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Uber wants to rule the world but first it must conquer India

Uber wants to rule the world but first it must conquer India
New drivers who have signed up for Uber learn how to use the app from the staff at one of its offices in Bangalore, India, March 27, 2017. Source: The New York Times

Uber wants to rule the world but first it must conquer India

BANGALORE, India — Ms Nandini Balasubramanya’s office on the southern edge of India’s technology capital does not look as if it would play a key role in the world’s most valuable start-up’s plans for global conquest.

On many days, the tiny space has no electricity. So Ms Balasubramanya keeps the door open, the noise and dust of Bangalore’s traffic-choked streets streaming in. On one wall, next to a table where she greets a stream of neighbourhood job seekers, is a large menu of the documents she asks of each applicant: Driver’s licence, proof of insurance, vehicle registration permit, proof of bank account, and a half-dozen other chits to pass through India’s bureaucracy.

There is also a framed photograph of a smiling Mr Travis Kalanick, chief executive of the United States ride-hailing company Uber.

ON-THE-JOB SUPPORT

Ms Balasubramanya, 32, does not work for Uber, though. She is an “UberDost” or “friend of Uber,” an independent recruiter who is paid by the company for each driver she brings on. The work is rewarding but often difficult, she said.

After all, this is India, and some drivers have little actual driving experience. Ms Balasubramanya has trained people who have never worked before, and those with little experience managing money or interacting with middle-class customers. Many also do not know how to use a smartphone app — the beating heart of the Uber ecosystem — or they struggle with basic map reading.

“I show them how to use Uber, teach them how to use navigation, or how to use a phone,” said Ms Balasubramanya.

She has a team of recruiters constantly out scouting for new drivers. And she recently hired a few more employees to call those drivers, making sure that the ones she has found are sticking with Uber, not quitting the service out of apathy or confusion.

Ms Balasubramanya’s office is just one of hundreds of UberDost offices that Uber has set up across India, where the ride-hailing company now operates like a military division bent on subcontinental conquest.

After last year’s bruising retreat from China, where the company was outgunned by local incumbent Didi Chuxing, Uber is diving fully into this nation of 1.3 billion people, pouring money, engineers and logistical expertise into dominating what could one day be the world’s largest market for transportation services.

Uber is famously aggressive, and that trait shines through in its ambitions for India. Relatively few people own cars here, so Uber’s long-term goal is to leapfrog Western-style car-ownership culture and move directly into a society where people do not buy cars, they hail Ubers.

REALITY BITES

India is also where Uber’s vision of itself as a lean software company has come crashing into the sobering realities of analogue life in a rapidly developing country. Its aim of blanketing the world in hail-able cars remains complex and daunting.

“The way to think about it is that India is a super-important place in the world that has huge cities, with huge transportation needs that we want to serve,” said Mr Kalanick in an interview. “We want to be there, and want to be there in a big way.”

That interview, in which Mr Kalanick was by turns combative and charming, took place in mid-January, just before Uber descended into a sustained series of corporate crises. The company is dealing with a sexual-harassment scandal and greater scrutiny of its freewheeling culture. Mr Kalanick has since pledged to “fundamentally change as a leader and grow up”.

The troubles have cast a shadow over any plans the privately held company, which is valued at nearly US$70 billion (S$97.8 billion), might have had to launch a public stock offering. The particulars of its operation in India also highlight the fact that, for a business dependent on global domination, Uber still has a long way to go.

Uber, which hung up a sign in India in 2013, now operates in 29 cities, including some of the most congested on the globe. OPTIONAL TRIM STARTS Throughout the country, the roads tend to be terrible; clogged with traffic, potholes and pedestrians, marked by ever-shifting routes and a freewheeling interpretation of automotive rules that is almost balletic in its lawlessness. OPTIONAL TRIM ENDS

It is not just the roads. India’s cellular networks can be spotty and slow, and banking, credit cards and other financial mainstays cannot be taken for granted. More than that, vast differences in education and wealth create a social dynamic between riders and drivers that cannot be smoothed over by improving an app interface.

Not only are many of Uber’s drivers here unfamiliar with smartphones, some are illiterate. Often, drivers and riders do not speak the same language. Many drivers need financial help to purchase or lease cars, and then require continuing help to manage their finances and other details of their small businesses.

COMPETITIVE PRESSURE

On top of all this is competition. Uber faces an aggressive and well-funded Indian rival, Ola Cabs, which operates in 100 cities and offers a wider range of services than Uber does.

Both Uber and Ola argue that the long-term payoff for their efforts in India could be transformative. Ride sharing is changing Indian urban life; getting around cities has become cheaper and safer, especially for women. It is also altering life for hundreds of thousands of drivers, many of whom are drawn from India’s poorest ranks.

Yet Uber’s quest towards remaking transportation in India, which the company sees as a template for other developing nations, is bound to be long, expensive and complicated. Uber said this month that it lost US$2.8 billion in 2016. The company did not break out losses in India, but Mr Kalanick said the company’s investment here is “an order of magnitude lower” than the spending on its misadventure in China.

“We are not profitable in any of the cities we’re in now,” said Mr Amit Jain, president of Uber India, in a phone interview. “We have a path to get there, and we are confident we will.”

