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The Collection Wed, 02 Apr 25 |
Multiple stories, multiple perspectives, one theme worth your time—every week. |
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We’ve had two interesting developments in India’s ride-hailing sector recently.
First, India’s home and cooperatives minister Amit Shah announced last week that the Indian government will soon roll out a new cooperative taxi service, where the “profit will go directly to the drivers”.
According to an official statement, the primary objectives of the cooperative taxi service include:
* Democratic Management: Taxi drivers will form a cooperative society, ensuring equal participation in decision-making.
* Profit Distribution: Maximum profit earned by the cooperative will be equitably shared among the drivers, preventing corporate exploitation.
* Better Working Conditions: The model aims to enhance income stability, improve work environments, and raise the standard of living for taxi drivers.
* Consumer Benefits: With a driver-first approach, the service is expected to provide affordable and reliable transport options for customers.
Maybe some of those things sound novel… but others are quite familiar.
After all, when Bengaluru-based Namma Yatri pioneered a zero-commission model in 2021, the intent was largely the same. More control for drivers. Better earnings. Better bargaining power through auction models. All of which, by then, had become key points of contention between ride-hailing leaders Ola and Uber and drivers on their platforms.
Namma Yatri’s entry upended the prevailing commission-based model enough that it didn’t take too long for another challenger, Rapido, to adopt its tack. And by now, even Ola and Uber have started introducing similar systems for certain segments—all in the space of four years. The Indian government’s planned cooperative is just the latest in this line.
On top of that, Blusmart—another ridehailing startup with its own distinctive business model, also once touted as a major challenger to Ola and Uber—is in serious trouble, much of which is related to corporate governance, company holding structures, and financing. In a prescient story from nearly a year ago, we’d already written about how the relationship between Blusmart and its co-founder’s listed company, Gensol Engineering, is closer than is apparent—and why that could be a problem.
Well, that relationship is coming back to bite Blusmart now, and the story below is a great asset if you want to understand the seeds of Blusmart’s and Gensol’s current troubles.
Blusmart’s relationship with co-founder’s listed company could prove costly
The EV ride-hailing startup has grown its business thanks to cars leased from Gensol Engineering. But the weight of the ties may be too much to bear
So here’s my question: how have Namma Yatri and Rapido managed to not just hang on but also disrupt the market while their peer finds itself mired in complications?
That’s this week’s edition of The Collection. Hopefully, the stories, newsletters, and podcasts featured in this issue will help you get a better grasp of what’s going on.
It’s been over a decade since ride-hailing has been a thing in India, and yet, no major player has managed to produce a clear profit so far. You can’t even blame a lack of scale for this; Ola and Uber together hold ~70% of the market even now, maintaining a virtual duopoly.
But the two platforms are now facing structural disruptions from multiple fronts in India—from new marketplace models to threats from the “enemy within”. We did an extensive dive into these challenges in an October episode of the Two by Two podcast, featuring guests Nilesh Sangoi, CIO of Fincare Small Finance Bank, previously CEO of Meru Cabs; Pradeep Puranam, Head of Revenue and Operations at Yulu, and previously of Udaan and Uber; and Professor Srinivasan R, who teaches Strategy at IIM Bangalore.
Two By Two • 14 |
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As mentioned earlier, Namma Yatri’s zero-commission model has been one of the biggest vectors of disruption against the incumbents. Incubated by fintech Juspay and rolled out in collaboration with the Bengaluru Auto Rickshaw Drivers Union in late 2022, Namma Yatri now exists across multiple Indian cities.
One reason for why it has seen such growth is Juspay’s hands-on approach with the platform. In fact, Juspay has been more hands-on with Namma Yatri than even its UPI ventures, as we wrote in early 2024.
For Softbank-backed Juspay, mobility is the next UPI
After not going the whole hog with the UPI app BHIM—Juspay doesn’t want to lose an opportunity in mobility
In 2023, Rapido jumped on the bandwagon too, becoming one of the first platforms to apply the zero-commission framework to cabs. Then, it took what was clearly a model with a lot of promise and went about sweetening the deal even more for its driver partners.
For instance, it developed a system that eliminated the 5% tax deducted from its drivers on each fare with some, let’s say, legal ingenuity… by positioning itself as a SaaS company providing cab booking solutions for its driver partners.
How does Rapido’s model work exactly? And how close is it to replacing Ola as number two in the Indian market? My colleague Gaurav Bagur got into it in detail in this story from October 2024.
Rapido is done just being a bike-taxi app. It’s dead set on becoming the next Ola
Its 10-month-old cab-hailing service, powered by Namma Yatri’s blueprint, is already breathing down Ola and Uber’s necks
Namma Yatri and Rapido’s gains from moving to the zero-commission territory are now obvious enough that both Ola and Uber have started following suit. In February this year, Uber became the last major player to implement this model for auto rickshaw bookings.
So, essentially, Uber was forced to move away from a commission model to a subscription or a “flat fee” structure thanks to Rapido, and more importantly, Namma Yatri. In Uber’s own words, they weren’t doing this out of the goodness of their hearts, but because they wanted to remain competitive. The suppliers (in this case auto-drivers) don’t like a commission model. They prefer to pay a flat fee upfront to access a platform.
[…]
If there’s one thing we’ve learnt over the last decade in India, newer, younger companies have disrupted incumbents who’ve built a robust two-sided platform business. And they’ve all done it the same way—by introducing some form of a zero-commission model. Zerodha did this to stock-broking platforms. Nobroker followed the same strategy with real-estate renting. Meesho did it to Flipkart. And now Rapido and Namma Yatri have done it to Uber.
All that said, though, the Namma Yatri-Rapido game isn’t devoid of risks.
Blusmart might have shot itself in the foot by depending excessively on one group company for its operations and fleet, but for Namma Yatri and Rapido, the danger lies in the opportunities that auction- and tips-based models offer for exploitation of the consumer. My colleague Praveen Gopal Krishnan, writer of The Nutgraf, has explored these vulnerabilities in a couple of pieces over the recent past, writing that the auction model can actually be “much less transparent, incentivises coalitions, and is vulnerable to exploits.” I’d urge you to read both his pieces below to get a sense of the opportunities and risks intrinsic to such models.
What happens if we kill Swiggy, Zomato, Ola, and Uber?
India wants to create an open network to take on platforms. The cost is borne by the rest of us
Namma Yatri discovers ONDC’s faultline… by accident
How the auto-rickshaw ride-hailing app found the limits of its model
You can find this week’s entire collection of stories below. Do write to [email protected] with your thoughts and suggestions.
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Rahul leads the promotion and distribution efforts for the journalism produced by The Ken. He works at the intersection of the publication's editorial and business operations.
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