India’s ride-railing sector is constantly evolving, with companies exploring new ways to attract customers and enhance earnings for their drivers. In a recent development, Rapido, an on-demand bike-taxi aggregator, has introduced a subscription fee model for its driver partners, departing from the traditional commission-based structure on rides. This move aims to provide drivers with a more stable and consistent income.
Rapido’s launch of a subscription-fee model for its drivers is followed by Namma Yatri, another ride-hailing platform that launched a software-as-a-service (SaaS) model in February 2024. This ONDC-backed company shifted to a zero-commission structure, levying a fixed fee from auto drivers.
Rapido uses a daily login fee model, charging auto drivers a fee ranging from Rs 9 to Rs 29. In exchange for this fee, drivers gain the privilege of undertaking unlimited rides based on demand, without incurring any additional commission charges.
“The zero commission model has been introduced for both autorickshaws as well as cab services. We’ve witnessed a remarkable 20% increase in the number of captains opting for our SaaS-based platform, which is indicative of their positive reception to our innovative business model,” a Rapido spokesperson told Moneycontrol.
In contrast, Namma Yatri offers its services at a fixed rate of Rs 25 per day or Rs 3.5 per trip for the initial ten rides. After completing these ten rides, the services become free of charge. These distinct fee structures illustrate the varied approaches taken by ride-hailing platforms in India to strike a balance between profitability and providing appealing incentives for their driver partners.
In contrast to its counterparts, California-based Indrive is making waves by offering commission rates of 10-12% to its drivers in India. This stands in stark contrast to the more established ride-hailing giants like Uber and Ola, who continue to offer higher commission rates ranging from 25-30%.
New Entrants Challenge Uber’s Dominance
Over the past decade, India’s ride-hailing sector has witnessed a notable influx of new players, such as Rapido, BluSmart, and other platforms supported by the Open Network for Digital Commerce (ONDC). As these emerging players actively compete for the same customer and driver base, the already established players like Ola and Uber have implemented strategic measures to retain their driver supply and stay competitive in the evolving market.
In response to the changing landscape, Uber has reportedly adjusted its commission structure for drivers, lowering it by 5-7 percentage points during peak hours. This move is designed to incentivize drivers to be on the roads when demand is high, showcasing Uber’s responsiveness to market dynamics.
In November 2023, Uber introduced the Uber Pro program, which aims to provide drivers with various benefits, including preferred geographic locations, discounted vehicle maintenance and motor insurance, and enhanced micro-credit offerings. Drivers become eligible for these perks upon achieving specific milestones. It is noteworthy that during the pilot phase of the program, Uber observed a decline in the churn of drivers using the platform, indicating positive outcomes from the initiative.
Advantages of Subscription Models
The introduction of a subscription fee model by Rapido and other ride-hailing companies may stem from the resistance drivers have expressed against the traditional commission structures implemented by platforms. According to a senior executive from a leading ride-hailing firm, speaking anonymously, drivers have opposed these conventional structures due to a percentage of their earnings being claimed by the ride-hailing companies.
The executive emphasized that the perception created by the current commission structures, detailing the distribution of earnings between drivers and platforms, is negative. Drivers often feel they are losing a portion of their income to the platforms that facilitate their business operations. This shift towards subscription models could be a strategic response to address these concerns and improve the overall relationship between drivers and ride-hailing platforms.
Subscription models in the ride-hailing industry can offer several advantages for both drivers and platforms, contributing to a more sustainable and mutually beneficial relationship.
With a subscription fee, typically Rs 25-30, drivers can enjoy a more predictable and stable income. Instead of relying solely on the variability of individual trip commissions, drivers pay a fixed amount regularly, providing them with financial stability and helping them plan their expenses more effectively. This approach also increases the time drivers spend on the platform.
In the current ride-hailing landscape, the conventional commission model and ride-based incentive structures often result in drivers working extended hours, surpassing 15-17 hours a day.
Moreover, subscription models in ride-hailing platforms enhance transparency. Drivers gain a clearer understanding of the fees they pay and the corresponding services they receive. The introduction of a daily fee, offering access to customers, provides drivers with improved visibility into their earnings after accounting for the fee. This transparency contributes to a more informed and empowered driver community within the ride-hailing ecosystem.
