Ola, the Indian Softbank-backed ride hailing app that is aggressively expanding internationally, is coming to London. And Londoners will be happy to hear that its market entry strategy is a promised price war with rivals already operating in the capital.
If Uber, the ride hailing app that also counts Softbank among its major investors and recently lost its license to operate in London, thought it was having a tough year in the UK, the news is unlikely to have cheered its management up. Uber recently lost its license to operate in London, pending an appeal. It’s still able to offer its service until that appeals process reaches its conclusion. But if it is won, which is far from guaranteed after Transport For London accused the tech giant of not being ‘fit and proper’ to operate in its area of jurisdiction, the competition is about to heat up.
Simon Smith, managing director of Ola’s operations outside Europe has said the Indian rival will prove an “aggressive” competitor. It will charge passengers lower prices to attract customers and lower commissions to lure drivers. He is also confident the company can reach break even quickly, by pinching business from Uber, and the smaller and more recently arrived Kapten and Bolt.
“We’ll be launching a very ambitious customer acquisition strategy. We’ll offer consistently good value for customers and they will be rewarded for their loyalty.”
Ola was founded in 2010 in Bangalore and is one of the best funded start-ups to ever come out of India. As well as Softbank, investors include Chinese tech giant Tencent and Ratan Tata, the steel billionaire. It has already attracted over $2.5 billion in investment capital and was last valued at around $6.5 billion.
It has been expanding at breakneck speed in recent years – much like Uber itself a few years earlier. Ola currently operates in 250 cities across the world. The majority are in India – 200, and another 33 across Australia and New Zealand. It already also operates in several cities in the UK and has 10,000 drivers across Birmingham, Cardiff, Coventry, Reading and Exeter.
Until recently, Uber looked like it would corner the UK ride hailing market, having launched in London in 2012 – only its second city outside of the USA. A large and loyal clientele was attracted in London, which is one of its top five markets globally. Of the 126,000 licensed private hire and black cabs on London streets about 45,000 offer their services on its platform. But new competition and the looming threat of the decision to revoke its license being upheld on appeal has thrown Uber’s London and UK future into serious doubt.
Ola has yet to reveal its prices or how much it will charge drivers. However, for the first two months, Ola will waive commissions. Mr Smith has also insisted that after that period it will beat its competitors on both fronts:
“In London we’ll offer drivers the best deals in the market. There will be enough cars so that customers get at least as good a service as they do with the incumbents.”
Ola is confident that is can return a profit in London despite the competition and its price war strategy. Mr Smith explained:
“As long as we launch aggressively, we’re confident we can get there quickly. That is what we’ve seen in other markets. At a significant market share, this industry supports break even operations.”