The Government of Delhi rejected Uber Technologies‘ application to run taxis in the state on Tuesday, the latest roadblock the ride sharing service has hit in its foray into the Indian market.
While the Press Trust of India reported Uber’s rejection late on Tuesday, the company has not yet acknowledged that a decision has taken place. “We haven’t received any official notification yet,” said an Uber spokesperson. “Uber remains committed to serving the Delhi community and we continue to work closely with the Delhi authorities to address any concerns they have.”
It is possible that the official notification has been delayed, but it is unlikely that it would cause Uber to cease operations. The company has flouted regulators and restrictions in many markets. In France, authorities arrested Uber’s leadership after the company continually ignored regulatory warnings.
One of India’s smallest states, Delhi, became the latest site of flare-ups between ridesharing services and the government last December when an Uber driver was arrested in connection with the rape of a 27-year-old woman. Operations by app-based taxi services were banned last December. Although the ban was lifted early in June, neither Uber nor competitor Ola Cabs has yet been granted permission to operate in Delhi. Uber’s application was rejected for noncompliance with the previous ban on ridesharing services since the company filed an application before the ban was lifted in June.
Uber now needs to reapply for permission under the Delhi government’s new City Taxi regulations, according to the Times of India. The City Taxi regulations, which came into force on August 17, provide legal recognition for services like Uber, but cap them at operating 2500 vehicles and enforce a government-mandated fare structure. While Uber’s business model is no longer entirely at odds with Indian regulations, the new fare structure and capacity caps could hamper successful operations by the company in Indian markets if other Indian states were to follow Delhi’s lead.
Although Uber and Ola Cabs have added location-aware panic buttons inside their apps, neither has moved to install physical panic buttons inside vehicles as mandated by the Delhi government. Political pressure for panic buttons has grown since an Uber driver was arrested in connection with rape last year.
The new government-mandated fares require taxis to charge 10 Indian Rupees per kilometer (about $0.24 per mile). This fare is around 43 percent higher than what UberGo’s surge-free rate is in Delhi.
Uber’s prices also undercut India’s ubiquitous Auto Rickshaws, which are 15- horsepower open-door vehicles with three wheels, while still providing passengers with vehicles that have doors, windows, and four wheels. Rickshaw drivers are clearly feeling the competition – one Rickshaw driver in Pune, India, almost threw me out of his vehicle when he thought I worked for Uber.
Auto Rickshaw unions are planning a resistance to Uber which includes upgrades to four-wheel vehicles, which could be stiff competition due to their distribution, but Uber remains bullish on its India growth. As one representative said, “millions of Indian commuters and drivers love Uber and have embraced this change.” The company should probably hold off on planning victory parties at its Delhi offices, though.
The company is facing stiff competition from Ola Cabs, which recently received a huge investment from Falcon Edge Capital. In India’s notoriously credit card-averse market, Ola’s well-implemented cash payment option could give it the edge. Uber has had a pilot program for cash payments in India, and will soon be rolling out the system across India. It’s unclear whether losing the first-mover advantage that Uber has historically held so dear will impact the success of their cash-based platform.
As was the case with Amazon’s entry into India after Flipkart gained operational approval, similar services like Ola Cabs gaining government permission will clear the way for Uber. It would be difficult for regulators to selectively target Uber with government challenges, especially with the company’s increasingly well-oiled lobbying efforts in India.
Uber recently announced that its India office will be the first outside San Francisco to have major decision-making power, which will certainly help smooth relations with the government. Despite this, Uber’s stiffest competition will come from unions that are increasingly aggressive towards app-based startups. Just this Wednesday, realty website NoBroker’s offices in Bengaluru were attacked by traditional brokers who felt threatened by the competition.
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