The earlier system of calculating the variable incentives based on the number of trips made etc. was seen as highly arbitrary and not to the liking of the drivers.

Ola switches to fixed commission to retain drivers
Money Shared Mobility Monday, January 06, 2020 - 20:18

Ride-share cab aggregator Ola has been under pressure for some time from investor SoftBank to turn profitable as soon as possible and to go public with its IPO. The company has been taking several steps in this direction since then.

One of the latest moves Ola has made is to standardise the payouts to the drivers across the country in order to attract more drivers into its fold. The commissions and incentives paid by Ola had not been going down well with the driver community. Many of them would drop out or do more trips for rival Uber. These would leave Ola with less vehicles on the road and therefore drop in business. The company is now switching to a fixed 20% commission from all drivers. This will make sure the drivers will know what to expect at the end of the month and encourage them to stay put with Ola and not think of migrating. The earlier system of calculating the variable incentives based on the number of trips made etc. was seen as highly arbitrary and not to the liking of the drivers.

The policy to incentivise the drivers will still be in place but it will be limited to just 5% of the overall earnings being set aside.

The other positive outcome for Ola from this move is that its own internal cash flow will improve and will result in posting better results financially. The only factor that must be worrying Ola and the other cab aggregators in the country is the proposed legislation the government is expected to bring to regulate the sector including the commissions retained from the drivers etc. There are unconfirmed reports that the government may put the cap at just 10% of the fare collected from the riders.

Ola has more plans up its sleeves, apart from the driver incentive standardisation. One of them is to offer its cars on lease to corporates. Ola owns 10,000 cars and can turn into the largest operating lease company in the whole of Asia. The other is to offer the self-driving cars to individuals. Though operationally these streams of business may pose more challenges, the rewards in terms of the returns are quite handsome and much less risky.

The company is already associated with the two-wheeler renting business along with Vogo. That venture will see the companies jointly deploying more than 100,000 scooters on the roads.

While carrying out all these activities, the company is constantly looking at cutting down on the losses figure in its balance sheet. The last report for the financial year 2018-19 reflected the losses coming down to half the previous figure.

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