Why Uber's capitulation in China is bad for Ola, but good for India

Uber has a far more level playing field in India. It must respect that and continuously raise the bar on service

Harichandan Arakali
Published: Aug 5, 2016 11:30:07 AM IST
Updated: Aug 6, 2016 07:37:39 PM IST
Why Uber's capitulation in China is bad for Ola, but good for India
Image: Reuters

Uber merging its Chinese operations with Didi Chuxing is being seen as capitulation by the California startup in its most important market outside the US. It also frees the cab-hailing company to focus on a market that can become equally big in the years to come, and also one where Uber already has a much stronger footing — India.

In some ways, India is more amenable to comparing a multinational giant and the local market leader operating within its borders, than China — be it Amazon and Flipkart or Uber and Ola. Where China is accused of always engineering the upper hand of the local, often state-owned, business, western companies have far more freedom to operate in India.

This means, Uber, which already may have as much as a third of the Indian ride-hailing market, has a much better shot at increasing that share, in competition with local market leader Ola.

India has its own rules, such as the requirement for a second-factor authentication for payments, which meant Uber had to tie up with mobile wallet provider Paytm, instead of having its customers’ credit cards on file.

There are modest restrictions on the use of Google Maps and related location services by Uber or any other internet-age company in the country. The central government is, however, looking at more granular rules on the use of geo-location information.

Indeed, Google itself is far more free to operate how it chooses in India than in China. Amazon, which has an insignificant business in China, has just opened its first India-based data centres for its cloud business, and has opened its Prime service to Indian customers.

India is similarly strategic to most other multinational technology companies from Microsoft, which has had a long presence in the country, to Facebook, which has its biggest user base outside the US in India.

Google’s Android One programme may have flopped in India, with local partners, but the low barriers to online sales of imported phones in the market have helped millions. Xiaomi and Lenovo and others have put 3G and 4G smartphones in the hands of millions of Indians, bringing them closer to the internet economy.

The last time a large technology company actually upped and left India, citing restrictions, was probably IBM after the foreign exchange rules of 1974. And today — in the period starting with the economic liberalisation in the country that started in 1991 — India has become a hugely strategic market and base for IBM.

India’s rule makers today increasingly recognize the importance of remaining open to technology companies for the country to lift the hundreds of millions of its citizens still living in abject poverty.

Uber and Ola are both India’s partners on that front, but as rival businesses, India’s largely hands-off approach — again in comparison with China — could give Uber an edge. Ola now faces a challenger synonymous with ridesharing worldwide, and which has a far greater share of the Indian market than it did in China.

Uber has also rid itself of an enervating distraction at a time when the Indian ride-hailing market is very nascent. An estimated 500 million trips happen every day in urban India, including all the various modes — from the metro trains to autorickshaws to the ubiquitous scooters and bikes. Cab-hailing service providers’ share of this market is in the low single digits.

Ola says it fulfills more than a million rides a day in India, while Uber has said it is close to hitting a million rides a day in the country. The combined number is still only a fifth or sixth of the numbers claimed by Didi Chuxing, China’s dominant ride-hailing service provider with whom Uber merged its Chinese operations this week.

On the regulatory front India’s Union transport ministry has already released a fairly comprehensive set of guidelines that individual states could adopt or use to build their own rules on how to treat the new-age cab services.

With its official Startup India policy, the country has also demonstrated it wants to genuinely listen to entrepreneurs — such as Ola’s founders — and help with forward-thinking policies. Complaints about how arbitrarily local transport authorities still treat cab-hailing can only be countered by the point that Uber and Ola face the arbitrariness in equal measure.

On the pure technology front, in the last two years Ola has made significant strides in offering a richer app and the rudiments of what will one day become a full-fledged platform. That said, Uber, born in France and raised in Silicon Valley, brings a sophistication to its app, which has made it too a verb, like its investor Google.

Even in India, anecdotally, at any startup conference for instance, one is most likely to hear references to “Uber-like” or “Amazon-like” user interface and customer or user experience. After Apple. Ola has some ways to go before one can hear “Ola-like” in the same breath.

By effectively stemming its profuse bleeding in China, Uber gets to focus a lot more on India, which founder Travis Kalanick has said is one of the fastest growing markets in the history of the company. And with no China-like interference to give the local guy a leg up, Uber has a far more level playing field in India.

Uber must respect that, in attempting to capture a bigger slice of the Indian ride-hailing market. It must do so not just offering discounts to customers or incentives to drivers. It must keep its promise of bringing its technological prowess to bear on the findings of its fledgling local engineering team in Bengaluru.

That involves continuously raising the bar on the quality of the service it offers its Indian customers, no matter how strong Ola’s competition proves. Amazon has showed it can be done, taking the competition to Flipkart. The result is more value for the rupee for the Indian consumer — may the best business win.

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