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Global ride-hailing firm Uber Technologies is rethinking its car leasing strategy in India, its second-biggest market, as drivers have returned dozens of leased cars early after the company cut incentives, people familiar with the matter told Reuters.
Uber had planned to buy 15,000 new cars last year and lease them out in a bid to attract more drivers – a strategy it has used in other markets – but it suspended the scheme for a while in December after leasing just a third of that total.
After burning through millions of dollars over three years in a battle for market share with local rival Ola, backed by Japan's Softbank, Uber has cut the incentives it gives to drivers and raised the fares it charges passengers.
The incentives and, to an extent, the leasing scheme aimed at drivers without their own cars, boosted Uber's driver numbers, helping it rapidly gain around 30 percent market share.
Uber has said its services are in 29 Indian cities and it has more than 2,50,000 drivers on its platform, but it lags Ola, which says it operates in more than 100 cities with about 5,50,000 drivers.
Two people with knowledge of the matter said Uber miscalculated the impact that the reduced incentives would have on drivers' earnings, especially those making lease payments.
At an open meeting for staff in December, around the time the incentives were being reduced, Uber's India chief Amit Jain said the buying-for-lease scheme was being temporarily suspended while the company evaluated its leasing strategy, one of the sources said.
Uber did not comment on Reuters queries related to Jain's announcement or the impact of the incentives cuts on its leasing programme.
Raj Beri, business head for leasing in India, said the scheme was set up to help drivers without cars get on its platform and make money. He said:
In a recent blog post on Uber's website, Jain defended the cuts to driver incentives and signalled a strategic shift for India. "We can shift from start-up mode to a more sustainable business model," he wrote.
Leasing is only a small part of Uber's overall supply in India, but is seen as a way to lock drivers on to its platform for longer, and stop them switching to Ola.
That wasn't an issue when incentives were high.
Several Uber drivers said they feel trapped as a surge in the number of cars on Uber's platform has led to fewer rides, at a time when incentives have been cut, making it harder to keep up lease payments.
In a dusty car lot on Delhi's outskirts, guards told Reuters that dozens of cars standing idle belonged to Uber and had been returned by drivers.
An Uber spokesman said the company doesn't comment on "anonymous speculation".
As part of its review, Uber may reduce the three-year lease term and let two drivers share the rent on a car, one of the sources said.
Uber did not comment on its leasing targets or the future of the scheme.
"People left well-paying jobs to drive an Uber," said Sandeep, another Delhi driver, adding his monthly ride income has nearly halved to Rs 60,000 in two years, despite working longer hours.
(Published in an arrangement with Reuters)
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