Ola has made a significant change to its cab-hailing business by introducing a nationwide flat fee model. Under this new structure, drivers can retain 100% of their earnings after paying a fixed daily access charge of Rs 67, The Times of India reported on June 30.
This move replaces the previous commission system, where the platform deducted up to 30% per trip. This shift marks a pivotal moment in the economics of ride-hailing in India, as Ola aims to address market pressures while trying to regain the loyalty of its drivers, ToI's report (by Supriya Roy) said.
Strategic shift amid market pressures
The recent changes at Ola come amid increasing competition in the ride-hailing sector. Senior executives within the company have acknowledged that the decision to implement this flat fee system is partly a reaction to the dwindling market share Ola has experienced, ToI's report said.
The balance of supply and demand has shifted unfavourably, prompting the company to reconsider its operational strategy. As one executive told ToI, the situation is dire: "It's a race to the bottom, a desperate hail mary."
To support this flat fee model, Ola has enacted significant cost reductions, including downsizing its acquisition team and reducing driver incentives. By cutting costs associated with the prior commission structure, the company hopes to increase efficiency and improve driver earnings.
Driver earnings and other impacts
Data from industry experts reveal that Ola's new model could positively influence driver earnings, particularly for those in urban areas.
In major cities, where drivers complete around eight trips daily, the potential gross earnings can reach approximately Rs 2,400 per day. Under the former commission structure, drivers would net around Rs 1,800 daily. With the flat fee model, net earnings could increase to about Rs 2,333 per day, translating to roughly Rs 58,325 monthly.
While this change may lead to enhanced earnings for experienced drivers, it also transfers more financial risk to them. As Pratik Shah from EY Parthenon points out, while the flat fee model offers more control over earnings, it can be challenging for new drivers or those operating in less busy areas.
As the ride-hailing landscape continues to evolve with varied pricing structures globally, the success of Ola's flat fee model remains to be seen, the reports noted. The company is betting on this approach to stabilise its business and attract drivers back into its fold, but the long-term implications for all parties involved will need careful monitoring, it noted.
This move replaces the previous commission system, where the platform deducted up to 30% per trip. This shift marks a pivotal moment in the economics of ride-hailing in India, as Ola aims to address market pressures while trying to regain the loyalty of its drivers, ToI's report (by Supriya Roy) said.
Strategic shift amid market pressures
The recent changes at Ola come amid increasing competition in the ride-hailing sector. Senior executives within the company have acknowledged that the decision to implement this flat fee system is partly a reaction to the dwindling market share Ola has experienced, ToI's report said.
The balance of supply and demand has shifted unfavourably, prompting the company to reconsider its operational strategy. As one executive told ToI, the situation is dire: "It's a race to the bottom, a desperate hail mary."
To support this flat fee model, Ola has enacted significant cost reductions, including downsizing its acquisition team and reducing driver incentives. By cutting costs associated with the prior commission structure, the company hopes to increase efficiency and improve driver earnings.
Driver earnings and other impacts
Data from industry experts reveal that Ola's new model could positively influence driver earnings, particularly for those in urban areas.
In major cities, where drivers complete around eight trips daily, the potential gross earnings can reach approximately Rs 2,400 per day. Under the former commission structure, drivers would net around Rs 1,800 daily. With the flat fee model, net earnings could increase to about Rs 2,333 per day, translating to roughly Rs 58,325 monthly.
While this change may lead to enhanced earnings for experienced drivers, it also transfers more financial risk to them. As Pratik Shah from EY Parthenon points out, while the flat fee model offers more control over earnings, it can be challenging for new drivers or those operating in less busy areas.
As the ride-hailing landscape continues to evolve with varied pricing structures globally, the success of Ola's flat fee model remains to be seen, the reports noted. The company is betting on this approach to stabilise its business and attract drivers back into its fold, but the long-term implications for all parties involved will need careful monitoring, it noted.
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