Ride Sharing is a comparatively new and disruptive industry that is fueled by people’s need to beat the congestion and travel faster. It didn’t even exist a decade ago, is now valued at $61.3 Bn and expected to grow to $218 Bn by 2025.
Over the past few years, the ride-sharing industry has taken the global road transportation market by storm and has gained popularity, primarily because of companies devoted to making transportation more reliable, safe, and enjoyable. Ride sharing, till date, contributes to the biggest share of sharing economy valuation globally. The global ridesharing market is expected to witness a CAGR of 16.4 % reaching USD 148.7 Bn by 2024. The ride sharing market covers online platforms and apps that bring together passengers and drivers. Using the apps, passengers request for rides and are matched with drivers in the vicinity. In 2018, revenue from ride sharing accounted for USD 15.6 Bn.
In the Indian market, Ola has witnessed a rise in market share from 53 % in July 2017 to 56.2 % in December 2017. Meanwhile, Uber’s market share tanked by 2.4 % from 42 % to 39.6 % during the same period. Uber, which once emerged as the biggest player in the ride-hailing segment globally, has gradually been losing ground against local rivals in different countries.
With a reported valuation of USD 50 Bn, Didi Chuxing is the world’s most valuable startup after Uber. Other top players include- Ola, Go-Jek and Grab. Go-Jek, Indonesian emerging ride-sharing startup, has grown to become a USD 5 Bn business backed by the likes of Google and Tencent. The company currently operates in 50 cities in Indonesia, and launched in Vietnam in August with plans to move to Thailand and the Philippines soon. Go Jek has already made strategic investments in Pathao, a top Bangladeshi ride sharing company.
According to ABI Research’s latest study on mobility, out of 16 Bn ride-hailing trips that were completed last year, over 70 % were completed in Asia, making Asia the world’s largest ride-hailing market, with North America and Latin American coming next. In global comparison, most revenue is generated in China ($28,176 Mn in 2018). In China, the dominant player now is Didi Chuxing – a result of a merger between Tencent-backed Didi Dache and Alibaba-backed Kuaidi Dache – having bought out American competitor Uber (Huang, 2018).
Currently, Didi Chuxing is operating in 400 cities in Asia, followed by Ola serving 102 cities. Didi runs car pools, minibuses and buses in addition to taxis and luxury cars. Indian Ola is also weighing options for a few other international markets, including, UK, Bangladesh and Sri Lanka. In July 2018, Didi and SoftBank ploughed USD 2 Bn into Grab. In August the Chinese upstart invested in two Uber clones, Estonia’s Taxify, which serves Europe and Africa, and Dubai’s Careem, which operates in the Middle East. As for Southeast Asia-headquartered O2O Company, Grab has ambitiously forayed into eight countries, including emerging markets like Cambodia and Myanmar.
Over the recent years, Bangladesh has been experiencing strong economic growth (7 % plus GDP growth) with an economy worth USD 250 Bn. Pathao, the popular local ride-sharing company, recently valued over USD 100 Mn implies that the startup scenario of Bangladesh is moving at a faster pace than ever. Pathao confirmed TechCrunch that its valuation is over USD 100 Mn (approximately BDT 820 crore). In Bangladesh. Ride-sharing has created employment opportunities for more than 100,000 people, signifying the sector’s impact in terms of employment generation. Although the latest announcement of 5 % VAT on ride-sharing will make the service a bit costlier, the sector is expected to maintain its exponential growth.
All of growth in the ride-sharing industry can be explained by customer’s need to find some mode of transport that is cheaper, safer and less time consuming. Internet of Things(IoT), mobile platform, GPS ride tracking, up-front fee estimates and automatic credit card payments makes ride-sharing apps an attractive alternative to traditional transportation system for the users. The industry is not only creating value for its customers but also creating value for the drivers and the environment. It creates a part-time/full-time employment opportunities with flexible timing with good pay. Additionally, if everyone could fill a car of four people, this would mean four times fewer greenhouse gas emissions. This would mean significant change to the amount of greenhouse gas in the atmosphere and would slow down the rate of warming.
The road to profitability is still bumpy for the ride-sharing giants. The companies mainly make money from the fees collected from the rides and advertising revenue generated from advertisements in their websites. However, significant amount of the revenue is spent to pay from the 15-25 % commission on fares to the drivers for providing ride services.
Opportunities in the market only shows a positive upward trend. With increase in the number of Internet users every day, the popularity for ride sharing is only going to rise. The Internet of Things (IoT) is coming to auto. Consumers now realize that connectivity is the key. Technological advances such as- active window displays (i.e., where windows are screens on which you can view content or controls), perfect integration with smartphones (i.e., the ability to access smartphone controls via the car’s dashboard), remote vehicle Shutdown (i.e., you can turn your car off via a smartphone app in the event of a theft attempt), comprehensive vehicle Tracking (i.e., tracking your vehicle in case it gets lost or stolen) are increasing the acceptability of the ride-sharing app.
However, the industry poses some key risks and challenges. Unlike taxis, which are regulated on a city-by-city basis and have to follow specific guidelines, ride-sharing services haven’t had to adhere to the same strict regulations. However, this is beginning to change—some states are enacting laws to set standards and insurance requirements for ride-sharing. Additionally, upcoming court decisions will help determine who will be held liable for ride-sharing accidents in the future.
Driver risk exists as drivers do not have insurance coverage for all of their risks. Drivers can be dropped by their insurance company if they engage in a commercial activity on a personal auto policy. Passengers are also at risk as when a passenger gets into a car arranged by a ride-sharing app, he or she automatically agrees to a number of terms and conditions. If the driver gets into an accident and the passenger is hurt, there’s no guarantee that the driver’s insurance company or the ride-sharing service will pay for damages. Safety is also a concern for both drivers and passengers. A driver never knows the type of person about to get into the back seat. Likewise, a passenger only knows how reliable a driver is from the information a ride-sharing service shares about the driver on its app. Lastly, the burden of tax is largely falling on the customers and the business is still in its embryonic stage.
With the advancement of technology the market for ride sharing will only become more lucrative with time. Keeping up with the disruptive dynamic market and creating value would be the biggest challenge for ride-sharing giants.
