PESTLE Analysis - How does UBER India stands out

Uber India is the Indian arm of Uber, an international company headquartered at San Francisco, California, USA. Uber acts as an aggregator in taxi sharing business.

Uber India, is the second largest unit for the company and has recently crossed 500 million trips milestone. Employing over a thousand people across 29 cities ¹ and is growing at a phenomenal rate of over 100 % year-on-year ² and is actively expanding into smaller cities. It is also the second largest taxi aggregator in India after Ola.

Here is the PESTLE analysis of Uber India.

Political factors:

Uber from the very beginning has been facing scrutiny all over the world for not having clear regulations and bending rules in general. Many countries, including India has issued notice and taken action against Uber for employing taxis without commercial licences. It is also accused of not owing responsibility for accidents, incidents of crime and harassment by drivers under its umbrella. France, Netherland and some Asian countries has initiated steps to bring regulations in this regards.

Drivers were convicted of rapes in India in 2014 and 2017. Various states have issued stern warning to Uber for not following rules to ensure transparency and security.

Governments are also looking into price control mechanism to discourage Uber's dynamic pricing strategy.

Economic factors:

Uber is modeled on shared economy, wherein Uber acts as a bridge between vehicles owned by drivers and passengers. It connects potential passengers through a mobile app and transfers the request to the nearest driver, who drives to the location.

Introduction of ride hailing service caused a surge in private drivers, unemployed youth and those looking for new career opportunities, to invest in commercial vehicles, mainly drawn by initial reported earnings of around a lakh of rupees per month. The competition with Ola, its main competitor and economics of scales caused reduced incentives, taking the edge off the initial stimulation to join Uber. Having lost its sheen, both Uber and Ola are facing a huge deficit of skilled drivers to help them to be consistent in their business growth.

Driver unions and even the central government are contemplating to enter the market at a lower rate per kilometer than Ola and Uber. If successful, this can further dent the operations of private ride hailing services.

As a pre-emptive measure to ward off pressure of high fares, both Ola and Uber has started ride sharing options, wherein a passenger shares a ride with other passengers and pays less than half of regular fare. A win win situation for both passenger and Uber.

Break even revenue is still a dream for Uber India and its operation is funded by venture capital.

Socio-cultural factors:

Companies like Ola since 2010 and Uber since 2013, has caused a marked change in people’s mind-set.

In an era prior to ride hailing companies, consumers often found themselves helpless while trying to rent a taxi at night. Even during the day time un-organised taxis and auto-ricksaws held the general public to ransom, refusing rides, refusing to go by meter, demanding exorbitant fares and often behaving badly with women. Females tried to avoid late evening / night duties, causing professional loss to their careers. Late outing programs were mostly abandoned in absence of reliable transport. Late night arrivals at the rail station or airport were cursed. Citizens lacked better options and did not feel safe and secure in general.

Apart from bettering the lives of drivers who joined, these ride hailing services given its convenience and efficiency provided an avenue to the citizens to change their routine. Urban smart phone wielding commuters are able to plan and set up meets and families could go out together, without worrying about the haggles of travel. This directly influences occupancy of restaurants, late night cinema shows and higher footfalls at shopping malls and amusement parks. Offices could work longer enabling them to compete better. Train and flight travels to unknown cities are easier with ride waiting on arrivals, even at midnight. Bar goers booked rides, instead of driving in a drunken state.

Technological factors:

The exploding of operations of ride hailing services is mainly because of use of technology. Commuters just needed a smart phone to download and install the ride hailing apps from Uber. Register and one is ready to go.

With improvement came journey estimation, point to point travel, abuse reports, support system, transparency in statements and receipts.

With real-time tracking not only the commuter is able to check the route being taken; Uber too can keep an eye on the ride. Thus, adding to the safety quotient.

Digital money transfer system as Paytm, UPI, credit card and debit card boosted the ease of the commuter going cashless. The drivers too benefit from the new technology.

Legal factors:

As per report ³ as recent as 13th October, 2017, Supreme Court of India is to examine a plea to make ride hailing companies to be accountable for drivers’ offences. In another corner of the world, Transport department of London has imposed a ban and has decided not to renew its licence.

In India, ride hailing services were brought under the ambit of Service tax (and now GST) unlike other taxis.

In some states, government wants to regulate their fares and bring them at par with regular black-and-yellow cabs and reduce the demand driven prices.

Environmental factors:

Though it can be debated that ride hailing companies were responsible for increase in sales of mid-segment cars, the effect it caused on traffic congestion is still to be studied fully. One theory suggests that such services will reduce carbon emissions in cities by lessening the usage of personal automobiles as it takes away the incentive of owing a personal vehicle. People will tend to use public transport more if they have Uber as last mile connection or as a back-up in case they are not able to avail the same. Also, cars deployed by Uber are new and relatively more fuel efficient and less emission is expected.

Sustainable cars need to be one of the priorities. Both Uber and Ola are moving into e-cars and hybrid cars to reduce environmental damages.

Conclusion:

In conclusion, it may be said that Uber India is a big player in shared economy market, with options to branch into other revenue streams using the same infrastructure and plotting a survival and competition plan. UberEATS is one of its initiatives.

Bans and restriction is the biggest challenges it is facing. It needs to review its human management and stick to strict back-ground check while adding drivers to its fleet.

Uber in markets where it is falling short of expectation is merging its business with rivals. Yandex, Russia and Didi Chuxing in China took over operations of Uber. Similar merger or acquisition with Ola or Meru, another app based taxi service in India, cannot be ruled out in future.

Vinay Pandey, 29/10/2017

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References :

1. http://www.business-standard.com/article/companies/uber-india-witnesses-strong-growth-plans-to-double-driver-base-by-2018-117080301201_1.html
2.  http://www.livemint.com/Companies/VP4hwqdmLv3FRg0DV64hxO/India-business-growing-at-over-100-yearonyear-Uber.html
3.  http://indianexpress.com/article/india/ola-uber-supreme-court-to-look-into-plea-on-app-based-cab-services-4887790/