Ridesharing companies are less than a decade old and they are already disrupting transport industry with unprecedented force and speed. Millions of people around the world use ridesharing apps. Millions more will be using them soon. As consumer markets grow in different parts of the world, so does the competition for every user. Yet, so much remains unclear or unknown about the business of ridesharing, including competition between global and local players and the future of ridesharing in the face of changing consumer behavior and legal and regulatory battles.
Ridesharing allows individuals in need of transportation access a pool of drivers through a mobile app. In a traditional ride-sharing business model, market players do not invest in any physical infrastructure (such as setting up factories or service centres) or traditional assets (such as cars or garages). Unlike conventional companies, they do not have any employees. The drivers are merely participants of an income-generating platform.
Ride sharing is by far the biggest building block of what is known as the “sharing economy”. Ridesharing platforms connect drivers and vehicles with consumers who want rides at an agreed price. Typically, a customer uses an app on his/her smartphone to request a ride at a particular time and place. The app on the phone then walks the customer through a series of steps, including the actual or expected price of the ride, the location of the driver, and the likely wait time. It also allows the customer or the driver to contact each other without giving out personal information. These platforms take advantage of GPS to arrange for the ride and help determine a driver’s best route.
It’s not the technology, but better service that cut the game for Taxi industry in countries like U.S.A, Canada, Australia. As for Uber and Grab outperforming taxis in customer service - 7.6 compared with 7.2 - attributed this to driver ratings systems and ratings-based incentives found in private-hire apps.
As the taxi industry in many cities across U.S.A and Canada fights for its existence, companies and drivers struggle to understand that potential fares are choosing Uber because it offers better customer service, not just lower fares or ease of an app. A survey by Public Transport Council (PTC) of U.S.A revealed that, private-hire services fared better than taxis in all comparable categories, such as waiting times, ease of booking, information on services, and ride comfort. Grab and Uber also fared better than taxis in drivers' knowledge of routes, customer service provided by the driver, and safety.
Another report by Oxford Martin School reveals that, whilst ride-sharing typically resulted in a fall in income of around 10% among salaried drivers, it also resulted in a 50% rise in the number of self-employed drivers in a city. The higher hourly earnings among self-employed drivers suggest that capacity utilization has increased with Uber (in terms of the time spent in the car with a passenger), as its platform allows for better matching between drivers and passengers. However, for traditional taxi drivers the effect has been the opposite, with a decline in the amount of time they have a passenger in their vehicle.
There is a pattern, Uber, which once emerged as the biggest player in the ride-hailing segment globally, has gradually been losing the battle against local rivals and their analogous business models in different geographies. Almost 18 months ago, it had exited Chinese market after bleeding about USD 2 billion after lost China to Didi Chuxing. A year later, it announced a truce in Russia by merging its operation with a homegrown major Yandex. According to latest industry insights, Uber has almost conceded defeat against its rival GRAB in Southeast Asia. It’s reportedly preparing to sell its Southeast Asia business to the Singapore-based company in exchange for a sizable stake. Things don’t seem hunky-dowry for Uber in India as incumbent Ola has over 3X reach than the former (Uber operates in 31 cities).
According to a market and competitive intelligence company, Kalagato, Ola has witnessed a rise in market share from 53% in July 2017 to 56.2% in December 2017. Meanwhile, Uber market share decreased by about 2.4% from 42 to 39.6% during the same period.
With a reported valuation of USD 50 billion, Didi Chuxing is the world’s most valuable startup after Uber. Didi is far more than a smartphone app for hailing cars, the willingness of local consumers to experiment has helped shape its business model. Didi runs car pools, minibuses and buses in addition to taxis and luxury cars. It has services for the elderly and can send a driver to take you home in your own car. The firm provides about 20m rides a day in China, several times the number managed by Uber worldwide. Didi hopes to use AI to predict a customer’s transport needs, be that for cars, public transport or bicycles. Its platform offers 200,000 EVs, a figure set to rise to 1m within a few years, and it plans to promote autonomous cars heavily.
Didi owns stakes in ride-hailing services worldwide, from India’s Ola and South-East Asia’s Grab to Brazil’s 99 and America’s Lyft. In July Didi and SoftBank ploughed USD 2 billion into Grab. In August the Chinese upstart invested in two Uber clones, Estonia’s Taxify, which serves Europe and Africa, and Dubai’s Careem, which operates in the Middle East. Besides Softbank, the major subscriber of Didi, other investors include all the BAT companies, as well as Apple.
