Two of India’s largest startup unicorns, Ola and Flipkart, and their CEOs – Bhavish Aggarwal and Sachin Bansal – have come under immense criticism recently for suggesting that the Indian government intervene in what they see as ‘capital dumping’ and unfair trade practices by companies like Amazon and Uber. In a column on TNM, I too had criticised this suggestion.
However, some maintain that Bansal and Aggarwal have been misunderstood.
We sit down with Ola’s COO, Pranay Jivrajka, to clear the air. In a detailed and exclusive interview to TNM, Pranay says that what they are seeking is not protectionism, but a level-playing field. He says that Ola is investing far more in the Indian ecosystem than its competitors, and that it does not want Uber to create a monopoly in India by dumping capital. Excerpts from the interview.
1. How does Ola see the fast expansion of its rival Uber in India?
We have always welcomed competition. It gives more choice to consumers, keeps us on our toes, helps us innovate faster and eventually the ecosystem is benefitted. This helps the market stay agile. No one is against competition, be it national or international companies. Every industry should have competition, especially in our case where we are evolving at a very fast pace, it is essential that there is healthy competition.
Uber has been in India for well over three years now. They have committed billions of dollars in cash for the Indian market. If you notice, there is only a little progress in their market share, in spite of them spending so much in subsidies and incentives. We are almost three times their size, like some reports in the past have suggested.
It has been quite some time now, and what is missing is real innovation for India. It is not just about expending capital on the same set of drivers every day, it is about how do you invest in the ecosystem, make it vast and make it more inclusive for everyone.
2. There are reports that Ola's valuation is shrinking and will further shrink in the coming days. How do you respond to such reports?
If you see over the past five years, we have never commented on valuation. That is something we generally don’t do, and it is against our policy as well. But what we believe in is that there is a huge opportunity to build mobility for over a billion people, and that’s our mission. If you see the macro view, there are more than 300 million urban rides which happen in India today, and we are not even doing one percent of that. So, what is definitive is to realize this mission and create value for all our stakeholders. This is how we see value creation.
3. You say that Uber is indulging in ‘capital dumping’ in India. Can you explain what you mean by that and what exactly is the problem with it?
Fundamentally it is about capital dumping, and what it means is companies like Uber actually use their profits from international markets to fund their losses in other markets, in this case India. It is not about foreign direct investments, foreign capital or Indian capital, Indian company or foreign company – that is not the real issue here. The real issue here is what is the source of your capital and how are you deploying it, and what is the intent behind that deployment. Instead of investing in the ecosystem, what is happening is dumping of capital. This is done with the intent to monopolize the market.
And it does not end there. What will happen later, and we are actually seeing this in China right now, is that the market will be monopolized, the consumers will get exploited. Drivers will not make enough money. There is no free lunch, all of this (the spending by Uber now) would be recovered eventually. Everyone is here to make money. This is the fundamental problem and issue that we are trying to raise.
4. So, you are saying that this is not about foreign or Indian capital, but how the capital is being deployed…
And the intent behind deploying the capital.
Yes, the intent. Don’t you think you did the same with smaller cab operators in India, what you accuse Uber of doing now?
Actually not, that’s very different. Today the entire ecosystem works with us. The entire ecosystem is getting benefitted from the technology and the platform that we provide. We have cab operators of all sizes and scale; from a few cabs to a fleet of a few hundred cabs, on our platform since the beginning. We have more than 1.5 lakh drivers, kaali-peelis and autos working with us in India. We run shuttles. We have operators of all sizes and scales, and we have seen them growing with us, from single-car owners to fleet-owners. And this is a cycle, their drivers will also become entrepreneurs.
If I talk about the situation today, there are only a handful of cities which actually make for good business, and it is in these cities that irrational capital bumping is happening, and monopolization is happening.
We for example are in more than 100 cities. More than 80% of these cities for us are profitable, because we don’t have this irrational competition. There we work with autos and others as well. So fundamentally, we believe that it is a supply constraint market, and all forms of operators can work together.
5. If it is about all of this, then why make a distinction between Indian and American companies?
What we are looking for, and what Bhavish also spoke about, is a level-playing field for India-origin companies and MNCs. It is about what we are here for. It is about investing in the ecosystem and contributing. One example is what Ola did during the Chennai floods, to help people (with Ola boats). That never had a significant business advantage, but we thought that we can do that and we did. Even post-demonetization, our teams across 40 cities have been working to help people. We focus on skilling as well.
