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Intra-city mobility: A short primer

The post is written by our EZPP partner Raunak Bhiwal with relevant edits and changes by our editorial team. We routinely partner with high-quality industry professionals to develop content for our platform. If you're interested in joining the program, please apply here: EZPP

The rise of intracity mobility startups can be attributed to the teething troubles the existing transportation system suffered from like the non-availability of vehicles at the right place, exploitation by the drivers, lack of safety, and road congestion. With the new age consumer increasingly choosing to stay 'asset-light', rental options like Ola and Uber will continue to thrive. In today's post, we understand the opportunity and players in the market, look at the prominent themes emerging in the space, and wrap by looking at a few problems that the sector has seen.

Understanding the space

The mobility space in India is huge and growing! An average Indian spends 7% of his day in commuting to office, with an average speed of 24kmph in major cities. To solve this multi-faceted issue numerous startups have emerged, each trying to solve a piece of the puzzle, leaving the customer spoilt for choice. You want convenience you can choose Ola/Uber, you want cheaper options you can use Shuttl/Rapido/Moto. If you are in sales and need to travel extensively then you can take Vogo/Bounce. Folks with a sustainability bent can hop onto a Yulu/ Zypp. What had begun as an exercise in capturing a largely unorganized fragmented market, has transformed into new ways of doing business and new niche markets. For instance, now Zoomcar provides an option of P2P carsharing, wherein car owners who do not use their cars extensively can lend their cars for a shorter duration. The sheer size and scale of the space continue to attract innovation, backed by a tonne of capital!

Next, let's try to look at the prominent themes emerging in the space.

As with any major sector, we find the top VC funds pumping in loads of cash. Matrix has taken positions in Ola Electric, Oye, & Vogo; Nexus in Rapido; Sequoia in Bounce & Zoomcar; Naspers in Quickride; Accel in Bounce and Tiger in Vogo & Ola Electric. If it moves, they have money on it! What is interesting however is the attention these firms are getting from large auto corporations, eager to strike a partnership with these firms to capture a piece of the pie that these firms offer.

The electrification move is driven by both a concern for the environment a need to bring the operational costs down. The cost of operating an electric vehicle can be 1/5th of the cost of running an IC engine powered vehicle. Additionally, the current government has set very steep targets of selling electric vehicles to bring down the pollution, wanting fleet operators to move to EV vehicles by 2025. Electric focussed mobility firms should see good growth and potentially a better path to profitability in the times to come.

Other key themes that emerged in the space are shared, pooled & micro-mobility, largely as ways to plug gaps that the larger first entrants had missed. An economic ride, lower pollution, and lesser congestion make the system better for all parties involved. For users looking to save a few bucks at the expense of time & convenience will find value in services like Shuttl (mini-bus) and Bounce & Vogo (Short term two-wheeler rentals). Realizing the segments they missed, both incumbents Ola and Uber have now ventured into carpooling and bike rental services.

That being said, not all is happy and rosy with the space. We now try to look at some of the recent problems the sector has faced.

Regulators, Partners, & Everything in between

Great Empires are built on the graves of many. At least, that is what the current stakeholders feel is happening.

Drivers: Existing rickshaw and taxi drivers have been affected quite a bit due to the entry of the large players in the space, albiet due to the error in their own ways. From the attack on Zoomcar vehicles in Ladakh to the strikes against Ola and Uber, the space has seen strong backlash from the driver community. While the external drivers have protested against the firm, the drivers at the mobility startups aren't too happy themselves. "Partnership is signed within closed doors, but it gets ripped on the road," they say in the industry. Uber’s IPO fiasco and WeWork’s debacle has brought the focus back on the good old profit margins and the players that once rewarded drivers with handsome incentives are now trying to squeeze the margins out of the drivers which has attracted their wrath. The fact that some of these drivers took out loans to buy cars expecting similar incentives to continue once enhances the problem.

Regulators: Regulators have emerged as the second hindrance in the space. Last year, Rapido and Ola bikes were banned in Bangalore. Each state has a separate Motor Vehicle Act, and the acts have been ambiguous about Bike Hailing as a form of taxi service. Such ambiguity puts some breaks to the growth in the last mile connectivity and disrupts business for some firms from time to time. Problems in the developed markets have been far more severe, with everything from the contractual nature of the driver's employment to their minimum wage coming into question.

Infrastructure: New companies like Yulu, Vogo, and Bounce need docks to find success. If electric vehicles are to become pervasive in the country then the government needs to ensure appropriate infrastructure is available. The charging stations would need to be developed by a combination of startup founders, traditional auto players, power firms & fuel station partnerships and some help from the government. A tall task indeed.

Food: Ola and Uber both have tried their hands in the food delivery segment and have been unsuccessful. With Ola taking its foot off the pedal and Uber selling its food business to Zomato both have essentially thrown the towel on that front.

With that we conclude the piece. While it is still too early to say which of these startups will come out as a winner, what is clear is such enterprises will surely help organize this highly unorganized sector and some of the woes of the general public will surely subside.

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