BAMCEF UNIFICATION CONFERENCE 7

Published on 10 Mar 2013 ALL INDIA BAMCEF UNIFICATION CONFERENCE HELD AT Dr.B. R. AMBEDKAR BHAVAN,DADAR,MUMBAI ON 2ND AND 3RD MARCH 2013. Mr.PALASH BISWAS (JOURNALIST -KOLKATA) DELIVERING HER SPEECH. http://www.youtube.com/watch?v=oLL-n6MrcoM http://youtu.be/oLL-n6MrcoM

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Thursday, November 27, 2014

CABS, PHONES AND BILLIONS OF DOLLARS START-UPS HOPE TO MAKE

Nov 27 2014 : The Economic Times (Kolkata)
CABS, PHONES AND BILLIONS OF DOLLARS START-UPS HOPE TO MAKE


A new and unlikely, symbiotic and yet uneasy partnership between tech-powered and VC-funded start-ups and thousands of unsophisticated driver-operators is changing the way the `50,000crore taxi industry works, writes Shelley Singh
Ram Kumar, 28, carries three phones -an iPhone 4S, a Samsung and a Micromax Canvas. Four years back when he came to Delhi from Badhauli, a village close to Lucknow, he owned none. The phones are lifelines to this fifth standard dropout who has been driving for a living -a tempo in Lucknow to begin with followed by stints with local taxi operators, before he joined Taxi For Sure.He brought his first car, a Swift Dzire two months ago and has put it in service with Uber, the global rideshare start-up that is in the news for many good reasons and some bad ones. Uber gave him the iPhone. It also gave him and his car a makeover.
Uber asked him to change the bumper of his car from black to white, to go with the colour of the car. It instructed him never to start his day without a bath and to wear a neatly pressed grey uniform with black shoes, polished daily.
The iPhone buzzes bookings from Uber and rides from Taxi For Sure come on the Micromax. Running with two cab companies will help him make more money, he hopes. The Samsung is for his personal use.
Uber's powerful algorithm and software spews out bookings into Kumar's iPhone and has come to run his life. He does eight to 10 trips a day now, higher than the three to four daily trips he averaged earlier.
This new, intriguing and symbiotic, yet uneasy partnership between two contrasting players -venture-funded and tech-powered start-ups like Ola, Taxi For Sure and Uber on the one hand and thousands of unsophisticated driver-operators on the other -is slowly changing the way the $8 billion to $10 billion Indian taxi business works.
By using technology to connect the dots, this bunch of cab start-ups is making it easier and cheaper for customers to find cars and are also helping driver-operators to get more business. Doing this well is helping them earn fancy valuations.
Sample this: ANI Technologies -it owns the Ola brand -clocked revenues of `51 crore and losses of `34.2 crore in FY14.Effectively it is now losing `67 for every `100 earned. And yet, the last round of $210 million funding it received from Japan's SoftBank valued ANI Technologies at $650 million (almost `4,000 crore).
Investors are betting that this business will grow exponentially and profits will eventually come. About `470 crore of taxi business was done via the digital platform (laptop and smartphone) in the first eight months of 2014, estimates PhoCusWright, a travel industry research consultancy.
The growth is in tandem with the rise in the smartphone user population in India -179 million out of 300 million net users log on from their handhelds. At least 95% of this market is still dominated by unorganised operators.
"Any sector with a high degree of unorganised play is an easy target to disruptive forces. Now, that's being seen in the taxi business,"says Abdul Majeed, partner, PricewaterhouseCoopers (PwC). "I believe the taxi business will soar to $23-25 billion by 2025 with innovations on multiple fronts -drivers, cars, price and experience."
Odd, but Productive Partnership
The oddity of this partnership between techpowered start-ups and unsophisticated driver-operators is best captured in the iPhone Uber has given to Ram Kumar.
"The iPhone is disabled -I can't make calls or surf the net. Uber disabled it as drivers were watching videos in their free time," says Kumar.
"The purpose of the iPhone is to receive and transport people, not for anything else.It is disabled for security and functionality reasons," says Neeraj Singhal, head of expansion, India & subcontinent, Uber.Singhal, a CFA, joined Uber in 2013 and is based out of San Francisco, the start-up's headquarters. "Uber puts money in my account directly every seven days. I was told the money comes from America," says Kumar, in awe of the efficiency of the system. "I get a balance alert on my Samsung."
Along with the business flowing in through the phones comes some tension too. Says Vineet Chauhan, a driver with Ola: "I don't understand the pricing logic. When I was with Meru, it was `23 per km, now it is `14 per km. Companies don't explain the logic of pricing to us. But there is no choice. If I don't sign up with them, I won't get business."
But this partnership, however odd and edgy, is turning out to be productive.
