With a sharp focus on unit economics, cab-hailing companies Ola and Uber reduced driver incentives significantly in the first quarter of calendar year 2017, according to a report from research and advisory firm RedSeer Consulting.
The Times of India pegged the magnitude of the cut at 30-40% from the previous quarter. VCCircle couldn’t immediately ascertain this and has sent queries to RedSeer for more clarity.
New Delhi and Bangalore saw the biggest drop in incentives in the first quarter, the report said.
The spend on driver sops by cab-aggregators as a percentage of the gross booking value (GBV) started falling since the second quarter (April-June) of calendar year 2016, the report added. GBV refers to what riders pay to the aggregator.
Email queries sent to Ola and Uber didn’t elicit an immediate response.
In an earlier report titled ‘State of the Online Cabs Market,’ RedSeer had said that lower spending on incentives had put brakes on growth of cab-aggregators Ola and Uber in the first quarter of calendar year 2017.
Besides, a spate of driver strikes across the country meant the two companies had to resort to legal means to prevent dissenting drivers from disrupting work. Hundreds of driver-partners also quit, which resulted in cab demand outstripping supply.
However, the rationalisation of incentives is leading to better unit economics for the cab-aggregators, and Redseer describes the slump as a short-term phenomenon. Growth is expected to revive as supply stabilises and demand for carpooling goes up.
In another observation, RedSeer said the online mobility industry is likely to witness five-fold growth in terms of trips by 2020.
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