Indian Taxi Price Wars. Ola Slashes Fares to Rs. 10/km, Low Priced UberX Comes to Pune, Mumbai

Competition is always great, especially for consumers. First there were mobile voice calling price wars, then came the eCommerce wars (and it is far from over) and I think the next battleground seems to be Taxi fare prices.

Indian rental cab market is evolving at fast pace. While there have been number of players in taxi rental space for quite a while, with the rise of new-age mobile-and-tech-enabled taxi rental, this space has seen players aggressively taking steps to capture Indian cab-traveling consumers’.

Last week, Ola Cabs, one of the leading mobile application for cab booking announced fare reduction in it’s “Ola Mini” category for Delhi NCR region consumers. The prices have been reduced from Rs 14/km to Rs 10/km for Ola Mini. The minimum fare has also been reduced from Rs 150 for 6 kms to Rs 100 for 4 kms. Ola cabs is currently available in 12 cities of Mumbai, Bangalore, Delhi-NCR, Chennai, Pune, Goa, Jaipur, Chandigarh, Hyderabad, Ahmedabad, Indore and Lucknow

On the other hand, fast-growing San Francisco based Uber Cabs announced that they are introducing their affordable segment in three more Indian cities of Mumbai, Chennai and Pune. It is already available in Delhi and Bangalore. Uber Cabs recently launched in Ahmedabad, Chandigarh, Jaipur and Kolkata bringing the total cities to 10. India is now the largest market in terms of number of cities outside of US.

Uber has come up with a comparison chart to show how cheap Uber X is for it’s consumers. Here is for people traveling in Pune from point A to point B in various modes of transport.

While Ola has slashed its rates only in Delhi, these new low-fares are sure to be propagated soon to other cities as well. It is interesting to note that Ola’s rates being cheaper than Uber X (about 4 Rs. per km) are nearly equivalent to what a Auto Rickshaw charges in city of Pune (see above chart).

Our Take

Indian Taxi market is huge and is estimated to be in the region of $6 to $9 billion. However, a very small percentage (4% to 6%) of it organized. So, for taxi rental aggregators and providers, this is a huge untapped market. Even with rise of many new players in this space, they are unable to keep up with growing consumer demands.

In addition to this, it looks like very soon fares for these cabs are going to come to a level of what Auto-rickshaw charges to consumers. If that happens, most consumers will obviously prefer to travel by cabs rather than Auto-rickshaws. This will expand the market tremendously.

There is no doubt that these fall of rates is great for consumers – however, the key thing would be to see how these new age players are able to cope up with growing demand.

I have personally traveled with Uber and Ola couple of times, and the experience has been beyond my expectation. If such service is available at affordable rates, I may even ditch taking my own car from place A to place B, and so will many others.

The Taxi wars have begun and we will see who is the last man standing!