The auto-rickshaw is an indispensable part of the Indian urban commuting landscape. While Uber started out as a cab service using four-wheelers in India, in the last few years we began offering auto services through our app. We have witnessed a thriving e-hailing auto sector take shape because of the value the service brings to drivers and riders alike.
Despite these benefits, the future of the e-hail auto sector in Bengaluru is under a cloud. Currently, Uber and other players in the city are operating under a stay order granted by the Hon’ble Karnataka High Court after the Karnataka state government announced a ban on aggregators for running autos.
We firmly believe there is a solution to this impasse, one that involves appropriate fare regulations that account for both the unique value proposition of auto services on platforms like Uber, and additional services provided by these platforms. As discussions on this issue continue, we wish to clarify our stance on some critical aspects of this issue.
E-hailed auto is different from street-hailed auto
Auto services on platforms like Uber have a different value proposition than regular street-hailed autos. Through platforms, customers have the advantage of doorstep pickups, and no longer have to walk to auto-rickshaw stands or hail an auto off the street.
This convenience of doorstep pickup, along with a host of other services, are the reason why Uber Auto has thrived in the city. Every month, over 10 lakh residents of Bengaluru use Uber Auto to get around their city. They are served by over 50,000 auto drivers who supplement their earnings via Uber. However, drivers need to be compensated for the additional distance they travel and time they spend for providing these doorstep pickups.
Not compensating drivers for pickups will lead to poor consumer experience and take us back to pre-ridesharing times
The current fixed metered fare does not adequately compensate drivers for the additional distance traveled and time spent in picking up a passenger from their doorstep. Over a period of time, this will result in:
- Lower availability of Autos for e-hailing, making the service less dependable
- Higher cancellations by drivers, especially on short trips – the core use-case for autos
- Offline solicitation of extra cash and haggling
The data is already pointing towards this. Since removing the doorstep compensation, cancellations have increased by over 50% in the city, as availability reduces and drivers turn down trips that are not economically viable for them.
Platforms like Uber provide critical services that enhance safety, convenience and digitization of this sector
When you book an Uber Auto, it comes with features including GPS tracking, safety helpline, 24×7 phone-call and in-person support, rider and driver on-trip insurance and law enforcement response assistance. Street hailed autos don’t come with any of these features. Platforms incur significant costs to provide these value added services.
In addition to the above services, Uber must invest to build and operate the platform. We have tech and engineering expenses, marketing spends to onboard more drivers and riders, and many other costs.
Facilitating a market is not free. Commissions are used to cover our costs and make the business model viable. To be absolutely clear: Our commission ≠ our profit. A flexible commission structure, and one that ensures a fair margin for aggregators, will ensure the sustainability of e-hail autos and also encourage investment in the space, leading to the introduction of new features and services.
Platforms will not be able to viably operate with the current 10% commission cap
Currently, our commission in Bengaluru is capped at 10% of the fare collected. This is not financially sustainable. If our costs can not be covered through commissions, we will have to find ways to offload costs that could impact the experience of drivers and riders. In the face of these commission caps, we may have to make the difficult decision to limit Uber Auto to select parts of Bengaluru where the service is viable. This will hurt drivers and inconvenience riders who depend on aggregators for their commuting needs.
Choice is good for both riders and drivers
Platforms like Uber complement the street-hail ecosystem of the city. Drivers and riders can choose either based on what works best for them. Bengaluru has seen the emergence of several e-hailing platforms, all of which are innovating and allowing riders and drivers to derive more value for their money and time.
The current pricing and commission constraints will curtail this thriving ecosystem. The people of Bengaluru have made it clear that they value door-step pick ups, no haggling and round the clock support that platforms like Uber provide. We want to work with the government on appropriate fare regulations that build on the benefits that e-hailing has brought to the auto sector.
Bengaluru deserves more travel options, not less.