Some of you may remember Mr. C Sivasankaran’s announcement to foray in to the cab space with Utoo Cabs (that’s pronounced ‘ut — too’ not U2). For those less familiar with the man — he was the original promoter of the Aircel group before selling his stake to Maxis in 2006. You should read about that — it’s a movie waiting to be made.
Anyway, backed by the Piramal Group — he’s jumped into the fray and is taking on Uber & Ola with Utoo Cabs. They seem to be making some headway.
In less than a year, they’ve found their way into just over 0.4% of smartphones in the country. That’s impressive since they’re currently operational in only 3 cities — Bengaluru, Chennai & Hyderabad.
The value of their rides ranges between Rs. 130 — Rs. 200 with a median spend of Rs. 170. That’s significantly higher than Uber & Ola (you can see their rides values here). So you’re likely to spend more per ride with Utoo then you are with Uber or Ola. That’s pretty ironic given their USP is that they don’t apply surge pricing.
That and the fact they offer to buy homes for their drivers. Seriously. Read this article if you don’t believe it. Since the financial engineering involved in buying a house for some or all of your drivers is the subject of a report of its own — my question is this — is capital all it takes to enter the taxi segment?
At this point, why would you, as a user, even look beyond Ola & Uber? You’re clearly paying more per ride with Utoo since both of these players are willing to lose money to ferry you around.
Even if you have access to capital (which Utoo does), can you serve the same customer as effectively as Uber/Ola at this late stage of the game? How do you create network density so that customers don’t have long waiting times?
In the taxi business, we know that supply matters.
From a customer experience point of view — it’s the only real differentiator. Are drivers, who’ve grown used to fat incentives from Uber/Ola, leaving in such large numbers that a third player can hope to emerge? How can any company offer these incentives and expect to make money? The economics won’t work.
How long can you artificially keep end user prices lower than costs? And if you don’t, how will you get customers if your competition is willing to lose money and you’re not?
Thanks for your time,
Ashish
- Team KG
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You can reach me on ashish@kalagato.com