At the very basic level, drivers are connecting more easily with customers, thereby spending less idle time and earning more."Earlier a taxi and customer could be 50 yards apart, but unable to connect. Now via apps they are making the business conven ient for both," says Vikas Agnihotri, director, travel, BFSI, CPG, Google India.
All of Uber's customers land on the app as that's the only way you can book either its Black service, equivalent of a business class, for `18 per km or the X service, an economy ride, for `14 per km. Nearly 80% of Ola bookings are via the smartphone app and close to zilch from laptops and desktops. The balance is accounted for by call centre bookings.Unpredictability is quickly going away as people use apps to book cabs, says Agnihotri.There are 1.6 million registered taxis in the country. Inventory of cabs connected with organised players like Ola, Meru and Uber comes to less than one lakh, giving plenty of room to grow. PhoCusWright predicts a 12% year-on-year increase in the car rental business, while PwC is more bullish with a 15-18% growth outlook per year. The demand, according to Aprameya Radhakrishna, cofounder, Taxi for Sure, is 10 times more than supply. "That gives a potential market size of $60 billion," says Radhakrishna. Adds Siddhartha Pahwa , CEO, Meru Cabs: "My demand is 25% more than what I can supply."
More Cabs, More Cities...
This unlikely partnership is powering a rap id shift -more and more driver-operators are being enrolled by the cab companies.
Taxi For Sure added 11 cities in the past four months, taking its penetration to 14 cit ies. It covered only three cities in the first two years after its launch, but plans to expand to 56 cities in the next one year, according to Radhakrishna. Meru covers 12 cities and plans to add one new city each month -this month was Chandigarh. Carzonrent, a 15-year-old company that runs EasyCabs and is present in 39 cities, plans a 200-city expansion in two years.
Uber, which started in December 2013 in India, is in 10 cities; its largest operation (in terms of cities covered) outside the US.Says Uber's Singhal: "We have seen 35% month-on-month growth so far. Now with PayTM, there has been a surge in traffic."
Uber partnered with PayTM for mobile payments in October -the move necessitated by regulation as the Reserve Bank of India does not permit the single-step payment authentication that the Uber app allows.
...and Cheaper Rides
In its latest move, Uber has sent out comparative prices, comparing itself not with rival taxi operators but with autorickshaws! A ride on UberGo, it claims, will be cheaper than taking an auto. For example, it is charging `85 for a ride from South Delhi's Safdarjung Enclave and central Delhi's Khan Market. An auto ride would cost `90.However, as this writer found out, getting cabs at such low rates is almost impossible. "Such schemes are to attract customers, who will end up taking a dearer op tion," says an analyst who wished not to be named.
Adds Amit Yadav, a driver with Meru, Ola and Uber, "I avoid calls to pick up pas sengers at low rates."
On November 1, Taxi For Sure launched `49 for the first 4 km scheme.Last week Meru offered 30% cash back for booking via its mobile wallet. In September, Meru ran `happy hours', giving discounts of `100 for trips between 11 am and 4 pm.
"This is great for customers, but drivers are getting crushed," says Vineet Chauhan, who drives a two year old Dezire for Ola. Adds Kumar, who drives for Uber and Taxi For Sure: "We get more rides to compensate for falling rates, but then there's hardly any time for even a tea break." Uber's Singhal sees things dif ferently. "We have seen that a decrease in prices increases driver earning over time. It's eventually a win-win for all," he says. That's not the only reason prices are coming down. "Demand outstrips supply, so prices should go up. But schemes like `49 for 4 km is our way of making an investment in a growing market," says Radhakrishna.
As much as they complain, drivers are also switching to where customers are going. And customers are going where prices are less -mostly Uber, Ola, Taxi For Sure etc.
Older players like Meru though are refusing to cut rates to build the market. Says Pahwa of Meru: "We have not reduced our base price of `23 per km. We will rely on cash back plans or happy hours that we had in September. At `14 per km we offer Meru Genie -hatchbacks like Toyota Liva and Ford Figo."
Of Lollipops and Surge Pricing
On the one hand, companies are slash ing prices to build the market. But on the other, they are quick to spot oppor tunities to augment revenues.
Borrowing ideas the from hotel and airline industries, some cab companies are moving to dy namic pricing. Uber's pricing is driven by an algorithm. "A sud den spike in demand will increase rates," says Singhal. `Surge pricing' is the industry term used to describe this. Fridays are busy and revellers may have to wait longer or shell out more. "But it's good for customers as eventually more drivers will hit the roads, easing short-term supply con straints," he adds. Uber offered `30 per ride extra to drivers on Diwali to encourage more cabs on roads.
