Battle for London's ride-hailing market is 'unsustainable', expert says

Ola is one of the many companies seeking to rival Uber
PA

London's ride-hailing market is becoming "unsustainable" as firms battle for Uber's monopoly crown, an expert has warned.

More and more firms have been entering the London market as Uber appeals against Transport for London's November decision to remove its operating licence.

But these companies are using unsustainable methods of concessions, freebies and new features to attract both customers and riders, transport commentator Christian Wolmar has said.

He told the Standard: "The firms cannot keep building themselves by throwing in more and more goodies, and giving more concessions, when, in the end, that is unsustainable so it just won't work.

Uber was forced into appealing against Transport for London's decision to refuse to renew its operating licence in the capital
PA

"Their goal is to wipe out all the competition and become the monopoly."

Ola, Bolt and Kapten - probably Uber's three biggest rivals - have all expressed their ambition to become the leading firm in London.

But Mr Wolmar said that this endgame is becoming more difficult as new rival apps continue to flood the market.

"With these ride-hailing apps, I just don't see the business model that leads to a profit apart from the monopoly.

"Consumers download the apps because the rides are cheap," he said, adding that Uber's unique selling point was simply being the monopoly and offering low fares.

"To survive, the companies would either have to completely dominate the market or they would eventually have to morph into conventional private hire firms that charge people more."

General view of the skyline of the City of London, on a cloudy Friday
AP

Mr Wolmar also shared his scepticism about the ride-hailing market in general, saying that London already had a "pretty well-established private-hire vehicle market" with mini cab firms, black cabs and companies such as Kabbee and Addison Lee.

After Ola's launch in London on February 10, chief operating officer Arun Srinivas said it aimed to become the leading ride-hailing app in London within the year.

"The opportunity is large and we believe that, with our position and the great start we have had here, we will get on the path to the leadership [of the market]," he told the Standard.

Mr Srinivas said the firm also arrived in London with a mission to show customers they were a "safe and quality platform".

Ola are training their drivers in safety, offering them zero commission for six weeks, and promising lower commission rates than competitors after this grace period ends, to lure in both the workforce and consumers.

Kapten has grown to be London's second largest ride-hailing app in just four months.
Kapten

This week, Ola also suspended surge prices for the foreseeable future but the firm is compensating drivers from its own pockets while riders pay cheaper fares in peak hours.

Mr Srinivas claimed these measures are part of their focus on "critical areas that are so often overlooked".

"Our priority is to offer a safer and better quality of service for the same price, and not just for the passenger but for drivers and local communities," he said.

"What we’ve launched is a sustainable platform for the long-term, built on a differentiated offering that raises industry standards."

Meanwhile, French app Kapten launched their London ride service in May last year, saying they were looking to clamp down on emissions.

They have offered customers environmentally-friendly features such as only opting for trips in hybrid or electric cars.

Ola's chief operating officer Arun Srinivas said that they aim to become the leading ride-hailing app in London
Ola

Mariusz Zabrocki, Kapten's UK general manager, which launched in London last year, said that they believe they can be the "category leader in London" but also believe the city has space for "several profitable players".

Mr Zabrocki said: "We will continue to offer the best product for riders, drivers and the community at large to meet that objective, whilst ensuring social and environmental responsibility is always front of mind."

"Kapten is also the only Uber competitor that verifies all drivers face to face to ensure highest safety standards," he added.

Meanwhile, Bolt's chief executive Markus Villig recently told Wired that they could win the race against Uber.

Mr Villig said: "If we provide low commissions and good earnings for drivers, then they’re happy to stick with us."

The ride-hailing app launched in London in May
Kapten

He said Bolt, which was founded in Estonia in 2013, used this strategy in its early days against normal taxi companies. "Nowadays, we’re doing that versus Uber,” he said.

Sam Raciti, Bolt's UK Country Manager, said: “We are currently the fastest growing ride-hailing company in the world and we’re also the most cost efficient.

"This enables us to offer consistent good deals for our riders and provide the best earnings to drivers – charging up to 50 per cent less than some competitors for using our platform.

“We now have over 1.5 million riders signed up in London alone and are profitable or close to profitable in two-thirds of the markets we operate in, indicating that growth and profitability definitely are possible.”

The Standard has contacted Uber for comment.

While each company looks for ways to become profitable in London, Mr Wolmar again stressed that the companies cannot survive in an environment where they are all constantly offering cheap fares, cutting prices and lowering commissions.

He said: "This is going to be a tireless battle for the top spot and there are no winners apart from the consumers who are getting cheap rides all the time."

"It is the cheapness that gets people into their cars because they just download the app and when another comes along, offering a free ride, they will flock to that.

"It's a bubble and I can see that it is bursting."

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