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Ola sees spike in driver-partners with revamped pay structure

Written by Moulishree Srivastava Published on   3 mins read

The new pay structure allows drivers to ascertain earning and differentiate it from incentives.

In its battle to rule India’s soon-to-be USD 54 billion ride-hailing-market, homegrown mobility unicorn Ola seems to have gotten an edge over American rival Uber as it sees its new driver-wooing plan finally working out.

The Bengaluru-based company is seeing increased engagement from its driver-partners after it moved to a standard payment model from the earlier incentive-based commission model about three months back.

Local media Economic Times, citing sources, said drivers on Ola have “spiked 7-10% in seven metro cities after the cab aggregator rolled out standardized commissions to keep drivers active during peak hours.”

Ola came up with a nationwide standard commission of 25% for its driver-partners. The new pay structure allows drivers to ascertain earning and differentiate it from variable incentives.

After 2015-16—the period when cab-hailing companies Uber and Ola, in their bid to outdo each other, paid their driver-partners the highest incentive ever, reaching as high as INR 500 (USD 7) for each ride—has now come down drastically. Up until late last year, Ola, the SoftBank-backed company provided a fixed payment as well as incentive, which was based on extra rides that driver-partners would do after finishing their quota of daily rides. By then, the incentive for drivers had come down to just up to 5% of their earnings, which left many of them with reduced income.

The new payout structure, as per the report, that has an average “take rate” of 20% for the company, gives drivers a more predictable and transparent view of their earnings as well as charges on tolls, taxes, commissions, and parking. Take rate refers to the percentage of the value of the transactions marketplaces facilitate that they deduct as revenue. The revamped structure reportedly is devised in a way that it won’t deter the company from its path towards profitability, the report added.

In the South Asian nation where cab-hailing is a duopoly market, there are over 200 million users and the revenue this year is expected to amount to USD 36 billion, as per business intelligence portal Statista. Ola, which is also present in the corporate business segment and high margin businesses like outstation and self-drive has about 2 million drivers on the platform, the report said.

To grab the larger pie of the rapidly growing market, getting drivers onboard is as critical as wooing customers, but it has been one of the key challenges that Ola and Uber are facing.

“At a time when car ownership is falling, consumers are willing to pay more for predictable supply during peak hours,” the report said citing an industry source. “The key to this business is keeping active driver supply with incentives under check.”

Ola’s move has come at a time when Uber is expected to completely focus on its ride-hailing business after selling its loss-making food delivery Uber Eats India to homegrown food tech unicorn Zomato earlier this month. In a statement, Uber CEO Dara Khosrowshahi said, “India remains an exceptionally important market to Uber and we will continue to invest in growing our local rides business, which is already the clear category leader.”

Uber is looking at profitability in all the markets it’s present in post its IPO faux pas last year that sent trigger warnings about startups correcting their unit economics across the technology startups ecosystem. “It also strategically comes at a time when Uber has moved its focus towards profitable growth globally, giving Ola the leeway to strengthen its presence in its home market,” the report said quoting an investor in the company.

On the other hand, as of now, Uber has not brought any changes in its incentives, the report added. The San Francisco-based company had rolled out a reward program for drivers called “Uber Plus” in November 2019. Under the program, its driver-partners can earn points on the rides that they take and use those points to get free doctor consultations and access to microloans, among other benefits.


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