The company, hoping to attract a wave of drivers to its platform, ran an ad featuring a cabby who credited Ola for an upswing in his fortunes. He narrates how he “turned his life around in 6 months” after leasing a vehicle through Ola’s leasing scheme.
Cab leasing scheme
Ola’s cab-leasing scheme, started that same year under the banner of Ola Fleet Technologies Pvt. Ltd, saw the company stockpile both new and used cars, leasing the same out to drivers for down payments as low as Rs 25,000 ($366). Following this, drivers get to drive around in their chosen vehicles for a daily fee. The objective was simple: increase the number of cabs on its platform to keep up with growing demand.
These upsurge in-cab numbers were something Ola realized was vital very early on. Demand for affordable cabs, in a country riddled with poor public transport infrastructure, rising fuel prices and a burgeoning population, was never going to be the hard part. Even with Uber and its deep pockets entering the fray. However, it would take more than affordability and pricing to win the cab wars. And Ola bet that supply would be the X-factor.
With attractive incentives and the leasing scheme to get them started, Ola managed to attract several youngsters and middle-aged Indians struggling to find stable jobs to come onboard as driver-partners. Traditional taxi and fleet operators with 10-50 cars also started listing on Ola, and they too were interested in leasing cars under the new scheme. For its part, Ola set aside Rs 5,000 crore ($730 million) for its cab-leasing operation when it first launched.
The success of Ola’s strategy is there for all to see—the company has managed to scale from 250,000 vehicles in 2015, to around 900,000 vehicles today.
Great earnings for driver-partners at a nominal entry fee plus huge strategic gains for Ola, it sounds like an outcome that’s too good to be true. Because it is. Behind the big numbers of Ola’s cab fleet is a ticking time bomb.
Three years after Ola launched its leasing unit, the hordes of people who flocked to Ola’s platform, either on a part-time basis or as full-time driver-partners, are an unhappy lot. According to several Ola fleet owners and individual drivers, The Ken spoke to, revenues have reduced drastically over the years. With driver incentives plummeting by at least 50% since Ola’s launch and fuel prices continuing to increase, both individual drivers and fleet owners are left counting the cost.
For drivers, the idea of leasing from cab aggregators made sense when incentives were astronomical. You see, back in 2016, when the leasing program of Ola was kicking into high gear, incentives made up more than half of a driver’s salary.
Sometimes, daily incentives could even be double that of the day’s fares. But over the years, both Ola and Uber have lowered incentives substantially. According to a report by consulting firm RedSeer, the share of incentives as a percentage of gross earnings dropped to 16% in the March quarter of 2017 from as much as 60% in the same period last year.
This has been a huge blow to drivers looking to pay their daily, weekly, or monthly rentals to the cab companies. To make matters worse, drivers who leased from Ola also found that the company offered them markedly lower incentives as compared to those on the platform with their own vehicles. And as the number of drivers on the platforms went up, the fewer rides there were to go around.
Drivers soon realized that they were working as hard for less money, or much harder just to keep their earnings stable. The glory days were over. Disillusionment came creeping in.
This is a far cry from what drivers had been sold. And the repercussions were not far behind.
A Bengaluru-based fleet operator who listed 45 cabs on Ola along with his partner, delisted all their vehicles early in 2017 after the earnings per cab fell below Rs 15,000 ($219) a month (after commissions). According to the operator, anything below Rs 15,000 is not feasible since he has to pay a variable salary to the drivers of those 45 cabs.