Uber’s India Ambitions Face Latest Challenge From Rival Rapido

A ride-hailing unicorn little known outside of India is gaining users faster than Uber Technologies Inc., disrupting the San Francisco titan’s effort to conquer a key growth market.

Rapido, based in the southern city of Bangalore, has upended the local transportation sector with its inexpensive motorcycle taxis and unique pricing model, racking up more downloads last year than Uber and fellow Indian rival Ola. The startup has now achieved profitability for the first time, its co-founders said in an interview, setting them up for a potential public listing.

Cut-rate pricing and a huge supply of drivers have been integral to Rapido’s unexpected ascent. By charging each driver a tiny subscription fee — rather than commissions on each ride as Uber does — Rapido is shaking up one of the world’s last major arenas for ride-hailing growth.

“What the four-wheeler is to the US, we believe two-wheelers are to India,” co-founder Pavan Guntupalli said. “Even in a small village you can find a farmer or a farmer’s son owning a two-wheeler.”

India is crucial for Uber because its massive population of more than 1.4 billion people represents an unparalleled opportunity for expansion. While the company derives most of its revenue from developed markets such as the US, hundreds of millions of Indian consumers are entering the digital economy, transacting online and forming brand loyalties. Uber sold its China business in 2016 and exited populous Southeast Asia two years later.

“India is not just one of Uber’s biggest markets, it’s one of our most strategically important,” Dom Taylor, Uber’s Asia Pacific head of mobility, told media in Mumbai Tuesday. He was speaking at an event to announce new features for the platform, such as one that allows riders to pay lower fares if they wait longer to be picked up. 

Ola was founded in 2010, three years before Uber’s India launch and five years before Rapido began operating. With billions of dollars in funding from top global backers, Ola and Uber have deployed vast sums to compete for customers, shelling out for advertisements and building out their driver networks as they expanded from cars into motorcycle and auto rickshaw taxis.

While the duo traditionally generated revenue by taking a commission on rides, Rapido has pioneered a new system.

Its motorcycle drivers pay a subscription, as small as 9 rupees ($0.11) per day, to gain access to its platform. They can then accept as many rides as they want, charging fares that they keep, beginning at 20 rupees. In a sign of Rapido’s success, Uber and Ola have followed suit with similar zero-commission pricing options for some drivers.

Rapido has been able to lure legions of drivers to its platform, ferrying workers, students and shoppers around cities where public transportation can be limited and many people don’t own cars. 

The Rapido app was downloaded some 33 million times last year, outpacing Uber’s 21 million downloads and Ola’s 19 million over that period, according Appfigures. While Uber and Ola have more cumulative downloads, when it comes to new user acquisition, “Rapido is managing it best,” said Randy Nelson, head of insights at Appfigures.

Rapido says it is notching 4.3 million rides per day across its motorbikes, auto rickshaws and cars, which is triple Ola’s count and about 40% higher than Uber’s. Ola and Uber didn’t respond to requests for comment on their daily ride count.

“Our business is growing sustainably at an incredible pace, and we are well positioned for long term success,” an Uber spokesperson said, adding that Uber leads India’s automobile sector, which is a higher-margin business.

Rapido has raised $200 million from WestBridge Capital, Nexus Venture Partners, Prosus and others, with the last round of funding coming at a $1.1 billion post-money valuation. It’s now investing to expand beyond the more than 250 cities in which it operates, targeting India’s many smaller locales. 

“Do we want to IPO? Definitely yes,” said Rapido co-founder Aravind Sanka. He said the company has no timeline set, however. It has enough funding for now and is focusing on long-term growth. 

To be sure, Rapido faces its own challenges. It suspended last month its motorcycle taxi services in its home state of Karnataka, after the local high court ruled that using personal motorbikes for commercial services is illegal.

The matter is now under judicial consideration, a Rapido spokesperson said. Uber and Ola, which offer motorcycle taxis in the state and elsewhere, also suspended operations. Non-electric motorcycle taxis have also been banned in the state of Maharashtra, local media has reported.

There are also questions about whether or not Rapido and other zero-commission ride-hailing services are liable to levy India’s goods and services tax, or GST, on their zero-commission rides. 

In addition to offering more affordable transportation options, Guntupalli and Sanka say safety has been a key focus. Rapido offers taxis for women that are driven by women, and in recent years has begun installing seatbelts in auto-rickshaws, which typically don’t have them.

The pair say they, along with fellow co-founder Rishikesh SR, simply understand better than their rivals what local consumers want. “We ourselves are middle-class Indians,” Guntupalli said.