Didi’s success shows how local companies can cause global disruptions with sharing-economy services road-tested in China. The country’s urbanites already use smartphones to rent umbrellas, mobile-phone chargers, basketballs and other necessities for a small fee. The firms behind such services are pioneering the use of micropayments and credit verification using analysis of social media.
As much like most of the trends in countries flow to this side of the world behind time, ride-sharing is also no exception. Bangladesh witnessed a leap in ride-sharing space with the emergence of Pathao, the most popular local ride sharing company which got off the ground in 2016 and the entrance of Uber in Bangladesh market in late 2016. At this juncture, besides, Pathao and Uber, quite a few ride-sharing companies are emerging to cater to the mounting public demand. As of November 2017, an estimated 500,000 commuters have opted to avail ride-hailing on cars and bikes via apps - also known as e-hailing. This number was only 10,000 in January.
In 2016, ride-hailing tech companies stormed the Bangladeshi market with Uber, Pathao and Amar Ride launching services in Dhaka. Such initiatives have set a trend of using mobile apps to order a taxi or motorbike for either sole or shared travel. Interestingly enough, Pathao began as an E-delivery way back in 2015. Using its fleet of motorbikes, the company was successful but it was not till October 2016, when Uber launched in Dhaka in November 2016, Pathao decide to introduce motorcycle ride sharing services. Notwithstanding their popularity, Pathao is not the pioneer in motorcycle-based ride-sharing in Bangladesh. That honour belongs to Share-A-Motorcycle or SAM, which was launched in May 7, 2016. However, it seems Pathao’s superior business model has made them more successful and popular. It appears that Pathao’s success was noticed by Uber because in the final quarter of 2017, Uber launched UberMoto - following the model of motorbike taxi service Pathao provides. In essence, Uber has essentially set the tone for companies such as Chalo, Muv, Dhaka Moto, Bahon, Amar Bike, Amar Ride, Taxiwala, Dako, Ezzyr, Goti and Hellow Ride, all of whom have created a booming e-hailing market.
Worsening traffic condition: With 36% of the country’s urban population living in capital Dhaka, it has become one of the world’s most densely populated cities. According to a World Bank estimate, in the last 10 years, average traffic speed has dropped from 21 km/hour to 7 km/hour, only slightly above the average walking speed. Congestion in Dhaka eats up 3.2 million working hours per day. In connection to the horrid statistics, bike brings out a sigh of relief in young urban dwellers being the fastest mode of transportation.
Convenience: Public bus and CNG are the two mass transportation mostly used by Dhaka dwellers. Besides the comfort issue in a public bus, one may not be beneficial commuting in a bus in a rush time as it stops in different place to take passengers. Although, public bus service have been improved over the time, there are still complains such as not getting a seat in sitting-service bus, misbehavior of the conductors and so forth. The other option remains for the mass commuters is CNG. It has been discerned that Dhaka dwellers, catering to all ranks and walks, have formed a dissatisfaction for CNG due to higher asking fare, declining commute requests and to some extent, misbehavior of the CNG drivers. Ride-sharing fits into the space in between the costing and convenience of bus and CNG, which created a room for the ride-sharing services to thrive.
Growing middle class: Compared to 38% population classified as middle income or affluent in Indonesia, only 7% of total population in Bangladesh is middle-income.
The consumer product revolution that is being witnessed in this class, especially with the proliferation of banking facilities like credit purchases and easy installment / higher-purchase forms of payment and affordable loans have seen the consumer market record stupendous sales in consumer products ranging from foreign cosmetics, air-coolers, refrigerators to passenger vehicles.
Hike in bike sale: Motorbike sales soared nearly 50% year-on-year to 3.60 lakh units in 2017 thanks to a huge cut in supplementary duty on import of the two-wheeler's components. In 2015, only 1.43 lakh units of motorcycles were sold. The soaring sale of motorcycle provides impetus for young people to own a bike and have an additional income by getting incorporate in ride-sharing network.
Bangladeshi market seems to be sportingly participate in the ride-sharing space, for some good reasons.
