This change is reflected in a survey done by Ola. Two years back, when Ola surveyed its regular customers, they said that due to app-based taxi services, the need to own a second car had gone down. In the past year and a half things have changed. "Many of them now say they don't feel the need to own a car at all," says Anand Subramanian, senior director-marketing communications at Ola.
The competition between app-based taxi services has led to a drop in prices and more choices for customers. Last year, the option of sharing rides or carpooling was introduced. In March, Ola introduced a new segment called Micro, priced at Rs 6 per kilometre. No wonder, of the total taxi market in India, app-based taxi services command 12-13 per cent at present. "They are growing at 80-90 per cent yearly. Last year, app-based services had just 7-8 per cent of the total market share," says Siddhartha Pahwa, chief executive officer of Meru Cabs. Of every, 100 consumers that take taxis, 50 are now opting for the app-based service providers in urban areas. In tier-II and tier-III towns, the penetration is 15-20 per cent.
App-based services for short distance:
The lesser the kilometres you clock in a day while travelling, the more sense it makes to shift to an app-based taxi service, if you consider the cost of owning a car, the replacement cycle, fuel cost, maintenance and salary paid to a chauffeur. If you travel less than 25 km a day, buying a car does not make sense. An Uber or Ola taxi will cost you Rs 371, even if a surge in prices is considered (see table). If you have made an outright purchase and drive the car, you will spend Rs 676 a day - almost 80 per cent more. However, if the car is on loan and you have a chauffeur, you will spend Rs 1,168 on your commute each day.
Owning makes sense for longer distances:
The economics start to tilt in favour of owning a car if you clock 75 km a day, as seen in the table compiled by EY. You will end up spending Rs 954 in an app-based taxi service, whereas using your own car will cost Rs 1,020 if it is an outright purchase and Rs 1,112 if bought on a loan. For a heavy user, driving 125 km a day, owning a car makes perfect sense. You also need to consider two big factors before deciding between owning a car and
shifting completely to an app-based taxi service. One, keeping a driver would automatically add around Rs 400 to your per -day cost, considering an average monthly salary of Rs 12,000. Two, if you have taken a car on loan, the interest cost can further change the equation, as it increases cost of ownership.
"While they may make economic sense, one or two bad experiences with app-based taxis can make a person stop relying on them," says Ashish Verma, assistant professor - department of civil engineering, Indian Institute of Science.
Peak time travel:
The cost for app-based taxis have been calculated considering the traveller gets a surge of 1.3 times only twice out of 10 times he hires a car. What if the surge price is more and happens more often? For those travelling less than 25 km a day, it would still be economical. But, as the distance travelled increases, surge pricing takes away the cost benefit of hiring a taxi. For those travelling 75 km or more and driving their own car, it's better to buy and use their own vehicle.