YatraGenie: Taxi-Aggregator Model in Danger of Collapse :

YatraGenie: Taxi-Aggregator Model in Danger of CollapseHeres a surprise: A CEO bold enough to talk a deep flaw in the Indian taxi-aggregator businessand why it needs to be fixed quickly.

Hand to our hearts, if any of us (taxi aggregators) say we are changing the lives of drivers, wed be bullshitting, says Renil Komitla, President and CEO, YatraGenie.

That isnt the sort of thing you hear every day. In fact, its the kind of thing you never hear in a market jacked up on investor money Red Bull--let alone from the CEO of a tech-transport company.

But thats just the sort of straight-shooting person Komitla is.

So just who is this man and why should you listen to him?

Heres why: Because Komitla knows the travel business. YatraGenie isnt Komitlas first brush with the transportation business. Years ago, before tech-transporters became a fad, Komitla set his mind on fixing the transportation problems of his home town, Nellore, Andhra Pradesh. In 2004, he started Komitla Bus Services to ensure that Nellores citizens could access good quality bus services.

Thats when he learnt something important: For the most part, transportation in India, isnt a sustainable business, not at current prices.

I started Komitla to serve the people of Nellore, to offer them decent bus services. Over the course of 12 years, Ive personally put in more than Rs 4.2 crore into to keep services running, he says.

The same applies to the taxi business. And aggregators, he says, arent making things worse by lowering prices.

When the flood of investor money dries up, its the driver ecosystem that will suffer the most, he says.Were beginning to seesigns of that.The recent protest s among Uber drivers in India objecting to the aggregators revised incentives, shows this.

But he does believe it can be fixed. Heres how.

Whats the problem with the taxi business, the way it is today?

I dont know if my peers in Ola and Uber agree, but technology can only play a limited role. The operator, thats the people driving cabs, have to be in business if anyone else--including end-customers and taxi aggregators, can benefit.

Whether youre taking about Ola or Uber or YatraGenie, we can only be in business if the underlying layer, thats the people who run cabs and buses, are healthy and profitable over time.

The problems, we face today, are deep-rooted and are beyond the ability of one person or company to fix. (These problems boil down to unsustainable pricing). Lets take, for example, a ride from Koramangala to the Bangalore airport. Thats about 33 km. Now, if you take a Meru cab, which charges Rs 19.5 per kilometer (after the first 4 km), you will pay about Rs 770 including taxes. 50KM, you will pay about Rs 1200 including taxes. Taxis like Ola, Uber, YatraGenie it is about Rs 800.

For the same distance, an operator in the US or another country in Europe, will get paid about the equivalent of over Rs 7,500.

To make things worse, cars cost about 40 percent more in India, diesel costs 20 percent more, and car maintenance is more expensive. Yet, the selling price for taxi services here is almost a tenth of what it is there.

How in this world can an operator be successful? Its next to impossible.

One of the problems is that the government often fixes the rates. And once fixed, it takes years before they are revisited.

New technology entrepreneurs like Ola, Uber and YatraGenie, make this worse by undercutting prices even further.

Are you saying that the entire cab ecosystem, in its current shape and form, is unsustainable?

Yes, thats exactly what Im saying. Its not long term, not until we change the pricing mechanism.

Related content:

Ola Integrates Technology with Transportation

Meru Cabs Unruffled by Competition in the Market

Carzonrents taxi business is about safe, convenience and consistent quality delivery

Since taxi aggregators cant change the prices of cars, diesel or car maintenance, the only way to ensure that drivers can make a sustainable living is to increase the cost of a ride. What number do you suggest?

Realistically, a driver will be able to be happy, and an aggregator will make money, at a price of Rs 26-27 per km.

At that price, a driver will be able to take home about Rs 25,000 to Rs 30,000 and will be able to afford decent education and medical for his kids.

So why dont taxi aggregators lobby the government to raise prices?

No aggregator has a right to ask the government to up the pricesnot when they offer Rs 6 per km!

What youre saying is in direct contrast to the slew of hoardings claiming drivers can make up to Rs 90,000 a month.

Thats marketing. It doesnt work. Its a marketing gimmick meant to get drivers to join an aggregator.

To make Rs 90,000 a month, a driver must make Rs 3,000 a dayand must drive every single day of the month.

To make Rs 3,000 a day, at an average price of Rs 10-11 a km, a driver must drive about 300 km a day! Can you imagine a driver trying to do that in a city like Bangalore?

On average, if a driver is working with a popular tax aggregator, he will probably do about 200 km a day. Thats if he is lucky and is willing to work 12 hours a day.

Even if a driver is this lucky--and works 30 days a month, which assumes they never take a holiday and never fall sick--they will make about Rs 65,000 a month. From that 20 percent goes to the aggregator, leaving the driver with about Rs 48,000. Then they have to pay for diesel (about Rs 30,000 a month), the cars mortgage, and servicing. They arent left with much.

And if you work 12 hours a day for 30 days, well you are going to fall sick!

What are you doing about this, because you are party to the problem?

My model is different. Im not interested in building a billion dollar business overnight. We want to take our time and build a business thats both profitable and sustainable for the drivers.

Im seriously looking at bringing about change. Im trying to ensure that we start with the transporter. Like, I said, if the transporter is healthy, the ecosystem will work.

Since I cannot go over the pricing cap that the government has set, we have created a package for drivers. Part of the idea behind the package is to ensure that drivers dont stick to city driving only. if drivers agree to increase the radius in which he is working, they can make more money.

This way we arent throwing incentives to drivers. The last thing we want is to create a culture in which we reward people for merely doing their jobs. Incentives should be limited to people who are super stars.

But Im afraid that, in the last few years, in the rat race to become market leaders, taxi aggregators are spoiling our own people. Were telling them that well reward them just for doing their jobs. Were creating problems for ourselves and were shooting ourselves in the foot.

Some day or another, if we continue down this path, things will break.But players like Meru have been in this line of business for some years now. How do you explain that?

I have a lot of respect for Meru. Meru doesnt make these promises to their drivers. I have to give them credit. And until the other aggregators came along they didnt have discounting models.

But, that said, at Rs 19.5 per kilometer (the cap that the government has put in Karnataka), the operator is still making a loss.

You said some day, if we continue down this path, things will break. Can you make a guess of when?

That really depends on how deep the pockets are of the investors behind the aggregators.

So the question boils down to: When will investors stop investing and this bubble bursts?

My guess is that it wont go on for too long. Another two years at the most. I say two years because weve reached a stage where the two unicorns (Ola and Uber) are literally fighting. A fight, by the way, that isnt good for all the other players, big and small, who cant match the throwaways they are offering.

I hope that the investors and the folks running the aggregators realize that when the ecosystem breaks, there will be a lot of people on the road. End consumers will use public transport or autos, but the drivers will be in trouble. Remember, a lot of them have left mom-and-pop stores or other means of employment to drive taxis. When things go bad, its going to be hard for them to re-start.

I think the bigger aggregators should have some moral responsibility. A business that runs only on discounts has to stop.

Source:

http://www.cio.in/ceo_talks/yatragenie%3A-taxi-aggregator-model-in-danger-of-collapse