Uber’s meteoric rise has had its fair share of hurdles, between fighting with Lyft and responding to incoming threats from other startups. But as both companies continue to dominate US headlines, there’s another battle Americans may be less familiar with: car-based ride-hailing vs. two-wheelers.
It was this subject that led to my conversation with New York Times reporter Vindu Goel earlier this month. Goel was working on a piece that aimed to explore the impact that shared, low-end transportation options like bicycles and mopeds might have on mobility, particularly in emerging markets like India. Hailing a car via Uber and Ola, Uber’s archrival in India, is expensive for many Indians, and consumers are already familiar with two-wheelers, which are more commonplace than cars. Might these conditions enable disruption?
It’s certainly a fair question. Whenever industry leaders overserve the needs of their customers—charging too much for a service when customers would be willing to pay less for less performance—they’re at risk for disruption; that is to say they’re at risk of being displaced by competitors who offer more affordable and accessible solutions. This happens in part due to asymmetric motivation: the entrant is highly motivated to capture a slice of the market that the industry leaders is happy to concede, either because they’re not threatened by it, or because their business models aren’t able to profitably serve those customers.
In this case, two-wheelers do seem likely to steal some market share away from Uber and Ola’s car-based ride-hailing services in India and countries with similar conditions. As long as price points are low enough, they should be able to attract customers with simpler needs——like those traveling alone, over short distances (like first and last mile trips), or with limited cargo. For instance, a woman traveling a few miles from the bus stop to her home, carrying just her purse, may be happy to spend less and cover the distance by a bicycle or a moped, rather than request a car ride via Uber or Ola. If short trips like these represent a significant portion of ride-hailing leaders’ revenue, then low-end alternatives could pose a risk.
But does this spell disruption? Unlikely.
Uber and Ola have business models that allow them to respond to this threat and act accordingly. Far more than just car-hailing services, they’ve set themselves up as networks that facilitate interaction between riders and transportation services. So unlike traditional businesses that might need to retool a factory to produce a new product in order to respond to a potentially disruptive threat, Uber and Ola are much more nimble. In fact, rather than flee from the threat, they’re actively embracing these low-end options into their networks. We see no asymmetric motivation.
Uber, for instance, is striving to be a one-stop shop for all our transportation needs, from scooters to cars to public transit. In India, it already offers auto-rickshaws and motorbike taxis in certain parts of the country. Given the threat and opportunity that two-wheelers pose, it seems likely the company will either develop more of these services for the Indian market, or acquire smaller startups as it has done in the US with Jump. Pradeep Parameswaran, Uber’s President in India and South Asia, has noted, “In India we are building a robust product mix of hyperlocal innovations like UberMoto, UberAuto and UberPool to address the unique challenges of the Indian mobility landscape.” And they’re not stopping there. Parameswaran said, “As we continue to move forward and solve the mobility issues, we will add more products such as electric vehicles, especially two and three wheelers, that could provide cleaner, convenient and affordable transportation to all.” For its part, Ola is planning to invest $100 million in Vogo, a moped-sharing startup. Like Uber, Ola wants to be the single source for a range of transportation needs from cars to auto-rickshaws to mopeds.
Since the ride-hailing leaders are willing to embrace these low-end alternatives, the Theory of Disruptive Innovation predicts that they will be able to fight off any potentially disruptive threats. Unlike industry newcomers, Uber and Ola already have a large customer base and significant brand equity working in their favor. Convincing customers to use a startups’ two-wheeler, when Uber and Ola are just across the street, won’t be easy. However, embracing these low-end alternatives is definitely not going to be a walk in the park. For instance, they’ll need to cannibalize themselves since the revenue from a two-wheeler ride is expected to be lower than that offered by a car ride. Also, regulations may hinder expansion of two-wheelers, as has been the case in San Francisco.
Discussion of disruption aside, though, it’s clear the transportation industry is undergoing an exciting transformation, seemingly from all angles. As innovation continues to progress, I’m happy to see more options readily becoming available to consumers across the globe, and across the socioeconomic spectrum.