Fast commuting: According to urban transport experts, the speed of cars is high (18.3km/h) during AM period but much slower (10.7km/h) in the PM period. Therefore, an average speed of 14 km/h can be estimated. Bike is the fastest mode of transportation, which can go as long as 16 km/h. It indicates that a commuter taking a bike ride share can reach desired destination lot early than by bus or car or CNG.
Employment creation: An estimated 40,000 drivers/riders under the ride-sharing network implies the job creation potential of this sector. From a car/bike owner/driver's perspective, Uber-Pathao has brought about tangible positive benefits. A survey by two Senior Research Associates of Policy Research Institute (PRI) reveals that the gross income of a ride-share car owner is some BDT 60,000 a month. The average monthly income of a Dhaka resident is estimated at around BDT 30,000 a month, which is half of what an Uber car owner can earn.
Comfort with reasonable costing: A ride-share car user spends some BDT 300/trip. In other words, a frequent ride-share user ends up saving threefold without losing the comfort of a car experience. A comparatively hassle-free ride-share bike user spends less than BDT 150/trip. Meanwhile, a CNG user spends some BDT 250/trip and enjoys none of the improved services (such as door2door pickup-drop-off) of a ride-share product.
The popular ride-sharing company Pathao has recently announced that it raised a “pre-Series B” investment led by Go-Jek. The Indonesian firm first invested in Pathao’s Series A in 2017. Reportedly, the funding amounts to be around USD 2 million. Pathao confirmed TechCrunch that its valuation is over USD 100 million (Round about BDT 820 crore).
Autorickshaw drivers have long faced criticism for not taking passengers to their destinations and charging exorbitant prices. The CNG Autorickshaw Workers Union Council has announced a strike in Dhaka and Chittagong in November 2017 over a list of demands that include the banning of app-based transport services. Bangladesh Road Transport Authority (BRTA) says the situation is the fault of the autorickshaw drivers themselves. Two years back, with the consent of drivers and owners, the government set the fare per kilometre travelled as well as the daily deposit to owners in order to bring order to transport services. Despite a near-doubling of the fare in the process, drivers soon became unwilling to charge only metred fares. According to a BRTA official, around 210,000 three-wheelers have been registered with the organisation since the country’s independence in 1971. Of them, 13,000 CNG-run three-wheelers have been permitted to operate in the capital and as many in Chittagong city.
A number of ride-hailing apps have incorporated CNG in their transportation network. Drivers in Dhaka appear to be planning to join rather than beat the technological wave. But the compromise in the transfer to apps has not been unanimous. Most CNG autorickshaw owners are not signing up with “Hellow” – the app touted as the first to support CNGs. Of late,
Ride sharing service OBHAI Solutions Limited, popularly known as OBHAI, has signed on 650 CNG-auto rickshaws to strengthen its services. The CNG drivers and owners signed up their vehicles with OBHAI at its office in the capital.
Indian Ola is also weighing options for a few other markets including, UK, Bangladesh and Sri Lanka.
The way China’s giant ride-hailer Didi Chuxing is expanding its operations in Asia and investing in other ride-sharing companies like Uber and Ola, it is not unlikely for them to venture into Bangladeshi market having discerned the market potential.
As a result of ride-sharing being mainstream in the western part of the world, car sales dropped at a moderate level in the U.S.A. Almost 20% of the ride-sharing users in the U.S.A delayed or avoided buying their own car due to availability of ride-sharing services. If ride-sharing grows at the current pace in Bangladesh, car sale in Bangladesh may also plunge.
Ride-sharing has become a popular and quintessential phenomenon in most of the city-dwellers everyday life. The impact of bike ride-share is evident in 50% hike in bike sale in 2017. The immense acceptance of ride-sharing mainly ascribes to its door-to-door pick up and drop off service, ease of finding a vehicle in emergency hours and no “decline culture”, that the city dwellers are habituated to while finding rides in the era of three-stroke wheelers. From another aspect, rise in purchasing power of middle class bracket of the society, made rooms for the ride-sharing space to flourish. And this phenomenon is now not only restricted within the bounds of The mega city of Dhaka; this is spreading at a rapid pace in other parts of the country as well. The fact that ride-sharing created employment opportunities for more than 40,000 people, asserts the promise of this sector in economic prosperity. Although, the latest announcement of 5% VAT on ride-sharing will make the service tad costlier, the higher authorities should move cautiously and evaluate how the imposition of new regulations would create an impact on the millions of commuters and the local ride-sharing startups.