India Plans On Capping Uber & Ola Commissions to 10%
Drivers' dissatisfaction with wages and treatment is not just an adversity for ride-hailing companies in the U.S. It is an international phenomenon. Drivers all over the world wish Uber, Ola and other ridesharing companies reduce their commissions from 20%+ and share a percent of the additional fees charged to the rider. This has been a prominent demand all over the world since 2016 and has lead to numerous demonstrations and protests worldwide to bring about a change in their business models.
India is clearly taking note of this and the federal government has proposed reducing the commission according to a comprehensive 23-page document titled “Central Guidelines For Aggregators.” This law is still a draft and came up swiftly after Uber was stripped of its license in London for the second time in just over two years due to a recognizable "pattern of failures” on safety and security. India is the second biggest market for Uber and the proposed change in commission is expected to resurface after the current shutdown to help Drivers and restaurants on Uber Eats earn more, boosting economic recovery.
What do Ola and Uber have to say?
“The 10% (commission) is not viable, it has to be something around 20%,” said Joy Bandekar, a former executive at Ola. He exclaimed that their system could not survive if they saw a sudden change to a lower rate.
India is a huge growth market for Uber accounting for close to 11% of their global rides. Softbank backs both Ola and Uber and industry experts say this law would instantly halve their revenue from rides.
What does this mean for the future?
Uber and Ola have made it clear over multiple years of fighting the government that they think their business model of 20%+ commissions and additional fees is the only system for ride-hailing that can work successfully.
Though, this is simply not true because DiDi is rapidly expanding an even smaller 5% commission model in 20 more cities in Australia this year.
The devastating impact of the COVID-19 shutdown has also given the companies even more reason to drive their previous narrative into justified larger fees and commissions to survive.
Ride prices are expected to go up tremendously over the next few years as the companies recover and try to show profitability to investors. New ridesharing companies are rising locally to support Drivers with higher wages. These companies are promising during these times because Uber and Lyft will not be able to afford another discount way during this time. The company with a truly correct business model, better treatment of Drivers, and focus on affordable, cleaner rides will stand out.
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