Tourist Cab business-economics

Having booked outstation cabs for self/family across Tamilnadu, Kerala, Orissa, Bengal and Maharashtra, I thought to write some points on the business model. Usually, the pricing starts from Rs 9/10 per km for a round trip with min 250km/day. Add more for bigger vehicles, and sometimes an extra payment for the driver's food/stay arrangements. Obviously, toll/parking/interstate permits is extra. If one prefers self drive, then Zoomcar offers pricing starting at approx Rs 16/km(if one uses the 10km/hr option for Sedan on Sat-Sun, with Rs 12/km for extra kms). Here, it is actually costlier than usual cabs but ok for those needing err.privacy.

Anyways, I hired a car from Kochi-Munnar for 4 days. The package was Rs 7000 for 4 days, with 500km included, and driver's cost all included. At the outset, he filled his diesel tank for 33.3litres paying Rs 2,000. The tank was only 75% depleted at the end of the 450km long trip, implying a mileage of 18km/litre for 25lts. Assuming Rs 1500 for fuel, and Rs 250/day for driver stay and meals(so Rs 1000 for 4 days), the driver still earned Rs 4500 for 4 days towards his profit/salary/car hire costs. The vehicle was an Ertiga for which 5yr EMI will be Rs 17500/month for a Rs 8.6onroad price. Hence, assuming 60% utilisation or 18days/month, Rs 1000/day goes towards that. So actually, not much profit there. The real juice comes when the driver gets tips or increases utilization. 

With marginal cost of fuel only around Rs 3-4/km, why is there not a price war like seen in local taxis(ola/Uber). Even Savaari was costlier than the local operator who serviced us, even after the Rs 5000 discount on the rack rate. Reasons for this is usually low utilisation, tourist fleecing/oligopoly etc. 

In this market however, innovations appear confined to service quality and not to business practices like garage-garage(instead of point-point), and pricing. The claims of Droptaxi/Onewaytaxi and others(https://timesofindia.indiatimes.com/business/india-business/pay-only-one-way-to-cabs-for-outstation-travel/articleshow/59059749.cms) are not realistic since hardly anyone confirms the pickup in advance. Unless you are ok to change your plans in the last minute(say backpackers), this won't work when you wish to take connections. 

Also, as mentioned in this post(https://scroll.in/article/807342/unfair-competition-how-uber-and-ola-are-killing-livelihoods-of-mumbais-auto-and-taxi-drivers) the long distance fares(>25km/full day rental) are now the domain of app based aggregators like Savaari, Ola Outstation etc. So the local taxis are in the death spiral of smaller distances-less profitability-lower earnings-demand/need for fare hike-demand compression for long distance travel etc. 

Uber/Ola surge pricing proves that we need a regulated public transport

In Jan-17, Uber euphemistically announced 'price adjustments' as their communication of  increased fares. With them earlier having abolished time/distance pricing and surge multiplier in favour of 'flat fares', there was no new benchmark or way to compare the impact of this adjustment. If a government agency had done this, there would have been a hue and cry about opaque rule making, edicts etc, but when private companies like Google/Uber make decisions using Black Box algorithms, they cloak their rationale or data under the guise of 'proprietary business secrets'. Anyways, while regulation is usually considered bad by those negatively impacted, it is essential to address market failure which happens in public transportation. Imagine your fire safety, water supply, and utilities tariffs being determined opaquely and with time of day pricing. Would you accept it? Answer is probably no. A player with deep pockets(eg Uber) can sweep into a city, under cut the existing public transport systems by cherrypicking profitable business, and then increase tariffs and profits instead of expanding supply. This is my apprehension with allowing 'innovative' startups to operate under a non level playing field, in such an important field. Those with private cars or ability to afford taxis can probably cope with surge pricing, but the vulnerable folks who rely on public transport which eventually hollows out to Ola/Uber, would not have any back up option. I have covered some of these problems in another blog post here http://apoliticallyincorrect.blogspot.com/2017/01/uberola-value-proposition-fast-eroding.html


So what is the solution? Regulations like below are a good starting point once refined in the consumers favour.
http://mahatranscom.in/pdf/Aggregator%20Rules-15_10_2016.pdf

But the fact remains is that unless the new age startups address age old problems of access, discrimination, non refusal of rides, regulated tariffs with surge limits, we risk later issues

Can on-demand ridesharing transform the peak hour urban commute?

