ET Bureau CHENNAI: Chennai’s radio cab company Fast Track says it is ready to withdraw a complaint registered with the Competition Commission of India against Ola cabs, if it receives a commitment that Ola will stop discounting and hold down driver incentivisation.
“If Ola would give us a written submission on stopping these practices, the board will consider pulling the case out,” Fast Track’s founder and managing director Redsun C Ambigapathy told ET.
The softening of stand comes weeks after Fast Track had fired all cylinders against Ola. In its submissions to trade regulator, Fast Track had charged Ola with abusing its dominant position, creating entry barriers for emerging companies, narrowing the road for “equally efficient” players, and unfairly leveraging venture capital to flush out indigenous competitors.
The competition regulator has ordered an investigation into the workings of Ola after finding a prima facie case in the matter, with a geographic focus on the Bengaluru market. Ola is estimated to have a market share of 69% in the city after the acquisition of TaxiForSure.
Fast Track had also said its revenue per month has come down to 9.5 lakh from Rs 23 lakh, and it is fast losing drivers to a layered daily and monthly incentive system from Ola. After Ola’s entry into Chennai in October 2013, Fast Track has found it a task maintaining driver count around 4,500.
Ambigapathy alleged that heavy inflow of venture money has helped Ola cut prices and reward drivers. In its submissions, Fast Track has said that Ola loses Rs 230 a trip after earning Rs 344 for what is a service priced in the market at Rs 574.
Ola refused comment on this development.
But people aware of Ola’s operating strategies hold that a lean staff structure had helped it parlay earnings into platform development and rewarding drivers. “Ola’s app focus cuts cost in order booking, which is a large money guzzler through staff costs. It is focussed more on ploughing its revenue back into the ecosystem by incentivising drivers and investing in creating new drivers through bank tie-ups,” said an industry source in the know of Ola’s functioning.
Through Ola Pragati, the company has launched financing schemes in association with banks and has also thought up schemes for medical treatments for drivers.
Ola’s revenue stems for a 20% commission from every ride streamed into through its app. The company has expanded rapidly over the last four years to draw drivers in 100 cities; 65 of the cities are tier II or further into the hinterland. It has 1.5 lakh vehicles on its platform, including 45,000 auto-rickshaws it has been aggregating over the last one year. Its last stated public statistic on orders was upwards of two lakh each day in January, growing at 35% month-on-month basis.
“With such a scale, a fifth from each ride leads to a sizeable working capital that can be repurposed for platform development and other input costs. Having said that, Ola is, of course, utilising venture capital to drive incentives in the ecosystem, but it is not the only source,” said the person quoted above.
Investors in Ola are confident about the company maintaining its edge through its technology platform. ‘’Traditional cab companies handled bookings on a round robin basis, since their economic model required them to evenly distribute bookings across all drivers,” said Tarun Davda, director at Matrix Partners India, a VC firm invested in Ola. “Ola has been able to cut the average wait time for a customer down to 5-7 minutes. For drivers, this means significantly lower 'dry-run' kilometres, translating into higher earnings.”
Officials with the Competition Commission said case withdrawals have been applied for, though they have been far and few between. “They may reach a settlement. But once the information is with us, we will decide on anti-competitive practices based on merits of the case,” M S Sahoo, member, Competition Commission, told ET. “A case withdrawal also does not have any impact on a likely penalty on an opposite party.” He said withdrawals are a recent phenomenon and that there are a few in the pipeline.
The CCI has asked its director general to investigate without any influence of prima facie observations and conclude within 60 days of receipt of order delivered on April 24.
“If Ola would give us a written submission on stopping these practices, the board will consider pulling the case out,” Fast Track’s founder and managing director Redsun C Ambigapathy told ET.
The softening of stand comes weeks after Fast Track had fired all cylinders against Ola. In its submissions to trade regulator, Fast Track had charged Ola with abusing its dominant position, creating entry barriers for emerging companies, narrowing the road for “equally efficient” players, and unfairly leveraging venture capital to flush out indigenous competitors.
The competition regulator has ordered an investigation into the workings of Ola after finding a prima facie case in the matter, with a geographic focus on the Bengaluru market. Ola is estimated to have a market share of 69% in the city after the acquisition of TaxiForSure.
Fast Track had also said its revenue per month has come down to 9.5 lakh from Rs 23 lakh, and it is fast losing drivers to a layered daily and monthly incentive system from Ola. After Ola’s entry into Chennai in October 2013, Fast Track has found it a task maintaining driver count around 4,500.
Ambigapathy alleged that heavy inflow of venture money has helped Ola cut prices and reward drivers. In its submissions, Fast Track has said that Ola loses Rs 230 a trip after earning Rs 344 for what is a service priced in the market at Rs 574.
Ola refused comment on this development.
But people aware of Ola’s operating strategies hold that a lean staff structure had helped it parlay earnings into platform development and rewarding drivers. “Ola’s app focus cuts cost in order booking, which is a large money guzzler through staff costs. It is focussed more on ploughing its revenue back into the ecosystem by incentivising drivers and investing in creating new drivers through bank tie-ups,” said an industry source in the know of Ola’s functioning.
Through Ola Pragati, the company has launched financing schemes in association with banks and has also thought up schemes for medical treatments for drivers.
Ola’s revenue stems for a 20% commission from every ride streamed into through its app. The company has expanded rapidly over the last four years to draw drivers in 100 cities; 65 of the cities are tier II or further into the hinterland. It has 1.5 lakh vehicles on its platform, including 45,000 auto-rickshaws it has been aggregating over the last one year. Its last stated public statistic on orders was upwards of two lakh each day in January, growing at 35% month-on-month basis.
“With such a scale, a fifth from each ride leads to a sizeable working capital that can be repurposed for platform development and other input costs. Having said that, Ola is, of course, utilising venture capital to drive incentives in the ecosystem, but it is not the only source,” said the person quoted above.
Investors in Ola are confident about the company maintaining its edge through its technology platform. ‘’Traditional cab companies handled bookings on a round robin basis, since their economic model required them to evenly distribute bookings across all drivers,” said Tarun Davda, director at Matrix Partners India, a VC firm invested in Ola. “Ola has been able to cut the average wait time for a customer down to 5-7 minutes. For drivers, this means significantly lower 'dry-run' kilometres, translating into higher earnings.”
Officials with the Competition Commission said case withdrawals have been applied for, though they have been far and few between. “They may reach a settlement. But once the information is with us, we will decide on anti-competitive practices based on merits of the case,” M S Sahoo, member, Competition Commission, told ET. “A case withdrawal also does not have any impact on a likely penalty on an opposite party.” He said withdrawals are a recent phenomenon and that there are a few in the pipeline.
The CCI has asked its director general to investigate without any influence of prima facie observations and conclude within 60 days of receipt of order delivered on April 24.
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