Driver incentives were cut back after Uber burnt millions of dollars to counter its rival Ola

Uber drivers abandon leased cars as company cuts down incentives
Atom Uber Saturday, March 25, 2017 - 11:06

Cab-aggregator Uber seems to be rethinking is car leasing strategy in India. According to a report by Reuters, drivers have been returning dozens of leased cars after the company cut their incentives.

The report says that Uber had plans of buying 15,000 new cars last year and lease them out to attract drivers on to its platform. But the company suspended the scheme for a while in December after leasing just a third of that total.

Driver incentives were cut back after Uber burnt millions of dollars since it came to India in a bid to overtake its Indian rival Ola.

Uber was known to give its drivers incentives like smartphones and large cash bonuses. All of this meant that drivers could earn as much as Rs 120,000 per month.

“Those incentive payments have been pared back, in some cases to as little as 10 percent of fare income. Ride fares have risen to 1.5 rupees per minute of travel from 1 rupee,” the Reuters report states.

India is Uber’s second largest market and is currently one of the top players in India’s $12 billion taxi market. It currently is present in 29 cities with over 400,000 drivers on board. It has been striving to gain market share against its rival Ola which has its presence in over 100 cities and has 550,000 drivers on board.

Sources have told Reuters that Uber miscalculated the impact that the reduced incentives would have on drivers' earnings, especially those making lease payments.

In a recent staff meeting, India head Ait Jain said that the buying-for-lease scheme was temporarily suspended while the company evaluated its leasing strategy.

In a recent blog post on Uber's website, Jain defended the cuts to driver incentives and signaled a strategic shift for India. "We can shift from start-up mode to a more sustainable business model," he wrote.

Raj Beri, business head for leasing in India, Uber says that the company wants to bring more drivers on board. "We are very pleased with our progress toward this goal so far, and look forward to introducing the opportunity to more prospective driver partners this year," he said

When a driver leases a new small car through Uber’s leasing scheme, he pays a deposit of Rs 33,000. The Reuters report says that while this is less than what they would pay to buy a car from a dealer, weekly payments of nearly Rs 5,500 over three year add up to double of what drivers would have paid to service a car loan.

While leasing is only a small part of Uber's overall supply in India, it was seen as a way to attract drivers on to its platform, keep them for longer and stop them switching to Ola.

Several driver associations have been speaking out against the cab aggregator. In fact, Ola and Uber drivers in Bengaluru and Delhi are even launching their own tax-hailing apps.

When Reuters spoke to Xchange Leasing, Uber's local leasing arm, officials said no new cars were being leased out at the moment. One said the priority was to lease those cars returned by drivers, and it could be 2-3 months before new cars would again be offered.

Sources have also told Reuters that as part of its review, Uber may reduce the three-year lease term and let two drivers share the rent on a car.

Image: Torrenegra

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