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June 26, 2014
Nikita Garia, Mihir Dalal, MINT (A Wall Street Journal Partner)
New Delhi, 26 June 2014
Cab services provider Uber announced the launch of its low-cost cab brand UberX in Bangalore, New Delhi and Hyderabad to directly compete with local rivals such as Meru Cabs, Ola Cabs and others.
Uber launched in India last August with its higher priced, luxury car service, UberBLACK that charged a minimum of Rs.250 per ride. Though the company, which accepts payments only through credit cards, reduced fares later, they were still at least 50% higher, on average, than those of rivals such as Meru Cabs and Ola Cabs.
UberX will offer a base fare of Rs.50, and also charge Rs.1 per minute and Rs.15 per kilometre. The charges will vary based on the city, but the fares are similar to those offered by local rivals.
Analysts said the move by Uber reflects the need for brands to offer lower-cost but so-called “value” products that Indian consumers typically prefer. Foreign companies such as Amazon, McDonald’s and others have had to approach India as a distinct market and “localize” their products and services to appeal to Indian shoppers.
“We are a cost and value-conscious country. Value is more than low cost,”said Devangshu Dutta, chief executive at Third Eyesight, a consultancy. “Our service expectations are very high. Any company which is looking at the Indian market whether it is a product or service company, has to modify its approach, adopt different strategies and tactics to make its Indian business a success.”
Despite launching a lower-priced service, Uber still misses out on a significant part of the market as credit card usage is low in India and a majority of customers still prefer paying cash, an executive at an Uber rival said.
“Uber has only a credit card-based mobile app and no call centres,” said Aprameya Radhakrishna, co-founder, of TaxiForSure.com. “You can only go for immediate bookings. So they will have limited reach in the market. Let us see how they perform once they get into the lower end of the market.”
Uber is running a promotional campaign to boost sales, where a first-time user can get Rs.500 off on the first UberX ride.
The Google Inc.-backed start-up that started its operations in 2009 is present in 39 countries. In India it offers its services in Bangalore, New Delhi, Hyderabad, Chennai, Mumbai and Pune.
Uber, which does not own cars, uses state-of-the-art technology to connect drivers with passengers through a mobile app.
The radio taxi market is moving towards an asset-light model where websites such as TaxiForSure.com lend their brand to drivers and cab operators in exchange for a fee. Meru, too, has become part cab operator, part marketer.
(Published in MINT.)
