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Uber Gains Ground in a Giant New Market

Homegrown market leader Ola's lead is dwindling

August 22, 2017 | Retail & Ecommerce

The race to become the ride-hailing market leader in India is shaping up into a two-player race. According to recent data from Cheetah Lab, homegrown on-demand transportation service Ola Cabs had a sector-leading reach of 5.75% in late July 2017. That was only slightly ahead of Uber, with a reach of 4.82%.

Top 5 Ride-Hailing Mobile Apps Among Android Users in India, Ranked by Reach, July 24-30, 2017 (% reach)

Despite being buffeted by a wave of bad press that culminated in the June resignation of CEO Travis Kalanick, there are signs that Uber is gaining on Ola in India. The company recently reported that it had completed 9.4 million trips per week in India in July. By comparison, 5.5 million trips per week were recorded in August 2016.

And according to an analysis by App Annie, Ola had only a slight lead in users in May with 5.9 million monthly active users (MAUs), compared with Uber’s 5.5 million MAUs.

“The gap has been slowly closing between the two cab-hailing companies during the last 12 months,” said Lexi Sydow, senior markets insights analyst at App Annie, in an interview with the Economic Times.

Ola has, at times, demonstrated an edge over its competitor through a better understanding of its home market. The company, which first launched in India in 2011, has long accepted cash from its customers in India, a market where hard currency still remains a popular payment method given the low penetration rates of credit cards. Uber, which had relied on an in-app payment system in developed markets, did not start accepting cash payments in India until September 2015.

Ola has also taken pains to make its service more accessible to those on feature phones or low-end smartphones by allowing ride booking via texting starting in October 2016.

Ola also claims to have a leg up in the number of drivers it has on its platform, telling the Economic Times that it had 800,000 driver partners, with Uber claiming to have 285,000 active drivers in July. But Ola’s advantages appear to be eroding, while both companies face some new challenges.

Ride-hailing apps have historically attempted to acquire users by discounting rides and providing drivers with financial incentives, and then reducing both.

That seems to be the path both firms are now taking in India. RedSeer Consulting reported that Uber and Ola had cut their driver incentives in Q1 2017 by as much as 40% quarter over quarter.

These reductions have, at times, led to drivers using Ola and Uber to strike, and sometimes defaulting on car loans guaranteed by Ola. RedSeer also found that the registered cab supply in India has fallen in the first and second quarters of 2017, a change it credited to driver concerns about falling pay and no reduction in the hours they were expected to work.

One area that has shown some potential for both companies has been their respective ride-sharing services, Ola Share and UberPool. Local media outlets report these services now account for about 25% to 30% of rides booked via Ola or Uber in some of India’s largest cities.

The cheaper prices offered on the pooled ride services have reportedly expanded both firms’ customer bases to reach those who would not otherwise be able to afford them.

Rahul Chadha

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