[sustran] Uber Said to Be Rethinking Its Car Leasing Strategy in India as Driver Incomes Drop

[Vinay Baindur]

http://gadgets.ndtv.com/apps/news/uber-said-to-be-rethinking-its-car-leasing-strategy-in-india-as-driver-incomes-drop-1672916


Uber Said to Be Rethinking Its Car Leasing Strategy in India as Driver
Incomes Drop
Reuters, 24 March 20
[image: Uber Said to Be Rethinking Its Car Leasing Strategy in India as
Driver Incomes Drop]

Global ride-hailing firm Uber Technologies is rethinking its car leasing
strategy in India, its second-biggest market, as drivers have returned
dozens of leased cars early after the company cut incentives, people
familiar with the matter told Reuters.

Uber <http://gadgets.ndtv.com/tags/uber> had planned to buy 15,000 new cars
last year and lease them out in a bid to attract more drivers - a strategy
it has used in other markets - but it suspended the scheme for a while in
December after leasing just a third of that total.

After burning through millions of dollars over three years in a battle for
market share with local rival Ola <http://gadgets.ndtv.com/tags/ola>,
backed by Japan's Softbank <http://gadgets.ndtv.com/tags/softbank>, Uber
has cut the incentives it gives to drivers and raised the fares it charges
passengers.

The incentives - from free smartphones to cash bonuses worth as much as
double a day's fares - meant drivers could earn as much as Rs. 120,000
($1,838) a 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 Re. 1.5 per minute
of travel from Re. 1.

The incentives and, to an extent, the leasing scheme aimed at drivers
without their own cars, boosted Uber's driver numbers, helping it rapidly
gain around 30 percent market share.

Uber has faced challenges elsewhere in Asia, but the stakes are high in
India's $12 billion taxi market, a key area after it exited China last year
<http://gadgets.ndtv.com/apps/news/uber-to-merge-china-operations-with-rival-didi-chuxing-report-867652>,
and one where CEO Travis Kalanick
<http://gadgets.ndtv.com/tags/travis-kalanick> has said it expects to be
profitable soon.

Uber has said its services are in 29 Indian cities and it has more than
250,000 drivers on its platform, but it lags Ola, which says it operates in
more than 100 cities with about 550,000 drivers.

*Business shift*
Two people with knowledge of the matter said Uber miscalculated the impact
that the reduced incentives would have on drivers' earnings, especially
those making lease payments.

At an open meeting for staff in December, around the time the incentives
were being reduced, Uber's India chief Amit Jain said the buying-for-lease
scheme was being temporarily suspended while the company evaluated its
leasing strategy, one of the sources said.

Uber did not comment on Reuters queries related to Jain's announcement or
the impact of the incentives cuts on its leasing programme.

Raj Beri, business head for leasing in India, said the scheme was set up to
help drivers without cars get on its platform and make money. "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 in a statement.

In a recent blog post on Uber's website, Jain defended the cuts to driver
incentives
<http://gadgets.ndtv.com/apps/news/uber-india-president-amit-jain-speaks-up-on-strikes-wages-incentives-and-more-1665890>
and
signaled a strategic shift for India. "We can shift from startup mode to a
more sustainable business model," he wrote.

*"No benefit in leasing"*
Leasing is only a small part of Uber's overall supply in India, but is seen
as a way to lock drivers on to its platform for longer, and stop them
switching to Ola.

To lease a new small car through Uber's scheme, drivers pay a Rs. 33,000
($499) deposit - less than what they would pay to buy a car from a dealer
with a bank loan. But weekly payments of about Rs. 5,500 over three years
add up to nearly double what drivers would pay to service a car loan.

That wasn't an issue when incentives were high.

Several Uber drivers said they feel trapped as a surge in the number of
cars on Uber's platform has led to fewer rides, at a time when incentives
have been cut, making it harder to keep up lease payments.

"I'll not be able to save even Rs. 10,000 a month," said Arjun Chouhan, 38,
an Uber driver in Delhi who has leased a car. "There's no benefit in
leasing. What if I'm unwell? They don't listen."

In a dusty car lot on Delhi's outskirts, guards told Reuters that dozens of
cars standing idle belonged to Uber and had been returned by drivers.

When Reuters phoned Xchange Leasing, Uber's local leasing arm that has an
office near the car park, officials said no new cars were currently being
leased out. 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.

An Uber spokesman said the company doesn't comment on "anonymous
speculation".

As part of its review, Uber may reduce the three-year lease term and let
two drivers share the rent on a car, one of the sources said.

Uber did not comment on its leasing targets or the future of the scheme.

"People left well-paying jobs to drive an Uber," said Sandeep, another
Delhi driver, adding his monthly ride income has nearly halved to Rs.
60,000 in two years, despite working longer hours.

"We were tempted at the thought of becoming millionaires."