In what is being seen as the first big challenge to Uber’s growing dominance in the Indian market, domestic online cab aggregators are set to come together on a single platform to counter the predatory pricing unleashed by the foreign player.
A top executive of the country’s largest domestic player, Ola Cabs, told BusinessLine that dumping capital into the market will kill the fledgling industry completely. “Some of the players are using the profits they generate from international markets in the domestic market to lure drivers and attract customers at a price point that is not sustainable in the long term,” Ola’s Chief Operating Officer Pranay Jivrajka said.
Predatory pricing involves selling below the cost by giving out huge cash incentives to drivers to sustain the earnings they make from each ride.
Some of the top domestic cab aggregators came together at a recent seminar to collectively voice their concern about such tactics; the seminar was organised by the Management Development Institute in Gurugram.
Admitting that Ola too indulges in predatory pricing, Jivrajka said the company is forced to do this to maintain market share. “We are the only domestic player who has the capacity to dump capital and if we don’t do this, we can’t sustain our share.”
He, however, said Ola gives out a much lesser proportion in the form of incentives. He pointed out that Ola does not indulge in predatory pricing in markets where it is profitable. “Nearly 80 per cent of our markets are profitable, where we don’t give subsidy and infuse additional money from what the consumers are paying.”
Citing an example, Jivrajka said several drivers who work for Didi Chuxing, a cab aggregator in China, are up in arms as their earnings have dropped significantly after the company bought out Uber. “This is what predatory pricing does to the market where both customers as well as drivers start losing money in the long run,” he said.
Siddhartha Pahwa, the CEO of Meru Cabs and secretary of the Association of Radio Taxi India, said the new position taken by Ola was welcome as it now realises that such tactics will harm the industry eventually. “Those who deploy capital with the intent to kill competition will eventually hurt the industry,” he said.