Recently, I had to visit Nashik by public transport on short notice. Unsurprisingly, trains were not available and buses would have taken a long time. Therefore, I tried to locate ride sharing platforms where I found a couple taking their WagonR to Shirdi, and who preferred another couple to share the ride with. By paying Rs 1,000(for self+Spouse), I got dropped off at a tariff of Rs 2/person/km, which compares favorably with car rental.

I am not new to ride sharing being a power user of Uber Pool, Ola Share, Lifto et-al. Let me explain the reason for using certain words in the blog title:
Why on-demand: For people having predictable office timings, they could generally pool with the same person or fix patterns. But for people whose exit time is not fixed, on demand platforms are the method where new supply is created.

Why peak hour? Most people who drive to office would work during the normal peak hours of the city(else office transport is provided via cabs/buses for odd hours)
Why urban? For families travelling together, ride sharing is not a viable option due to limited seats, availability of like minded people and possible reluctance by older generation. Also, the cost per seat would not be much lower than hiring an entire car. Hence, I have not considered outstation or rural travel as a use case. Also, in semi urban locations, there are share autos at very low tariffs for popular routes, and ride sharing would not be too viable there in my view
Why Commute? While there are other use cases like leisure travel, commute is the repeatable demand pattern for ride sharing, and the one where the person often commutes without family in peak hours.

The benefits are cost, flexibility, comfort, company and time savings. It better utilizes existing assets without adding new vehicles(like Uber/Ola) on the road.

Some insights on the radio taxi industry

If you have to reach any place in time and/or in style, then taxis far outbeat autos. Besides the comfort(4 wheeler vs 3 wheeler, AC vs ordinary) in cabs, another advantage is their being waterproof, heatproof and having transparent meters and fares vis-a-vis autorickshaws. Having used radio cabs extensively in Bangalore and NCR(less often in Mumbai, Chennai and Hyderabad), some comments on the same

1. These fares have an upper regulated limit depending on the city. Many newcomers undercut these tariffs but may not be reliable on timing or availability(may cancel at the last minute)
2. The industry works on a model where both cab driver and customer pay. The two models are
1. Drivers drive company owned cabs paying Rs 1000-1500 per shift, and bearing the fuel charges. In turn, they can keep their entire earnings, and get the reservation fee share for the extra distance driven to pickup a fare
2. Drivers owning their own cabs pay a monthly subscription fee to the cab company, and usually a per pickup success fee. Tying up with one company is not enough, so often a single owner has 2-3 company tieups to ensure greater cab utilization. 
3. If you are not going for a long distance/airport drop off, then the cab may cancel if they get a better deal elsewhere. Of course, in organized reputed firms like Easy Cabs/Ola Cabs(I will NOT count Meru since it cancelled on me twice, once for an airport trip), drivers are fined if they do not reach 
4. There are many cab services in NCR which offer headline fares at Rs 10/km. What are the extras are-which make Meru/EasyCabs look cheaper for short distances
1. Min Billing anywhere from Rs 100-200 per trip
2. Airconditioning charges extra usually Rs 20-25
3. Luggage charges extra beyond X  bags
4. Call Centre reservation charges(since often NO online reservation)
5. How not to get conned/and save money
1. Book online where possible, to save on the convenience charge. Create an account to save frequently used destinations. 
2. Insist on a receipt for toll/tax, often the driver has a monthly pass but will still try and extract charges from you
3. Use the Google Navigator on to guide the driver in case of confusion on route, else on the per km model, any detours are at YOUR expense
4. Use the mobile apps where available-they offer discounts(like Ola Cabs 10%) and enable easy tracking of your cabs(i.e Ola Cabs)
5. Keep adequate change with you for the cab, often the cab will pretend that the credit card machine does not work OR will extract the bill even before you can take out your card. Tell the driver you want to pay by card, and if he plays tactics, complain to the company. It won't help for that trip, but will deter future pranks
6. How to choose a radio taxi firm
1. Give patronage to one which services ALL your needs including night time trips/short distances, not just the long trips. That is why Easy Cabs gets my vote vs Meru
2. Prefer one which allows online tracking of the cab to avoid tension of phoning call centre and tracking the cab progress