Neeraj Gupta, founder and managing director of Meru Cab Co. Pvt. Ltd, does not mince words when he speaks about the remuneration model for drivers at rivals Ola Cabs and Uber. “We don’t have any of these false incentives and keep on making false promises and say after one month that we have withdrawn these,” Gupta tells Fortune India. Whatever incentives Ola Cabs and Uber had doled out were not sustainable and now that has started to backfire, added Gupta.
Fortune India had earlier reported that driver incomes have dropped by at least 50% to ₹ 50,000 per month lately due to the maintenance expenses of cars, refunds for ride cancellations, and soaring fuel prices. A few drivers had also purchased more than one car to make the most of Ola and Uber incentives. Now, as incentives have dried up, car owners who took loans to do that are selling off the extra cars as they are not able to pay the equated monthly instalments.
Drivers of Ola and Uber in Mumbai had entered the second phase of strike on November 17 seeking higher pay, which was suspended on November 19 after Maharashtra chief minister Devendra Fadnavis promised a meeting with the companies and the drivers after the winter session of the assembly, which ends on November 30. Earlier, the drivers had gone on a 13-day strike starting October 22.
Meru Cabs operated with around 2,000 cabs in Mumbai during 2007-2018. It had increased the number of cabs to 5,000 in between but rolled back to the number to remain closer to profitability. As Gupta says, “We decided to run a small business but a profitable business.”
Protests by Ola and Uber drivers are benefitting Meru. In the past one month alone, it has added over 10,000 new cabs in Mumbai with nearly 7,000 drivers active on the Meru Cab app on a regular basis. With better availability of drivers, the trip requests have gone up by four-five times, Gupta said. In March this year, Meru Cabs launched a marketplace model wherein drivers can bid fares within a defined range on their partner app. Customers can choose from a list of up to 10 nearby cabs and select a ride based on the fare amount, expected time of arrival, car model and driver rating. While the upper cap will be as per government-stipulated fares, the lower price range is ₹10 per km. So, in the afternoon, when the demand is less, drivers can keep the price lower. In the evening and morning hours, when demand is high, the drivers can bid for a more competitive fare at the higher end.
“We don’t have remuneration. Ours is a strictly commission-based model wherein you get a commission based on the business you do on our platform,” said Gupta. This model works best when there are more driver partners and the demand is high. Terming the Uber, Ola drivers’ strike a “blessing in disguise”, Gupta said that the “tide is turning and we will want to capitalise on this opportunity.”
The strike against arch rivals became a testing ground for Meru Cabs, who sees the model to be sustainable for the company going forward. “We (the marketplace model) are currently in 11 cities. Overwhelmed by the response that [we] have seen in Mumbai, now we would span into another three cities—Bengaluru, Delhi and Hyderabad—and in next three-six months, we would want to expand to six-eight metros.”
Gupta sees the marketplace model and addition of new drivers on the platform to have a positive impact on the balance sheet. Earlier this year, the cab provider also turned to corporate clients to boost its revenues. Meru Cabs, present in 24 cities with 20,000 cabs across the country, clocked ₹322.64 crore in revenue in FY16 with a net loss of ₹16.49 crore, up from ₹3.32 crore in FY15, according to latest data from Capitaline database. It had reported a profit of ₹ 3.56 crore against net revenue of ₹182.32 crore the year before. Ola reported losses of ₹ 4,897.8 crore in FY17, up from ₹3,147.9 crore in FY16, according to the documents filed with Registrar of Companies (RoC). Uber’s losses too widened 61% to $4.5 billion in FY17.
As Ola Cabs and Uber evaluate the drivers’ demands for better incentives, Meru Cabs is in wait-and-watch mode. However, Gupta will let the market forces decide the price. “We will not undercut—let it be supply and demand,” Gupta said.