10 December 2015 08:18:59 IST

Uber’s auto service shut; move raises doubts on the aggregation business

Service was launched just eight months back

Uber’s decision to shut down its auto aggregating platform has raised questions on the business model and viability of the auto aggregators. Uber Auto service was launched just eight months back.

In the last one year, the Indian market has witnessed the birth of over a half dozen start-ups such as Jugnoo, mGaadi, AutonCab, Telerickshaw, autowale alongwith taxi-hailing app Ola entering this fairly new segment.

Low profitability Though most of the companies have raised funds and have expanded into different cities, they have not been able to make money.

Market experts say there are regulatory hurdles in aggregating autos, and fundamental flaws from the customer point of view. Harish HV, Partner, Grant Thornton, said, “Aggregating autos is a challenge, as they are mostly regulated by the State government and are limited in numbers. This poses a big difficulty in scaling up as everybody is trying to aggregate the same auto.”

In the case of Uber, the auto service was probably to test the market, Harish said, adding that the company might have thought of shutting down the service after facing fulfilment issues – wherein the customer ordered for an auto which never turned up.

Another investor, requesting anonymity, said auto aggregators will face difficulties going forward if they do not have any differentiating factors such as subscription-based models, where customers do not have to book for an auto everyday.

For example, customers do not mind paying extra for an AC cab, but they will not pay for autos.

Apart from that, autos are abundant on roads and customers use it for short distances.

Competition Uber also has had to face stiff competition from Ola, which also launched its auto service this year and has already aggregated about 60,000 autos across 5 cities.

Uber has not disclosed numbers of the number of autos it had on its platform.

Launched as a cash-only service based on government approved metered fare, Uber had not extended its service beyond Delhi, whereas Ola, Jugnoo, Autowale have expanded it beyond cities they are based in and are taking payments through mobile wallets.