Ola, one of the most revolutionary companies in the Indian business ecosystem, has been facing deep trouble in its cab business since the pandemic began to fade away. More than 30,000 to 35,000 cabs have gone out of business, and the surcharge is beginning to pain customers. Even after the pandemic, drivers are leaving the industry in large numbers. On top of that, even Ola employees are leaving, and after 11 years in the business, Ola cabs are still far away from profitability. The question is how did this revolutionary company get into such deep trouble in spite of the pandemic fading away? What exactly are the challenges faced by the company? And most importantly, what are the pointers that we need to keep an eye on to understand the future of the cab industry in India?
To understand this, let’s try to understand the basic business strategy of Ola and where exactly is the problem. Companies like Ola, Zomato, and Swiggy become more valuable because of the network effect, and their growth in the market can be stated with a four-phase framework. The first phase is cash drain, in which a company spends a lot of money to acquire stakeholders. In the case of Ola, they gave us insane discounts and ultra-cheap rates to tempt us to download the app, and drivers were given lucrative incentives. Because of this, both customers and drivers were happy, and Ola cabs started to grow in popularity.
The second phase is trust building. Because of the trust that Ola had built with the drivers, people in the lower economic strata started leaving their jobs, applied for loans, and bought a car just to become an Ola or Uber driver. Similarly, from the customer standpoint, we all got habituated with Ola and Uber, and as more people started using Ola, the company started growing massively.
But at the same time, with each passing quarter, they were incurring hundreds of crores of losses. Here’s where the third phase came in, which is dependency. Once you buy a car on an EMI, you are stuck with the cab business for five years until you pay off your loan. Similarly, from the customers’ end, we started getting reimbursements, some of us even left the thought of owning a car, we bought an Ola pass, used Ola share and made Ola an important part of our lifestyle. This is when many conventional cab services went out of business, and the Indian market started pivoting towards Ola and Uber.
And this is where the fourth phase came in, which is control. After creating a powerful irreversible ecosystem of both drivers and customers, Ola started to decrease its incentives to the drivers and started imposing surcharge pricing for customers. This is where the real struggle for Ola began in 2018 and 19.
Challenges Faced by OLA’s Cab Business
In recent times, Ola’s cab business has been facing significant challenges, and drivers have been leaving the industry in large numbers. Even Ola employees are leaving, and the company is still far from profitability. Companies like Fleek, India’s first subscription marketplace, are providing great deals on subscriptions of apps like Hotstar, Amazon Prime, Z5, Storytel, and more, with exclusive discounts up to 40%. With Fleek, you don’t have to pay the full price for the subscriptions, and you can manage them hassle-free. Fleek has a special offer for Thin School’s audience, where the first thousand people who sign up on Fleek using the link in the description will get 100 rupees worth of discount on a subscription of their choice.
