YatraGenie: Taxi-Aggregator Model in Danger of Collapse :
Here’s
a surprise: A CEO bold enough to talk a deep flaw in the Indian
taxi-aggregator business—and why it needs to be fixed quickly.
“Hand
to our hearts, if any of us (taxi aggregators) say we are changing
the lives of drivers, we’d be bullshitting,” says Renil Komitla,
President and CEO, YatraGenie.
That isn’t
the sort of thing you hear every day. In fact, it’s the kind of
thing you never hear in a market jacked up on investor money Red
Bull--let alone from the CEO of a tech-transport company.
But that’s
just the sort of straight-shooting person Komitla is.
So
just who is this man and why should you listen to him?
Here’s
why: Because Komitla knows the travel business. YatraGenie isn’t
Komitla’s first brush with the transportation business. Years ago,
before tech-transporters became a fad, Komitla set his mind on fixing
the transportation problems of his home town, Nellore, Andhra
Pradesh. In 2004, he started Komitla Bus Services to ensure that
Nellore’s citizens could access good quality bus services.
That’s
when he learnt something important: For the most part, transportation
in India, isn’t a sustainable business, not at current prices.
“I
started Komitla to serve the people of Nellore, to offer them decent
bus services. Over the course of 12 years, I’ve personally put in
more than Rs 4.2 crore into to keep services running,” he says.
The same
applies to the taxi business. And aggregators, he says, aren’t
making things worse by lowering prices.
When the
flood of investor money dries up, it’s the driver ecosystem that
will suffer the most, he says.
We’re
beginning to see signs
of that. The
recent protest s among Uber drivers in India objecting to the
aggregator’s revised incentives, shows this.
But he does
believe it can be fixed. Here’s how.
What’s
the problem with the taxi business, the way it is today?
I don’t
know if my peers in Ola and Uber agree, but technology can only play
a limited role. The operator, that’s the people driving cabs, have
to be in business if anyone else--including end-customers and taxi
aggregators, can benefit.
Whether
you’re taking about Ola or Uber or YatraGenie, we can only be in
business if the underlying layer, that’s the people who run cabs
and buses, are healthy and profitable over time.
The
problems, we face today, are deep-rooted and are beyond the ability
of one person or company to fix. (These problems boil down to
unsustainable pricing). Let’s take, for example, a ride from
Koramangala to the Bangalore airport. That’s about 33 km. Now, if
you take a Meru cab, which charges Rs 19.5 per kilometer (after the
first 4 km), you will pay about Rs 770 including taxes. – 50KM, you
will pay about Rs 1200 including taxes. Taxis like Ola, Uber,
YatraGenie it is about Rs 800.
For the
same distance, an operator in the US or another country in Europe,
will get paid about the equivalent of over Rs 7,500.
To make
things worse, cars cost about 40 percent more in India, diesel costs
20 percent more, and car maintenance is more expensive. Yet, the
selling price for taxi services here is almost a tenth of what it is
there.
How
in this world can an operator be successful? It’s next to
impossible.
One of the
problems is that the government often fixes the rates. And once
fixed, it takes years before they are revisited.
New
technology entrepreneurs like Ola, Uber and YatraGenie, make this
worse by undercutting prices even further.
Are
you saying that the entire cab ecosystem, in its current shape and
form, is unsustainable?
Yes, that’s
exactly what I’m saying. It’s not long term, not until we
change the pricing mechanism.
Related
content:
Since
taxi aggregators can’t change the prices of cars, diesel or car
maintenance, the only way to ensure that drivers can make a
sustainable living is to increase the cost of a ride. What number do
you suggest?
Realistically,
a driver will be able to be happy, and an aggregator will make money,
at a price of Rs 26-27 per km.
At that
price, a driver will be able to take home about Rs 25,000 to Rs
30,000 and will be able to afford decent education and medical for
his kids.
So
why don’t taxi aggregators lobby the government to raise prices?
No
aggregator has a right to ask the government to up the prices—not
when they offer Rs 6 per km!
What
you’re saying is in direct contrast to the slew of hoardings
claiming drivers can make up to Rs 90,000 a month.
That’s
marketing. It doesn’t work. It’s a marketing gimmick meant to get
drivers to join an aggregator.
To make Rs
90,000 a month, a driver must make Rs 3,000 a day—and must drive
every single day of the month.
To make Rs
3,000 a day, at an average price of Rs 10-11 a km, a driver must
drive about 300 km a day! Can you imagine a driver trying to do that
in a city like Bangalore?
On average,
if a driver is working with a popular tax aggregator, he will
probably do about 200 km a day. That’s if he is lucky and is
willing to work 12 hours a day.
Even if a
driver is this lucky--and works 30 days a month, which assumes they
never take a holiday and never fall sick--they will make about Rs
65,000 a month. From that 20 percent goes to the aggregator, leaving
the driver with about Rs 48,000. Then they have to pay for diesel
(about Rs 30,000 a month), the car’s mortgage, and servicing. They
aren’t left with much.
And if you
work 12 hours a day for 30 days, well you are going to fall sick!
What
are you doing about this, because you are party to the problem?
My model is
different. I’m not interested in building a billion dollar business
overnight. We want to take our time and build a business that’s
both profitable and sustainable for the drivers.
I’m
seriously looking at bringing about change. I’m trying to ensure
that we start with the transporter. Like, I said, if the transporter
is healthy, the ecosystem will work.
Since I
cannot go over the pricing cap that the government has set, we have
created a package for drivers. Part of the idea behind the package is
to ensure that drivers don’t stick to city driving only. if drivers
agree to increase the radius in which he is working, they can make
more money.
This way we
aren’t throwing incentives to drivers. The last thing we want is to
create a culture in which we reward people for merely doing their
jobs. Incentives should be limited to people who are super stars.
But I’m
afraid that, in the last few years, in the rat race to become market
leaders, taxi aggregators are spoiling our own people. We’re
telling them that we’ll reward them just for doing their jobs.
We’re creating problems for ourselves and we’re shooting
ourselves in the foot.
Some
day or another, if we continue down this path, things will break.
But
players like Meru have been in this line of business for some years
now. How do you explain that?
I have a
lot of respect for Meru. Meru doesn’t make these promises to their
drivers. I have to give them credit. And until the other aggregators
came along they didn’t have discounting models.
But, that
said, at Rs 19.5 per kilometer (the cap that the government has put
in Karnataka), the operator is still making a loss.
You
said “some day, if we continue down this path, things will break.”
Can you make a guess of when?
That really
depends on how deep the pockets are of the investors behind the
aggregators.
So
the question boils down to: When will investors stop investing and
this bubble bursts?
My guess is
that it won’t go on for too long. Another two years at the most. I
say two years because we’ve reached a stage where the two unicorns
(Ola and Uber) are literally fighting. A fight, by the way, that
isn’t good for all the other players, big and small, who can’t
match the throwaways they are offering.
I hope that
the investors and the folks running the aggregators realize that when
the ecosystem breaks, there will be a lot of people on the road. End
consumers will use public transport or autos, but the drivers will be
in trouble. Remember, a lot of them have left mom-and-pop stores or
other means of employment to drive taxis. When things go bad, it’s
going to be hard for them to re-start.
I think the
bigger aggregators should have some moral responsibility. A business
that runs only on discounts has to stop.
Source:
http://www.cio.in/ceo_talks/yatragenie%3A-taxi-aggregator-model-in-danger-of-collapse
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