Ola, Uber, other cab hailing apps may suffer severe Covid dent; personal car sales may benefit

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Updated: May 06, 2020 4:58 PM

The deadly virus, which is resetting consumer behaviour towards the usage and adoption of different services and pushing businesses to revise their growth strategies, might also challenge cab-booking businesses to address hygiene concerns on a war footing.

Uber, Uber Essential, lockdown, coronavirus, covid 19Ola, Uber has resumed services in select cities under green and orange zones. (File Photo)

Cab-hailing companies such as Uber and SoftBank-backed Ola, which have resumed services in certain cities under green and orange zones amid Covid-19 outbreak, are likely to have their operations hit significantly even after the lockdown. The deadly virus, which is resetting consumer behaviour towards the usage and adoption of different services and pushing businesses to revise their growth strategies for the post Covid world, might also challenge cab-booking businesses to address hygiene concerns for consumers on a war footing.

“Shared mobility services like cabs may get pushed out for six-nine months post-Covid as consumers will be hesitant to book rides. The number of trips may get curtailed. So there will be a challenge for these firms. However, the value proposition of shared mobility is very strong and it will continue as a seminal trend,” Yugal Joshi, Vice President at Texas-based consultancy Everest Group told Financial Express Online.

“It is a big challenge for them to revive growth post-Covid as they know the demand may not come for a very long time. There could be a dent on business for six-nine months. There are also issues on the drivers’ end who are sitting idle at home due to lack of demand,” Sanchit Vir Gogia, Founder and CEO of consultancy firm Greyhound Research told Financial Express Online.

Also read: Day 1 of relaxed lockdown: Amazon, Snapdeal get ‘thousands’ of orders; these products top the list

This is despite measures Ola and Uber repeatedly claimed to have put in place to check social distancing and sanitization in the cabs. For instance, Ola, which is now live in over 100 cities in green and orange zones, has mandated drivers to clean cabs before every ride, use masks, disinfectants etc. while on the job, non-AC rides to avoid recirculation of air, ask for cashless payments etc. Similarly, Uber, which is live in 21 cities so far in the permissible zones after the government’s directive, has rolled out similar measures.

“As we reopen our platform to millions of citizens for their commute and driver-partners whose livelihoods are dependent on serving mobility needs, the safety of both continues to be the topmost priority for us,” Anand Subramanian, Spokesperson and Head of Communications, Ola had said in a statement earlier. Uber too, in a company blog post, had said, “The health and safety of our community have always been and will continue to remain our top priority, especially now, as we resume services.”

While Uber declined to comment, Ola is yet to respond for this story

The possible slowdown in cab-hailing services leading to an unexpected surge in sales of carmakers is subjective. The middle-class consumers are less likely to invest in personal vehicles amid the overall economic gloom and jobs and salary cuts. “There cannot be a strong correlation between commuting through cabs and buying personal vehicles for short term and then going back to shared mobility. The big factor is the demand issue as the economy is down, people are losing jobs, their salaries are getting cut and so buying a new car may not be their top priority. It is a big investment,” said Joshi.

Also read: Amazon, Flipkart rival CAIT’s BharatEMarket opens registration for sellers; targets this many retailers

However, there is a large amount of scepticism among people who are ready to shift or go back to their personal vehicles to avoid chances of virus contraction. “Cars sales will happen in a very big way for those who are upwardly mobile and have money. This would definitely mean a reduction in the business of Ola and Uber. They might focus on enterprise side such as partnering with e-commerce, food delivery firms because that is where foreseeable money is, otherwise they will lose drivers,” said Gogia. Uber, for instance, had partnered with Flipkart, BigBasket and Spencer’s Retail to deliver essential goods and groceries.

To retain consumer demand, cutting down fares is also not an option for cab-hailing companies. It may help them in near-term demand but people are less likely to bargain their health for a cheaper ride. Also, being a high cash burn business, it won’t be possible for Ola and Uber to subsidize fares. The overall Covid impact would eventually hurt the valuation of cab-hailing firms like Ola and Uber. “They will see 30-40 per cent valuation dip in their next rounds of funding,” said Joshi. However, there will be some businesses who might get some extra money but not at the premium valuation.

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