Aiming to wrest control of India’s booming taxi market, two cab-hailing smartphone apps – Uber and Ola – are promising hundreds of millions in new investment while also facing off with one another in court. After getting stiff competition from Uber, India’s largest cab-hailing service Ola has initiated talks with investors to raise a fresh round of funds to sustain its lead over its arch-adversary.
Ola which has become third-most valuable start-up in India is in talks with both new and existing investors such as Didi Chucking (previously Didi Kuaidi,China’s largest taxi aggregator app) and SoftBank Group. Ola raised USD 500 million in November. The company is initially planning to get funds from its existing investors and then top it up with cash from new investors.
These smartphone taxi apps, introduced in India in 2010, have grown to account for 10 percent of the country’s overall taxi industry, which also includes regular cabs and three-wheeler “rickshaws”.
Ola has already bought out the upstart TaxiForSure, and both Uber and Ola offer rates below those of traditional taxis. Meanwhile, they are quickly adding new cities and customers, including car drivers increasingly fed up with traffic gridlock and difficulty finding parking on India’s overcrowded roads.
The heat in Ola-Uber battle for more market share has further increased several notches with Uber India President Amit Jain saying that a “sizable portion” of the $3.5 billion funding recently raised by the US-based taxi aggregator from Saudi Arabia’s sovereign wealth fund will be invested in India.
With a population of 1.25 billion India is considered to be the most important market for Uber, which is present in 461 cities globally, after the US and China. Uber, which dominates its home market, it is struggling to gain ground on Didi Chucking in China. Apple Inc invested USD 1 billion in May in Didi Chucking followed by a Chinese insurance company which also invested USD 600 million this week.
With Didi’s strong backup, the importance of India is very likely to increase for Uber this year as analysts expect the company to struggle to knock out Didi in China.
If Didi’s dominance will keep increasing by a significant margin in China, India may become as important for Uber as it is for another American tech giant Amazon: a market required for survival. In that case, Ola will face tougher competition and may need a bigger capital pool, analysts suggest.