The Ola Story: Leading the Pack Despite Heavy Losses

Ola, in its tussle with Uber, has created competition & ease for consumers. But has all this come at too big a cost?

Ola has played the fare game and flourished, but how far can it take it in the long term? (Photo: BloombergQuint)

Up until now, Ola has been the leading cab aggregator in India, followed by global giant Uber. Others like Meru and Easy Cabs have lost the race amidst the pricing battle that the two lead players ignited. But what’s striking is that Ola’s dominance has continued despite losses ballooning in the past year.

The homegrown taxi app has reported a mammoth Rs 2,313 crore in losses against its revenue of Rs 758 crore, which increased by more than Rs 100 crore over last year. The revenue growth has come about after Ola decided to reduce driver incentives, a move which triggered strikes in parts of the country earlier this year.

Also Read: False Hopes & Few Perks: A Glimpse of Ola, Uber Drivers’ Plight

If you take into account the fact that Ola has raised over $1.5 billion till date from its investors, chances of the cab aggregator repaying its shareholders look slim.

Compared to this, Uber is willing to further up the ante and is planning to raise an additional $1 billion in the years to come. Uber’s case is aided by its overall valuation, which stands close to $70 billion.

Clearly, the loss-ridden Ola has a battle on its hands. The homegrown cab aggregator, in its tussle with Uber, might have created competition, disruption and joy for consumers. But has all this come at too big a cost?

Ola and Uber’s market share. (Photo Courtesy: Kalagato)

This chart is indicative of the narrowing gap between Ola and Uber. So, not only are they neck-and-neck in terms of earnings, their overall market share seems to be at par as well.

Ola caters to over 102 cities, while Uber services less than 30 cities in India.

This staggering fact leads us to the big question – Why is Ola active in so many cities? And despite this, why are its earnings the same as Uber’s in India, even though Uber operates in far fewer locations? Has the cash infusion into Ola been utilised properly? Has the company gone overboard with its marketing and hiring spends?

The key here is to see if its investors are willing to bide their time, battle it out against a global player like Uber and continue to put the money where it matters. On the other hand, Ola needs to ensure that it pumps in money into services that’ll help it earn it back.

The key risk for Ola, like so many other Indian startups, is the weakening of investor appetite. Most fund managers and their ICs never expected such long and hard-fought battles. They now need cash exits, not valuation gains. 

Report by Research and Analytics Firm Kalagato

What the Cabs Pay

Ola’s business has thrived thanks to its entry-level Micro and Share services. Indians, being extremely price-conscious, have readily embraced travelling in four-wheelers for a fraction of the cost they were paying for a Meru or EasyCab (from Rs 23/km to Rs 8/km).

This has even forced Meru to bring its fares down to Rs 16/km, while cheekily promising no surge fares.

Ola has added offerings like SharePass to encourage more people to pool their rides with others. It also rolled out Ola Play, which offers in-car entertainment.

If Ola and Uber are to make big money, their big focus needs to be on the cab business. (Photo: Reuters)

Then there’s also Ola Lux that lets users book a BMW or a Jaguar. These varied avenues are where Ola’s money has been spent, with more expected to be added in the coming months.

Uber has stayed true to its Go, X and XL services. It introduced Hire recently, and is now offering UberEats as well.

But let’s get it straight, for Ola and Uber to make some big bucks, their big focus needs to be on the cab business.