[GTO]

Most of you would've heard of Uber recently offloading its Southeast Asian business to Grab - related link. The two had a common investor - Big Daddy Softbank.

Softbank is an investor in Ola as well. Now, the Economic Times is saying that officials of the two companies have been meeting. Is a merger of the two likely?

I personally don't think so as India is an incredibly important market for Uber (and Google, Amazon etc.). All of them failed to make it in China. India is too big a market for brand Uber to give up (ET states Ola will take over Uber India).

I sure hope no kind of merger happens, even if it's the other way around - Uber branding taking over Ola. Fierce competition makes things better for you & me, the end customers. Between the two of them, Uber & Ola perhaps have 99% of the app-based taxi market in India.

[androdev]

Both lack strong founders that can stand up to the investors. It's pretty much investors' show. Unlike Google, Amazon, Facebook, etc. these companies are harder to scale and face risks related to regulations and driverless tech.

It's becoming increasingly clear that driverless tech will have to wait. The moment few countries declare that driver partners are indeed employees, these companies will implode.

[ksameer1234]

Would be an end of disruptive phenomenon that app-based taxi service was. Probably the only thing keeping Uber and Ola in check is the fact that users have an option to select between at least two prominent choices. Same goes for drivers who can associate with aggregator offering more perks.

If this merger goes through, we'll probably have to go back and mend relationship with not-so-friendly neighbourhood rickshaw driver.

[blackwasp]

I'm not sure what the whole business idea of such companies is. Despite having 2 cars in close family attached to Uber, I'm really not sure of the end game of such companies. Frankly, as long as they are burning investor money, they will run. But there is no chance of them sticking around once the money well goes dry.

Merging both the entities will end up being a loss for both the driver/operator and the person who's booking the cab. And Ola operation is larger = higher losses, than Uber in India. Not sure if anyone would like that kind of baggage going forward.

Some points to consider -
1. What business model works on just loss with no sign of profits since the start? If they wanted to give incentives during the early phase, they should have taken zero profits and given everything after operational expenses and tax to the drivers.

2. Uncontrolled addition of cars - From an on trip time of 6 hrs a day, the taxis are struggling to get more than 3 hrs a day since the last year (personal experience). So while earlier atleast all the cars managed to break even, now none of the cars do.

3. Each company (Ola / Uber) giving more discount / incentive than the other.

4. Unrealistic salary expectation (though sustainable). Driving is hard work yes, but drivers get complacent. Attrition rate is high. Just to give you an idea, my driver takes home anywhere between Rs. 20,000-30,000 depending on his hard work. When the incentives started going down, the salary didn't go down.

5. Probably the major one - driver job is not considered as one with dignity in India (majority opinion). So 9/10 drivers or even more are just about okay. They will drive rash, ignore traffic signs and skimp on safety in general.

[Hells Bells]

Uber did not want to sell out and yet Softbank forced their hands. If Softbank sees a continued bloodbath between their two investments in India, they would forced their hands once again. Unlike Warren Buffet, I dont believe the PEs look to grow a company for perpetuity and at the end of the day, would look to make their investments come good with profits.

What would be interesting to see is who eats whom.

[vb-saan]

Originally Posted by GTO

Most of you would've heard of Uber recently offloading its Southeast Asian business to Grab - related link. The two had a common investor - Big Daddy Softbank.

Considering the way it happened here in Singapore, a merger or Uber offloading the business to Ola is quite a possibility. Uber was considered a bigger player with a wider operating fleet with their own car rental facility and even they got into a tie up with the biggest metered taxi group here - Comfort DelGro. And then it all changed this Monday with the announcement, and Uber will close off completely in early April.

[Hayek]

Tougher to orchestrate such a merger in India - we don’t have any organised competitor, and it could well be argued that a merger of Uber and Ola is anti competitive, and should not get CCI approval.

However, I do see Uber becoming more rational in terms of the kind of incentives it gives its cab owner / driver partners, and that will probably lead to a massive slow down in both cab addition and in the return expectations that cab owners / driver partners have. Those who have bought cabs and are cribbing should be clear - like in every other sector in India, demand is not a problem for cabs, it’s excessive entry that has destroyed operator economics. If you are not making enough on your Uber or Ola, consider shifting to using the car as a genuine national permit tourist taxi. As for drivers, I don’t see why pure play drivers will make more driving Ubers or Olas than any other cabs - ₹25-30 k in a city like Bombay is a very good comp for a driver.

However, the economic case for Uber and Ola in India is incredibly strong - most black and yellow drivers and cabs were hugely under-utilised and the technology solutions provide a huge efficiency which reduces costs and makes cabs accessible to many more people. So with rational pricing and expectations, these companies should become profitable over time.