Ola vs. Uber – Turntable

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Ola has one chance to turn the tables on Uber.

• Ola has secured $2bn in funding from Softbank and Tencent which it must immediately put to good work if it is to wrest the advantage from Uber in India.
• I think that this is an excellent time for Ola to receive a large cash injection as it is almost neck and neck with Uber in India and has the advantage of focus while Uber fights endless fires elsewhere.
• This advantage will not last for ever and if Ola can push its share back to 60% it will stand a chance of doing to Uber what Didi in China and Yandex in Russia have done before it.
• Car hailing is one of the best examples of a networked economy and, just like classifieds, it is extremely difficult to make money until one of two criteria are met:
  • First: one must have at least 60% market share or
  • Second: one must have double the market share of the next largest player.
• Data in terms of market share has been somewhat unreliable but it looks as if Ola has been able to cede only a small amount of market share in the last 12 months.
• Research by KalaGato Pte shows that Ola’s share in July was around 44% with Uber on 50% with everyone else fighting for the scraps.
• In October, Ola’s market share was around 50% (see here) and it looked to me like Ola would only survive with state intervention.
• During March 2017 Ola’s rides per customer stood at 2.95 while Uber were 4.38 with 40.9% of Uber customers paying less than Rs100 per ride while only 31.4% of Ola’s customers paying less than Rs100.
• While not definitive, this data indicates that Uber has been gaining share through aggressive pricing and the good user experience offered by the app.
• However, I think that Uber’s troubles have had a massive ripple effect right the way through the organisation resulting in the eye coming off the ball.
• It is this that has given Lyft a new lease of life in USA and now offers the same chance to Ola.
• This turmoil has only intensified with Transport for London denying Uber a licence to operate necessitating even more diversion of attention away from India.
• This $2bn investment and Uber’s focus elsewhere gives Ola a chance to halt its recent losses and turn them around.
• What it has to do appears to be quite clear:
  • First: cut prices and
  • Second: improve the usability of its app and service.
• If Ola can get back to 60% share then it will have reached the hallowed status at which it will be able to generate cash and Uber will not.
• It is at that point it will be in a position (as long as it holds onto 60%+) to eject Uber from India (probably through acquisition) but not before.
• Now it all comes down to Ola management’s ability to execute and upon this, everything depends.