In response to mounting competition from local competitors Rapido and Namma Yatri, Uber is shifting away from its commission-based structure for auto rickshaw drivers in India. The company will now implement a daily fee system, allowing drivers to utilize the platform and connect with passengers.
This transition marks the latest adjustment in Uber’s operations within India as it strives to enhance profitability.
Uber initially launched its auto-rickshaw service in India back in 2015, but it was suspended shortly thereafter. The service was reintroduced in 2018.
Uber isn’t limiting this model to India; a representative confirmed to TechCrunch that similar subscription-based bike and auto-rickshaw services have been rolled out in Bangladesh and other Southeast Asian regions.
This new approach was communicated to riders via email and is being implemented for all auto-rickshaw drivers across India, following a discreet pilot phase that had been underway for several months. Auto rickshaws are responsible for approximately 25% of all motorized journeys in India, according to research.
Traditionally, Uber’s commission rates range between 25% and 40% of each trip’s fare; however, the company indicates that these fees “vary from trip to trip.” In contrast, local rivals Rapido and Namma Yatri have adopted a subscription-based model without charging commissions.
With this new structure, auto rickshaw drivers on Uber’s platform in India will now be required to pay a daily fee between $0.23 to $0.46 (20 to 40 Indian rupees), contingent on their city, as reported by TechCrunch.
As commissions have been eliminated for auto rickshaw drivers, riders must now pay drivers directly, either in cash or via the Indian government-backed Unified Payments Interface (UPI). Additionally, Uber credits and promotions will not apply to auto trips, and there will be no cancellation fees for riders.
Uber will not disclose the total fare at the end of the trip; rather, it will recommend a fare, while drivers will have the authority to set their own prices.
“We’re not part of fare negotiations between riders and drivers,” Uber noted on its FAQ page, indicating that fare haggling may become a common practice among drivers and passengers.
Furthermore, Uber confirmed that it would maintain the capability for riders to report safety issues through the app.
While it’s improbable that this model will be replicated in markets like the U.S., the change underscores Uber’s commitment to connecting independent operators with passengers.
This update exclusively pertains to auto rickshaws, meaning four-wheeled vehicles in India will continue to function under the existing commission model.
Nonetheless, Uber is actively experimenting with various models in traditional ride-hailing, including a flexible pricing strategy in over a dozen Indian cities and simultaneous rides, all aimed at enhancing competitiveness in the world’s most populous nation. Currently, Uber faces intense rivalry from companies such as SoftBank-backed Ola, WestBridge Capital and Nexus Venture Partners-supported Rapido, Google-invested Namma Yatri, and numerous independent auto rickshaw and taxi drivers.
Compiled by Techarena.au.
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