The Indian economy continues to be one of the topmost nations having grown at a steady pace for the last couple of decades. This growth has led to a huge migration of the rural population to urban parts of the country.
The migration has evoked a rise in demands of adequate transportation needs. In cities, traveling long and short distances is a part and parcel of daily life. With the ever-mounting population, the transportation system seems incapacitated. In such circumstances, an out-of-the-box idea was badly needed to cater to the increasing number of travelers as well as provide comfort to the commuters. To fulfill this need, Ola Cabs emerged from nowhere on the Indian landscape.
Ola Cabs, more popularly known as Ola, is just like any other marketplaces online, but more specifically into providing Taxi services. Ola, which started as an online cab in Mumbai and is also known to be one of the fastest-growing businesses in India, out-beating its recent competitors Uber & Meru. Some people generally don’t prefer to travel in public transport like buses, auto due to the crowd, safety issues, and many more reasons. Also, if you are not a resident in a particular city then Ola Cab is the best option for traveling. So ideally speaking the Ola was like a problem solver for most Indians and also provided an efficient and only answer to the needs of people who needed transport solutions.
An unfortunate incident that resulted in the launch of Ola
One day, Bhavish Aggarwal the founder of Ols was traveling by cab from Bangalore to Bandipur. After traveling half of the distance, the cab driver abruptly stopped the car in the middle of a forest and demanded an exorbitant amount of money from him to complete the journey. This was completely unexpected, as Bhavish negotiated the price of the travel beforehand.
This incident made him realize that without proper contacts, it is very difficult to get a cab that offers fair services. And without proper contacts, one has to become a victim of the arrogance of the drivers and their overpriced services. He realized the untapped business potential.
Market study
A few days later, when he was bent on selling his tour package to a customer, the customer interrupted Bhavish Aggarwal by stating that he just needed a vehicle to reach his destination. At that movement, he realized that the people are not interested in tour packages but instead need vehicles to reach their destinations simply, at a predetermined cost safely. Ola bridges the gap between cab owners and commuters.
After the first-hand experience of such a huge problem, and a decent amount of market research he also realized that this in actuality was a genuine and deep-rooted problem for the masses. A lot of customers had fallen prey to such situations and were desperately in need of quality cab service. There clearly was a problem that provided vision to the amount of potential a cab booking service could have.
The keen-sighted co-founder of Ola Cabs, Bhavish Aggarwal knew that the majority of people will not afford cars, even when they are capable of affording cars. The main reason for this behavior can be attributed to the maintenance costs of cars, the cost of hiring a driver, the fuel costs, the hassle of parking, paying the taxes of vehicles, and the congestion and poor condition of the country’s roads. Only 37 percent of Indians own cars. So, he recognized that many will utilize the cab services instead of owning a car. In the future, no one wants to spend the majority of his time driving amid the snail-paced vehicular traffic and to reduce the traffic congestion, many will eventually prefer shared transport, like shared cabs, shared buses, etc.
Ola was born
Ola was the collective prodigy of Bhavish Aggarwal and Ankit Bhati and was officially owned by ANI Technologies Pvt Ltd, which translated to ‘Hello’ in Spanish!
During the initial days, the booking of an Ola cab was mostly a manual process. Many customers used to book a cab by phone calls, very few used to book cabs by using the Ola website. Drivers were called when a customer booked a cab by using the Ola website. Also, in the initial days, a car was borrowed for picking up customers, as some drivers didn’t arrive on time. A very genuine problem which was one of the major issues attached to cab service in India.
Using technology made sense and also there was a need at that point. So, there was the development of an app required to cover all aspects and provide a proper solution. Hence the proper focus was given to coding to make the cab booking process seamless by using automation techniques.