Surge pricing may be a sign of things to come, but for now, prices are moving down.
Savaari Car Rentals (SCR) -funded by Intel Capital and Inventus Capital -offers an airport drop for as low as `199, within 15 km of the airport and for `549 beyond that. "The earlier you book, the cheaper you get," says Gaurav Aggarwal, founder, SCR.
SCR is planning to give unlimited eight-hour rides. So far, eight-hour rides are for up to 80 km and thereafter a user pays more. "We will charge a minimum `1,500 for a Sedan and un limited distance. Also, to go from one city to another, the user pays for a two way journey. We will now charge only for one way," says Aggarwal.
More and more entrepreneurs are jumping into the great Indian cab party.
Old car rental companies are adopting the aggregation model. CarClub, with a fleet of 7,000, 60% owned in 55 cities, catering mostly to corporates like IBM, Oracle, Cisco, is one example. It is get ting its aggregation platform ready and plans to be in 200 cities by March 2016. "I believe the second-car ownership concept will go away as parking charges surge and space becomes an issue. This will further increase demand for taxis," says SP Balasubramanian, managing director, CarClub.
What Explains the Entrepreneurial Frenzy?
Three factors are fuelling this en trepreneurial frenzy. First, there is plenty of venture capital money flow ing into this sector. VC funds have invested at least $326 million in four cab companies over the past few years.
More millions are flowing in.
Second, investors are betting that technology can swing bookings away from the unorganised sector in favour of the new cab start-ups. Cab aggregators ­ Taxi For Sure, Ola, Meru and Carzonrent ­ together employ 4,400 people. Of this 800 or 18% of employees work in technology teams of these companies.
Surge pricing ­ which can help companies achieve spikes in profitability -is very much technology driven. Taxi for Sure offers Magic Trips to its drivers -a solution that tracks user behaviour over time and predicts the likelihood of picking passengers at a particular place say at offices or airports. Meru, which has a 350-member technology team, believes survival is impossible otherwise. "Business is shifting.
A non-technology based company can't see a change in consumer behaviour," says Pahwa .
The third reason, of course is this partnership between cab companies and drivers.
The cab companies need the drivers -mil lions of them. Drivers can get more business from the start-ups, even though they have to drive a lot more at lower rates. As the industry grows, the two are becoming more and more dependent on each other.
Three drivers ET spoke to for this story initially started as daily wage earners -driving taxis owned by companies like Meru, EasyCabs.As their earnings improve and they can spare money to pay loans they opt for vehicle finance (offered by the cab companies). In the third stage -where Kumar, Chauhan and Yadav are now -they buy their own cars and tie up with one or many cab aggregators.
The relationship between cab companies and its drivers is symbiotic, but it is not loyal. Drivers frequently hop from one aggregator to another and also run the same car with many aggregators, choosing the one offering the best deal. the one offering the best deal.
Meru and Carzonrent have a fleet of about 7,500 and 10,000 cars, but own only 12-15% of this. The rest, they claim are dedicated to them, following long associations with drivers. However, loyalties are eroding fast."We will go where business is," says driver-operator Yadav.
Meru and Carzonrent offer four-year vehicle financ ing -enabling many with driving skills to become mini-entrepreneurs with one or two cars. In doing so, they get a hold on the drivers till the loan is repaid by the drivers. But once the loan is repaid, the driver is free to enrol with other taxi services.
The `50,000-crore taxi market is in the throes of a major churn. "The intermediary is doing new things with a new cost structure," says Rajiv Vij, managing director & CEO, Carzonrent. "If a user gets a Mercedes or a BMW for `20 a km, he will be happy as the actual cost is over `100 per km... but for how long? The price is not real and not sustainable."
Every stakeholder is taking risks believing in the growth to come. But the investor needs to earn his money back, hopefully with returns commensurate with the risk taken. Cab companies, which are now making big losses, need to find a path to profitability.
Driver-operators can't be squeezed too much more.
What about consumers? "In July-September quarter, there has been a 118% increase in cab search-related queries on mobiles," says Agnihotri. Consumers only need to swipe their smartphone for their next cheap ride.shelley.singh@timesgroup.com





















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