In developed nations where cab markets have matured, incentives offered are in the range of 15-20% of the gross booking value.

Ola and Uber cut driver incentives by 30-40 pc in March quarter ReportImage source: Uber newsroom
Atom Cab Aggregators Saturday, July 01, 2017 - 10:49

As Ola and Uber increase their focus on revenue per ride, these cab aggregators have reduced incentives for its driver partners by about 30-40% in the March quarter compared to the one before that according to a report by RedSeer Consulting.

In developed nations where cab markets have matured, incentives offered are in the range of 15-20% of the gross booking value (GBV). This indicates that incentives might go down further, the report states.

Declining incentives might be decreasing driver satisfaction and incomes but the monthly take-home income of online drivers is still more than that offered by the offline sector, says RedSeer Consulting.

There have been reports that drivers are finding it difficult to service their EMIs as incentives decline. Banks like SBI have reported that several drivers do not pay back in time forcing the bank to seize vehicles and suspend loans to Ola and Uber drivers.

When Ola and Uber came into the market, they went all out to lure drivers with massive incentives, promising income of over a lakh rupees a month to driver partners.

The report states that these apps introduced incentives that almost equaled the GBV minus the commission deducted by cab aggregators.

However, Ola and Uber soon tweaked the incentive structure after assessing the driver’s weekly earnings.  

There could be a further drop in their incentives, which might be extended throughout the year, the report said.

According to earlier research report by RedSeer the demand for cabs was outdoing the supply as drivers were quitting Ola and Uber over falling incentives.

According to the report, while the number of registered cabs peaked during December-January at 500,000, the next three months saw a decline of 20% and this trend was largely attributed to falling incentives and a dip in driver incomes.

During the quarter, there was a registered 5% fall in cab bookings, which was preceded by an up to 45% decline in driver incomes.

In May, Uber admitted that its app miscalculated the cut for drivers and shortchanged them for two and a half years. The app calculated commissions for Uber on a pre-tax sum, whereas its terms of service stipulate calculating it after taxes are deducted.

It then decided to pay out an average of $900 per driver in restitution, costing the company tens of millions of dollars.

In April, The New York Times, reported that Uber may be using psychological tricks to push its drivers to work overtime. It is engaged in an extraordinary behind-the-scenes experiment in behavioral science to manipulate them in the service of its corporate growth.