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Despite trailing local competitor Ola in terms of size, customer survey reveals that it is the most popular company in markets where both providers compete

Shared mobility service provider Uber has operations across 40 cities in India. Although it lags behind its local competitor Ola in size, it is the most popular company in markets where both providers compete, indicates our new research, ‘Company Profile of Uber in India, 2019.’

Headquartered in San Francisco, Uber has a presence in over 700 cities spread across 70 countries. Spread across the globe, it has the biggest ridesharing network. India is Uber’s only major market in Asia, as it has sold its operations in China, Russia, and eight other countries in Southeast Asia.

The company is now considering making India its global hub for research and development to solve mobility and transport related problems in global markets. Uber is also on the verge of going electric. It has entered into a pilot partnership with Mahindra & Mahindra to add 50 electric vehicles to its fleet in Hyderabad.

Apart from the ridesharing, Uber had a vehicle leasing business in India, called the Xchange Leasing India Private Limited (XLI). This unit was sold off to start-up car leasing marketplace Fair.com, after the business incurred huge losses.

In 2017, Uber launched its food delivery business in India called Uber Eats. It currently competes with major players in the segment. Despite the diversification, eHailing remains the major revenue generating business for Uber in India. In 2018, the company completed over one billion rides in India and South Asia.

A Race with Ola

Ever since its entry into the eHailing market, Uber has faced stiff competition from its domestic competitor, Ola. In fact, Uber is Ola’s only key competitor in the Indian market. Both companies also compete in Australia, New Zealand, and the U.K.

As of 2018, Ola was ahead of Uber in terms of rides and presence in cities across India. Though both Ola and Uber have a presence in all metro and tier-1 cities, Uber has covered only 43% of the 68 tier-2 cities in the country. Ola, meanwhile, has a 71% presence in tier-2 cities.

Among tier-3 cities, Uber has the least coverage. While it has a presence in just 5 tier-3 cities, Ola has covered 155 in the segment. However, across service offerings and in tier-1 markets, Uber gives Ola stiff competition. Uber is the most preferred mobility partner in all tier-1 cities of India except Delhi-NCR, such as Chennai, Mumbai, Hyderabad, Kolkata, and Bengaluru.

The Most Preferred Brand

Though Ola is the largest player in the Indian market, Uber is the most preferred provider. There are several reasons why Uber has outdone Ola in customer satisfaction, according to the ‘voice of customer’ survey conducted by Frost & Sullivan as part of this research study.

Pricing is a key reason, as Uber is cheaper compared to Ola. Further, customers feel there are fewer instances of drivers denying service in Uber compared to its competitor. A substantial 61.1% of customers who responded to the survey said they found Uber cheaper than Ola, while 47.2% felt Uber has better cab availability.
Interestingly, Japanese multinational conglomerate SoftBank is a common investor in both Uber and Ola, holding a 15% and 26% stake, respectively.

Food Delivery Represents a Growing Business

The online food delivery market in India has remained consolidated since its inception. Only a few players hold a major market share. In May 2017, Uber’s food delivery business Uber Eats was launched in India. It competes with players such as Zomato, Swiggy, and Ola (through FoodPanda). Uber Eats charges up to 30% commission from its restaurant partners, depending on factors such as menu rates, delivery costs, and rental prices.

Globally, Uber Eats covers 220 cities, and has 80,000 partner restaurants. Of these, 12,000 restaurants are in India, with at least 40 new ones being added daily across the country. Uber Eats has operations in 37 cities across India, and a strong presence in tier-2 towns.

With increasing urbanization, Uber Eats sees fresh opportunities in expanding into newer tier-2 cities. The company has entered into a strategic partnership with Café Coffee Day to launch a network of virtual restaurants across multiple brands, which will be available for delivery exclusively on its platform.

With quick expansion across small cities and towns, Uber Eats grew sevenfold in volume within 6 months of its launch. While Swiggy, the market leader, clocked average daily orders of 800,000 as of December 2018, Zomato secured 650,000 and Uber Eats 150,000 orders.

Interestingly, Uber was all set to exit the food delivery business, and sell its operations to Swiggy. The decision came as the company was burning around $20 million a month in India to survive in a market where heavy price discounts by participants in the norm. However, the deal with Swiggy was called off in April 2019 as the companies failed to agree on financial and taxation clauses.

The Road Ahead

Uber plans to create a more sustainable business model in the future by transforming its role and expanding its horizon. Though eHailing will continue to be Uber’s main business in India, the company is planning to enter the bike sharing market, too. It has already partnered with Yulu to make e-scooters and cycles available for its users.

Uber is also planning to take on the trucking industry in the country with the launch of its Uber Freight service, which will help truck drivers connect with shipping companies in India. The company is also planning to start its aerial taxi service Uber Air in Delhi, Mumbai, and Bengaluru by 2023. Fares for the short term will be around Rs 200 per kilometre.

Uber is also planning to deploy autonomous vehicles in India soon. It has a collaboration with Toyota, and is well positioned to launch the automated ridesharing services. With these initiatives, Uber India’s revenues are expected to grow substantially from the current $78 million to $372 million by 2025.

Though Uber faces intense competition from Ola, the company feels India is a high volume market, considering the growing population and increasing per capita income along with the increasing millennial population. These factors are expected to drive the eHailing market in the country.

For more information on the Company Profile of Uber in India, 2019, please write to Bakar Sadik Agwan, Research Analyst – Mobility, at bakar.agwan@frost.com

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