So, you are saying you are not trying to pit Indian companies against foreign companies?
Actually, no we are not trying to do that. So yes, what matters is what you are doing and why you are doing it.
6. What do you see as a threat in Uber’s strategy in India?
I think we have a live example, a fairly recent as well, in China. After the Uber-Didi merger, there have been reports of drivers in Beijing striking in front of Didi’s office. There are no incentives anymore. There was an article recently in which Didi has said that they will become profitable very soon because they don’t have to spend money on subsidies. We have seen consumers dropping out. We have seen what has happened to the Uber app itself, it has become entirely Chinese and I know people who travel there and suffer because of this. There is no solution to it.
So, if Uber monopolizes in India, consumers will not have choice and drivers will not make the money they are making today. It would be a sub-prime kind of a situation, I would say. That would be very harmful for the industry. Increasing the prices then would hamper our overall growth.
7. Let’s assume that Uber is attempting to do what you accuse them of. So, what do you want to be done about it? Are you asking for government intervention or protectionism?
What we are asking for, from the government, is a level-playing field. It is not at all protectionism, we don’t want it. We are not against foreign companies and players coming to India. We are not against any competition, except for capital dumping, which is detrimental to the industry.
8. What exactly do you mean by ‘level-playing field’? What do you want the government to do, come up with a new policy?
The laws for capital dumping and WTO norms are very clear for India and other markets. Unfortunately, they are not very articulate when it comes to the service industry. This is a one-of-a-kind challenge that India is facing, because all this while, we have talked about trade laws with respect to manufacturing. But we are beginning to understand the Internet economy better now, so that is where we want some kind of an intervention from the government. There should be some restrictions around capital dumping, like it exists a lot of other industries.
9. So what then did Ola CEO Bhavish Aggarwal mean by wanting to take lessons from China? China is protectionist, isn’t it?
I think what Bhavish meant was not that we act like China, we are a democracy so we cannot do that. But we want everyone to understand the intent behind what China did and take some extracts from it. We should do something similar for a level-playing field.
10. Speaking of policy, why did you back the Karnataka cab-aggregator policy, which is clearly problematic and does not work to the benefit of the drivers or the industry? It seems like you want the government to intervene in the market.
I have a different view here. You don’t have the choice to back a policy or not. You adopt a policy, that’s the law of the land. What we can do is reach out to the authorities in the right forum, talk to them, explain to them and understand the intent behind it. We have a very collaborative approach here. I personally am very against any confrontational approach.
11. Would you at least agree there are parts of the policy which could have been avoided?
And that is something the Karnataka government is still willing to understand and collaborate on. We are working on the same. We support the policy, but there are a few points which we have called out. But we don’t want a confrontation, but collaboration.
12. Do you think the Indian market is big enough for Ola and Uber to coexist peacefully? What do you think is the ideal situation for the market, in the future?
The fundamental challenge is there has been no third ride-sharing company in the past three years, since the time the capital dumping and subsidies have started. More than 30 companies are working on bike-taxis, 4-5 companies on shuttles, a few companies work on autos – but cab-riding there is no other company in more than one city apart from Uber and Ola. And that is because they cannot sustain with the subsidies.
What we aspire for is that there are enough players, enough competition and meaningful competition on what value we create and to build the ecosystem together.
In terms of the opportunities that we have, the market is reasonably big. We are close to one-fifths of the world’s population, Both Uber and Ola are scratching the surface. Together, as an industry, we do about 1.5% of the total rides, which is an intuitive number. So, the potential is humongous.
And all this can happen only if capital dumping goes away, or there will be no innovation.
So, you think Ola and Uber can coexist in India, yes?
I would put it in a different way. Not just Ola and Uber, many more players should coexist and we must have fair competition.
13. How do you see Ola investing more in the ecosystem in India than Uber?
We are focusing on investing in the community here. We want to train about 5 million drivers over the next few years, and this means partnerships with government and non-government entities. We have signed MoUs with Indian companies like Maruti and Mahindra, and deep partnerships with the Ministry of Road Transport, Ministry of Skill Development etc. So we are focusing on skilling, and a chunk of our investment would go into this. We will also invest in promoting sustained and shared mobility. It has two parts, expanding Ola Share to other formats, presently we have it for point-to-point rides, but it will eventually cut across all our categories. It reduces cost and is environment-friendly. The other part is sustainability mobility, for which we have started our pilots 8-9 months back. We would like to take a lead on electric cars in India, to promote sustainability.