11.20.2014

Uber aims to conquer India with smaller, cheaper UberGo

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The taxi war in India is like the ongoing world chess championship, where every smart move by Indian challenger Vishwanathan Anand is swiftly countered by Norwegian world champ Magnus Carlsen, and vice versa. US-based Uber is in a similar fight to the death with its main Indian rival Ola.

Uber today launched a third tier for India called UberGo. This costs less than UberX, which in turn is priced lower than the premium UberBlack. While the UberX uses compact sedans like the Toyota Etios, and UberBlack larger cars like the Toyota Innova, the new UberGo for India will use small hatchbacks like the Etios Liva. India is the first country where Uber is going into this segment.

This comes close on the heels of Ola testing its app with three-wheeler auto rickshaw drivers in Bangalore. Auto rickshaws – called simply “auto” in India – are what locals commonly use for short rides, and they are even more disorganized and capricious than the traditional taxi services. Although a startup called M Gaadi has pioneered bringing auto rickshaws into the fold of on-demand services, the entry of a player with deep pockets like Ola could be a gamechanger. After a US$210 million funding round from Softbank of Japan earlier this month, Ola is now the third highest funded taxi app in the world, after Uber and Lyft.

With funds like that in the bag, the focus of these high stakes players is on market expansion at all costs. The new UberGo is priced at INR 11 (US$0.18) a kilometer, which would make it more affordable than an auto rickshaw. Ola Mini is priced even lower at INR 10 (US$0.16) a kilometer, but Uber at launch is “testing the very limits of low pricing” with 35 percent off on regular fares.

Earlier this month, Uber sorted out its regulatory tangle in India over credit card payments by tying up with local mobile payments enabler Paytm whose ewallet service is now embedded in Uber. This makes Uber more widely accessible through net-banking, debit card, and even cash payments, whereas previously it was limited to credit card users who are a small minority in India.

UberGo will likewise make the taxi app available to many more of India’s 1.2 billion people. “Think quick bank runs, short trips between meetings, jaunts to the mall and the movies – now there’s an Uber for your every need,” says an Uber blog post today announcing the launch of the cheaper tier.

Now the clock is ticking for its rival, Ola. What’s the next move? We will be watching out for that closely – just as we wait and see if Vishwanathan Anand can close the one point lead that Magnus Carlsen has taken over him in the world chess championship final.
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