India’s leading cab aggregator, Ola has shut down its TaxiForSure (TFS) business and has also laid off close to 700 employees. It has been just about 18 months since Ola acquired its rival, TFS for a sum of USD 200 million. At the time of taking over TFS, however, Ola had claimed that the TFS brand and distinct identity would be maintained. The initial intention was for TaxiForSure to work as a short distance taxi option that would plug the gaps in Ola’s mechanics and operations. But it seems that this intention changed when Ola launched its own service ‘Micro’ – a low-cost AC cab option available to all Ola users. Over the months, ‘Micro’ services have been made available to users in some 90 cities across the country. Micro, soon started to account for most of first time Ola users. In fact Micro started to attract more first-time mobile cab hailing service users than any other in the country.
TFS Integration And Brand Liquidation
Soon after acquisition, Ola limited TaxiForSure’s operations to 11 cities including three metros – Bengaluru, Mumbai, and Delhi– and eight other smaller cities. Only about 750 employees were retained in all in the metro cities and 240 more in the smaller cities. Over and above, these about 310 TFS employees had been working with Ola since the acquisition.
With the launch of Micro, it became only a matter of time before Ola decided to liquidate the TFS brand. In the process, Ola undertook a number of measures to integrate the TFS brand into the Ola platform. Most of the drivers and customers of TFS were brought on board and offered the Ola experience. The brand presence of TaxiForSure was initially curtailed across all cities where it was operational and TFS was offered only through the Ola mobile application. Not only was the TFS fleet transferred to Ola, drivers were offered more incentives to adopt the Ola brand.
700 Employees Laid Off
Now, with the TFS-Ola integration complete, employees who were not integrated and who remained part of the old TFS entity would have to be retrenched. A layoff of about 700 employees is indeed a large one and this primarily involves personnel working in support services verticals such as ground operations, driver relations, business development, and call centre services. Ola also claimed that it shall be offering “enhanced severance benefits and outplacement services” to all the employees who have been laid off to help them pursue a new opportunity. According to news reports, the laid off employees will receive three months’ salary as severance pay. The entire exercise is likely to save the company about INR 30 crore a month.
The acquisition of TaxiForSure by SoftBank-backed Ola was a major step in the quickly escalating taxi wars in India. Uber, Ola’s main rival and the most valuable startup in the world is locked in a battle for supremacy in the Indian market. Both companies are jointly combating state government regulations against surge pricing and fighting for a separate set of regulations (not to be clubbed with other taxi or radio cab operators). The introduction of UberGo, Uber’s low cost cab service is a major threat to Ola’s popularity. Both companies have also introduced ride sharing services (UberPool and Ola Share).
News reports from early August reported that Uber is selling off its China operations to long time rival Didi Chuxing Technologies. The rivalry had triggered an expensive price war in which Uber had lost some USD 2 billion in China. As part of the deal, Didi is now committed to investing USD 1 billion in Uber’s global operations and India will be in the spotlight. Uber is also planning to come up with an IPO helping the company to raise funds and expand at an unprecedented pace. Uber is now keen on concentrating in India and Ola’s layoff move is seen as an attempt to free up cash reserves for the upcoming battle.
It may come as a surprise, that after the China deal, Uber holds a minority stake in Didi Chuxing which in turn is an investor in Ola while the two (Uber and Ola) remain arch rivals in the India.
Ola – Brief Profile
Ola is the operational name for ANI Technologies Pvt Ltd. The company was set up in Mumbai in December 2010 but has since then has moved its headquarters to Bengaluru, the capital of Karnataka. Founders Bhavish Aggarwal and Ankit Bhati were keen to exploit the growing need for technological innovations and mobile aggregators in the travels and cabs market. Since inception, the company has maintained a high standard of technological innovation. In June 2016, by the time the company launched its mobile platform Ola Operator, it had a fleet size of about 4.5 lakh cabs and was looking to double the number. Operating in 102 cities of India, Ola went on to become the largest cab provider in the country and has launched a variety of services including Ola Lux (Luxury Vehicles), Ola Corporate (employee travel/cab management service), and has recently added inter-city cab and car rental services in Bengaluru . Since 2014, Ola has also been adding auto hailing services to its portfolio. This is, however, available in select cities only. SoftBank backed Ola has been valued at approximately USD 5 billion. This is after a USD 50 million fund raising exercise undertaken in December 2015.