Ola emerged as a service provider to Ola drivers to earn with respect
Ola Cabs attracted many new drivers by the entrepreneur’s ideas and provided them with huge incentives. It also helped many drivers to purchase their own cars by offering them EMI services. Along with time, Ola Cabs slowly raised the cost of its rides and decreased the incentives which were being paid to the drivers to make Ola Cabs profitable. But many drivers are still continuing with Ola Cabs because Ola Cabs provide them with many non-monetary benefits like converting a driver into an entrepreneur, giving them their due respect, providing them with a constant stream of passengers, etc.
Instead of buying and renting out its own cars, Ola partners with several taxi drivers and owners and adds a touch of modern technology to the whole setup. This allows people to book cabs at a short notice through Ola’s app. Ola is India’s homegrown ride-hailing app with a little less than 50% market share (as of Uber’s 2020 report) in India. It has users in over 250 cities of India and employs 2.5 million+ driver-partners.
Driven by a hyperlocal approach, Ola is committed to its mission of building mobility for a billion people. Staying in line with its mission, Ola has also ventured into auto and bike booking services.
Ola – Industry Details
India’s taxi-hailing market is valued at more than $40 Billion. The market is expected to grow at a CAGR of 6.3% between 2022-2024. The increase is supposed to happen due to the changing lifestyles of travelers and the growing disposable incomes of consumers, especially in Tier-I and Tier-II cities.
Ola – Business Model and Revenue Model
Ola has a simple business model. It acts as a facilitator to provide cab-booking services. Customers can book their cabs through the app. Ola does not own any of the cabs. Only those drivers with valid permits duly authorized and verified by transport authorities can sign up with Ola; they could be either self-employed or work for an operator who owns multiple cars.
Just like how we as customers use the Ola app, the drivers get access to a driver-specific mobile app on their smartphone once they register with Ola. This is done only after a thorough check of authenticity and conducting due diligence of the commercial papers and the personal papers of both the driver and the operator. The drivers have the flexibility to decide their own time to log in to the Ola application and accept requests for rides from customers. They may choose to remain logged out of the system as per their convenience. Ola takes a commission of 15% on average on all the bookings done through the app.
Ola factors to create the final bill for the user includes:
- Base Fare – Charged flat.
- Distance Fare – Charged kilometer-wise (different for different cities).
- Ride Time Fare – Charged on the time taken to travel.
- Peak Pricing – Direct ratio depending on the demand for cabs.
- Service Tax – 5.6%.
- Swachh Bharat Tax – 0.2%.
- Toll Charges – Toll Collection in case you cross toll junctions in the journey.
Ola – Acquisitions and Merger
Ola had acquired the Pune-based geospatial service provider, GeoSpoc to improve their location and geospatial technologies with an undisclosed amount. Talking about the acquisition, CEO and Co-Founder, Bhavish Aggarwal mentioned the need for “better, newer maps and geospatial services” for the “new mobility” and to build the future of location services.
Ola has covered an interesting journey from being nothing to becoming a company that provides a livelihood to thousands of people. Today, Ola has become a part of people’s everyday life in many cities.
Ola, which suffered heavily due to the coronavirus pandemic, being a ride-hailing app, has seen quite a progress after the lockdown and other structures have been lifted. The company confirmed that the recovery it has witnessed from the second wave of Covid was 3X faster than what it has seen while shaking off the blues of the first wave.
Ola has recorded outstanding losses at Rs 17,453 crores during the fiscal that ended in March 2021. The operational revenue of the company suffered over a 63% decline, which was even more than its rival Uber’s 47% decline, amounting to around Rs 983.2 crores in the above-mentioned fiscal. The operating revenue for Ola had seen a growth of 4.7% YoY to Rs 2662.63 crore in FY20, as per the annual financial statement of the company with the RoC, and is standing at Rs 1,679.43 crores (FY21).
Ola – Future Plans
Ola is looking to go public in the first quarter of 2022 and will most likely be filing its DRHP (Draft Red Herring Prospectus) in the December quarter. Furthermore, the plans of Ola with its subsidiary, Ola Electric seem big as the EV-manufacturing wing of Ola has already started achieving some major feats.
