Ola, Uber’s biggest rival in India, has followed it into another country now.
Seven years after its founding, India’s largest domestic ride-hailing company announced plans to enter Australia today (Jan. 30). The Bengaluru-based company has started on-boarding private hire vehicles and driver-partners in three major cities—Sydney, Melbourne, and Perth.
“We are very excited about launching Ola in Australia and see immense potential for the ride-sharing ecosystem which embraces new technology and innovation,” co-founder and CEO Bhavish Aggarwal said in the company’s press release.
The secret weapon that could give Ola an edge Down Under is the outsized foreign-driver population there. “Most (taxi-) drivers in Australia are Indian, which is good for Ola from a cultural point of view,” Jaspal Singh, co-founder of research and advisory firm Valoriser Consultants, told Quartz. As early as 2014, the number of Indian-origin taxi drivers overtook Australian-born cabbies. Just this month, Singh met authorities in Sydney and Brisbane who shared the feedback that migrants are capitalising on the shortage of drivers there.
“Ola is hopeful that they can capture the market by using the Indian diaspora,” Singh added.
The news comes on the heels of Japanese investing giant Softbank asking San Francisco-based Uber to return its focus to its core markets, one of which is Australia. Softbank is a major stakeholder in both Ola and Uber, fueling suspicions of a soft merger of sorts between the two in India.
The launch date for Ola’s commercial operations in Australia is still undetermined but a company spokesperson told Quartz that “rides (are) expected to begin in the coming weeks.”
In India, Ola operates in a 100-plus cities and has over 125 million users in the country. It claims to serve a billion rides annually. But volumes don’t always translate to big bucks, experts say.
“Taxi fares in India are amongst lowest in the world. So a high number of trips do not translate into revenue,” Singh said. “It is important to capture some international cities to build up revenue.”
In mid-2017, reports said Ola was eyeing launches in Bangladesh and Sri Lanka. But clearly, it picked Australia instead. “India, Bangladesh, Sri Lanka—these are all very price-sensitive markets,” Ankur Nigam, a partner at management consulting firm KPMG, explained. “If you move to a less price-sensitive market like Australia or Japan, for example, you can get a lot more bang for your buck.”
Plus, there’s no better time to lock horns with its enemy.
Globally, Uber has been facing behind-the-scenes turmoil, from adjusting to a new global CEO to fighting a whole bunch of litigations across countries to tax issues. Australia’s no different either: Uber’s licence to operate there was put under scrutiny following the London fiasco it was involved in. The northern territory of Australia has completely banned Uber. The company also lost the court battle over payment of the goods and services tax (GST) by its drivers.
Moreover, Uber’s been ousted from a handful of large markets like China and Russia. These losses, though, can be turned into wins for Ola.
“Uber enters a country, sets the tone, creates the ecosystem, and generates the awareness. The next guy who comes in has an added advantage. The evangelisation required is already done,” said Nigam. “Ola is then much better placed to learn from Uber’s experiences.”
Still, the road will be crowded in Australia. Uber, which entered Australia in October 2012, already has a stronghold on the market. Homegrown taxi company GoCatch may be slowing down but it is sputtering on. Last December, Estonian competitor Taxify launched in Sydney with a fleet of over 4,000 drivers—and heavy discounts. In a bid to beat Uber, the Didi Chuxing-backed company vowed to charge lower commissions from drivers and cap surge pricing at 1.5x.
However, Indian companies are well-equipped as they “are forced to build their back-end for a large potential customer base (and) execute at a low-cost base,” according to Sid Talwar, co-founder and partner at Mumbai-based venture capital firm Lightbox. “Unfortunately, very few Indian companies take advantage of the discipline needed to launch in India. And as a result, India produces very few global brands.”
Ola could change all that now.