Uber to Invest $500 Mn in India to Counter Ola's Market Dominance

By siliconindia | Tuesday, 29 March 2016, 07:01 Hrs

BENGALURU—Online transportation app, Uber plans to invest $500 million in India by June or Rs 1,000 crore a month, on average — as it challenges Ola for leadership in its third-biggest market. Just nine months ago, the world's most valuable startup committed to invest $1 billion in India, a market the company's founder Travis Kalanick has said could transcend either the US or China for Uber. "We are doubling down our resources for India," said a senior executive at Uber while requesting anonymity. Adding to the statement he said that the company has not yet utilised all the cash from the first $1-billion commitment. "The plan is to spend each dollar more efficiently than our competitors, and invest in building a team, technology solutions that are India-focussed, and quality," the senior Uber executive said. Uber declined to comment, as reported by Aditi Shrivastava, Indiatimes.

Uber and Ola are locked in vehement face-off, sometimes ill-tempered, to dominate in India. The Indian company, which considers Japan's SoftBank as its vital investor, reacted by claiming that the newly launched service called 'Micro' alone would sweep over Uber, which is estimated to be valued at $62.5 billion, within a month in India. According to industry experts and investors ET spoke with, Ola has a 15-20 per cent lead on Uber. "However, Uber has eaten into Ola's market share in top cities, which Ola is now vigorously defending," said an investor in Ola. Bengaluru, Hyderabad, Chennai, Delhi-National Capital Region and Kolkata are the major cities that beef up more than 70 percent of Ola’s and Uber’s revenue. Ola has raised a total of about $1.2 billion so far, including $500 million in November from investors including China's biggest taxi aggregator Didi Kuaidi that is building a global alliance against Uber. At the time, Ola was valued at $5 billion.

Uber and Ola are also fighting pitched battles in the Delhi High Court. The Bengaluru-based company has accused Uber of violating rules and operating cabs that use diesel as fuel. Uber has denied the charge. For its part, the US Company has sued Ola, accusing it of using a range of dirty tricks, including creating fake bookings. Ola has denied the allegation.

Uber will use the investments in government collaborations, business partnerships; strengthen its driver supply initiatives, marketing and expansion, sources said. "The additional investment in India is an interesting move as it will again start the regime of heavy discounts for commuters and incentives for drivers," said Jaspal Singh, founder of transportation advisory Valoriser Consultants.

According to a Goldman Sachs report titled 'India Rising Internet', the domestic online car rental market is expected to reach $1.4 billion by 2030. Ola is restructuring its business to focus on its core taxi business. Earlier this month, ET reported that Ola would maneuver its funds solely into its taxi business in eight major cities where it competes directly with Uber, with an increased focus on its low-cost taxis and ride-sharing services. Analyzing Ubers growth in 2016, it is evident that Uber has expanded to 26 cities, signed multiple pacts with state governments and government bodies, including the government of Telangana and the Automotive Skills Development Council, to create thousands of jobs and entrepreneurship opportunities, train and certify individuals, and make significant investments to support innovation and development.