prepaid taxis in India. I've been told by various sources that this the development of the petty "anti-capitalist" politics that dominated India since its supposed independence.
Here's a fair proposal:
1. Encourage competitors and allow the free market to set prices and revenue shares. A vendor undercutting prices will get higher ridership
2. Prevent price gouging via collusion - do not let the companies cartel up
3. Limiting surge pricing to 2X is the only reasonable policy in their proposal
After all, every stakeholder in this vertical is an at-will participant, with no compulsion to stay if the economics do not work out
That's not true. There are only 2 aggregators to choose from. Staying off one is not a feasible option for most.
> the government is baselessly capping their earnings.
They are not capping earning, they are capping percentage of fares. The cab driver puts in most of the cost.
> Encourage competitors and allow the free market to set prices and revenue shares. A vendor undercutting prices will get higher ridership
How? A company trying to enter this market would have a loong cash burn ahead of it with no certainty of a profit. Like social media, there's an inertia to users platform switching.
How any of this gives you reason to celebrate them rather than question what the f- went wrong is absolutely beyond me
Net-positive for who? Folks who can afford to pay for their services? That's probably just the top 10%. If you speak to the drivers, they have nothing but complaints about the economics of it all.
Not discounting the fact that there's increased traffic now and overall less emphasis on using/improving public transit.
> After pouring billions into creating and proving a market, the government is baselessly capping their earnings.
I don't understand this line of thinking: Pouring billions shouldn't really get you a free pass to exploit, corrupt, amend, sway, flout, transcend, overpower governance, regulations, laws, discussions, resources. As far as creating value is concerned (on-demand rides), may be you've got a point: The taxi industry was expensive before Ola and Uber set foot, but it turns out VC money is finite, and expensive is what makes it work economically on the supply-side.
> After all, every stakeholder in this vertical is an at-will participant, with no compulsion to stay if the economics do not work out.
Surely, you have heard abt the high incentives based payment structure that Uber and Ola had in 2015/16 that coerced the drivers into taking loans for their cars which they struggle to since pay, now that those incentives have been changed because IPO? It doesn't seem to me you're thinking much from the drivers' side who are really struggling to make ends meet with the current predatory commissions that Uber et al enforce. The problem here is, there's a disproportionate amount of power in the hands of aggregators which time and again they've exercised in a ruthless manner: There's a need to curb that greed that otherwise would eat up the already economically struggling populace, imho.
A government jobs in theory is to make sure they get the best possible deal for whatever area they are responsible for.
A situation in which Uber takes smaller cut and money flows to the drivers may be more beneficial for the local economy.
India is essentially planning on fortifying Uber's position. Well done. Mission accomplished, lobbyists. Go long on Uber stock.
Really myopic. Yes Uber/Ola overcharge and don't pay the drivers enough, after enticing them with offers and getting them in debt. But Uber had done this in the US and shouldn't have been a surprise.
The so-called fleecing, arrogant auto rickshaw is more resilient, can navigate the traffic better.
[1] https://www.telegraphindia.com/india/nirmala-sitharaman-blam...
I'm not a particularly price sensitive customer, yet I find myself taking auto rickshaws more and more. The gap between their fares and Uber are becoming a little to unjustifiable. I'm comfortable with an Uber being 1.5-2x more than an auto, but fares these days are often 2.5-4x higher.
My Uber usage is now reserved mostly for edge cases - going to the airport, going home after a night out, bad weather conditions
Uber/Ola has slotted itself as more of a nice transport option than a necessity. That’s a good deal for me, all things considered. Hopefully it stays that way.
My issue with using auto rickshaws are two-fold.
The first is comfort and safety. Rickshaw rides just feel crap and I can never feel safe enough to just wear earphones and relax.
The second is integrity. I don’t mind paying more. But there have been 3 auto rides out of my last five where drivers ask for one amount drive halfway there and demand 2x. I don’t know if it’s because I’m not a local or if I just look vulnerable. I just feel like I’m being used.
I have talked to multiple Uber/Ola drivers. Sure the economics aren't as good now. But they are still better than alternatives. That's the sad truth. Unless people can get them better jobs, Uber/Ola will have to do.
No nationalized bank( majority of auto loans) will use a coercive process. Hell no private bank will use one. RBI has clamped on that practice as illegal in 2010. Worse case is the bank repos the car and auctions it.
Any lost of income can just be mitigated by raising headline fares. Since most drivers are on all apps at once, they will take the job that post the highest fares.
It’s unions pushing to force drivers to be employees, not drivers.
GDPR, European VAT rules, data security, encryption requirements, etc. In the end all this just makes it harder for newcomers. Existing companies only need to adapt, newcomers need to comply (spend more time and money), before they even can enter the market and start competing.
Having a better position for future regulation is another benefit for being a first mover advantage.