It is especially difficult for India’s poor to get around. A tiny slice of the wealthiest Indians can afford private cars and drivers to ferry them. Others make do with an array of lesser choices: Bicycles, scooters, bicycle rickshaws, motorised rickshaws, buses so crowded that passengers hang out the door. Most Indian cities lack adequate public transportation, and because of the foul air and the dearth of sidewalks, walking can be perilous. In Bangalore, three pedestrians are killed on the roads every two days.

For both Uber and Ola, this presented an opportunity. Both thought technology would enable them to provide rides that were cheaper than other forms of transportation and more accessible to a wider swath of Indians.

“Before we existed, getting a cab in most Indian cities was expensive and difficult,” said Mr Pranay Jivrajka, a founding partner of Ola. “You’d have to call one day in advance. We started booking cabs with 12 hours’ notice, then four hours, and then we started on-demand. And today, if an ETA is more than five minutes, people start complaining.”

Uber had a grander goal. Mr Kalanick has long said Uber’s primary competition is private car ownership. If Uber can give you a cheap ride instantly, it could conceivably beat the cost and associated hassles of owning your own vehicle.

In developed countries such as the US, car ownership is entrenched, but not in India. There was a chance, then, for ride-hailing companies to vault over private car ownership entirely.

“You can’t have every resident of Delhi driving a car — that just wouldn’t work,” said Mr Kalanick. “They just don’t have the infrastructure to support it, so why build it out? So that will be a big deal.”

THE LONG HAIL

The leapfrogging of private car ownership remains far off. At this point, Uber has 200,400 active drivers on its platform in India. Ola said it has 640,000. Those numbers sound large, until you consider that nearly 400 million people live in India’s cities.

Still, citizens of a certain professional class — tech workers, frequent travellers — said Uber and Ola had become part of the fabric of Indian urban life.

“(Before Uber), folks were rather locked up at home,” said Mr Christian Freese, general manager for Uber’s Bangalore office, where the company has placed its only dedicated engineering centre outside of San Francisco. “Now you can see people go out, especially on the weekend. You just press a button and the car is there.”

CULTURAL ADJUSTMENTS

Well, sometimes. Often in India, you open the Uber app, press a button, and then — nothing. The app selects a driver, but the driver does nothing. His car’s icon just sits there, unmoving.

This is something of a cultural mystery. “Drivers in India take forever to start, and we are still trying to figure out why,” said Mr Apurva Dalal, Uber’s head of engineering in Bangalore. “We’ve tried to do research on it, but we don’t know why it happens.”

One reason may be the drivers: Many are unaccustomed to smartphones and may not trust the digital notification that comes in over the app. Most Uber rides in India involve riders phoning drivers to confirm that the ride is for real.

On top of that, Uber’s digital maps sometimes do not match India’s ever-shifting road patterns, so riders may have to tell drivers how to find them.

Compared with other options available to most Indian riders, Ola and Uber represent an improvement in access to transportation, and a steep drop in price. In Bangalore, a 35km Uber ride that lasted nearly an hour cost me 548 rupees (S$11.85). That was on UberX, the company’s middle-tier service; with UberGo or OlaMicro, which use smaller cars, it might have been a dollar or two cheaper. A taxi taking the same route might have cost more than US$10 (S$14).

At these prices, Ola and Uber are becoming everyday options for India’s rising middle class.

Uber has made several adjustments to its practices to get along in India

Cash is king here because credit cards and other digital payment systems are not widely used. It was an issue for Uber’s just-get-out-of-the-car-when-you-are-done payment method. So, in 2015, in a move that Mr Kalanick said took him “a little time” to get used to, Uber began accepting cash payments for the first time in the city of Hyderabad. Soon it started accepting cash across India, as well as in South-east Asia and South America.

By autumn, when the Indian government began a plan to cut down on the use of cash in the economy, about 80 per cent of Uber’s Indian rides were paid for in cash.

An even bigger change came in how it recruits drivers. In the US, sharing economy companies depend on untapped labour and capital: You have got a decent car, a phone, and you need money? Why not spend your weekends driving for Uber?

TAMING RISING EXPECTATIONS

But the dynamics of untapped supply do not line up in the same way in India. Lots of people need work, but relatively few have cars or know how to drive. Drivers must also secure a commercial driver’s licence and special registration status for their cars.

Most of Uber and Ola’s losses in India stem from their vast operations used to attract drivers — for example, the network of UberDost contractors. Both companies have also set up leasing deals with banks and car manufacturers to get special terms for drivers in need of vehicles.

Finally, there are the incentive payments. Over the past few years, to persuade drivers that joining ride companies was worth the cost of a long-term commitment to a new car, Uber and Ola gave drivers bonus payments on top of their standard fare for each ride, as Uber had done in China.

All this money created a new economy surrounding the car business in India. Several Uber and Ola drivers described the services as life-changing. They make 30,000 to 60,000 rupees a month, far above the median income.

Mr Lokesh N, a driver who lost his business and who now owns a fleet of cars on the Ola platform, said: “In India, there is a social stigma about driving, but now the public is starting to accept it. People who come into my car accept the dignity of my labour.”

The ecosystem these drivers depend upon rests on a shifting economic calculus controlled entirely by two companies. In the past few months, both Uber and Ola have begun substantially reducing incentive payments, sparking protests and strikes by drivers. Uber has said the subsidies will continue to decline. THE NEW YORK TIMES