Uber is moving away from its commission-based model for three-wheeled auto rickshaw drivers in India in response to increased competition from local rivals Rapido and Namma Yatri. The ride-hailing giant will instead charge drivers a daily fee to use the platform and connect to riders.
The business model change is the latest update to Uber’s business in India in an attempt to make the margins work.
In 2015, Uber first launched its auto-rickshaw service in the market, but suspended shortly after. The service was later relaunched in 2018.
India isn’t the only market where Uber is trying out this model, we understand. The company earlier introduced its subscription-based bike and auto rickshaw services in Bangladesh and some Southeast Asian markets, a spokesperson for Uber confirmed to TechCrunch.
The update, which was communicated through an email to riders, is hitting all auto-rickshaw drivers in India after quietly running it as a pilot for some months. Auto rickshaws cover up to 25% of all motorized trips in India.
Uber’s commission charges are typically between 25%-40% of each ride fare, though the company says its service fee “varies from trip to trip.” Rapid and Namma Yatri don’t charge a commission; their model is more subscription-based.
Now Uber is following suit. Auto rickshaw drivers on its platform in India need to pay a fee between $0.23-$0.46 (20-40 Indian rupees) per day, depending on the city they are in, TechCrunch understands.
As Uber has done away with commissions for autorickshaw drivers, riders will need to pay the driver directly in cash or digitally via the Indian government-backed Unified Payments Interface (UPI). Uber credits and promotions will not apply for auto trips, and riders will not be levied with cancellation charges.
Uber will also not show the final amount riders will have to pay at the end of their trip — instead, it will just suggest a fare, and the driver can set their own rates.
“We’re not involved in fare-related disputes between riders and drivers,” Uber noted on an FAQ page, suggesting haggling will become common among autorickshaw drivers and riders.
In addition, Uber said it would continue to allow riders to raise safety concerns through its app.
While it’s unlikely this model will translate to other markets like the U.S., the change reflects Uber’s mission of connecting independent contractors to riders.
The update is limited to auto rickshaws, meaning four-wheeler cabs in India still operate under the existing commission model.
However, Uber continues to experiment with different models in more traditional ride-hailing, including a flexible pricing service in over a dozen Indian cities and concurrent rides to stay competitive in the world’s most populous market. Today, Uber faces stiff competition from the likes of SoftBank-backed Ola, WestBridge Capital and Nexus Venture Partners-backed Rapido, and Google-invested Namma Yatri, as well as various independent auto rickshaws and taxi drivers.
