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Indian ride-hailing giant Ola is ramping up its efforts to go after chief rival Uber in Australia, launching its service in Melbourne, its third city in the country, and announcing plans to enter six more cities in the coming months.
Ola's move to expand into Australia is part of its plan to tap developed markets to build a profit base that can help fund some of its losses back home. The move comes at a time when US-based Uber is being forced to consolidate its North American and European businesses.
“We’ve been humbled by the response from customers and driver-partners alike in Perth and Sydney, and are incredibly excited about launching Ola in Melbourne,” said Chandra Nath, Head of Ola’s international business, in a statement.
The company claims it has been able to sign up 15,000 driver partners in Sydney and Perth alone and will continue to add more drivers as it expands its service across Australia. In order to grow quickly, Ola is charging drivers an introductory commission of just 7.5 per cent, far lower than the norm of a 25 per cent commission.
Australia is the first international market where Ola launched its service, while the company is also evaluating an expansion into New Zealand, Sri Lanka and Bangladesh. Business Standard had reported on January 9 that Ola was looking at overseas expansion and has put in place teams at the aforementioned regions.
Uber is already operational in 19 cities in Australia, but experts peg that the ride hailing market in the country though dominated by the US company still has space to grow. Apart from Uber, Ola is also going up against Estonian ride hailing firm Taxify which is backed by common investor Didi Chuxing.
Rivals are mounting pressure on Uber at a time when its newest and largest investor Softbank is pushing the company to consolidate its business within North America and Europe, while giving up its loss making entities in Asia. After selling its China unit to Didi and its Russia business to Yandex, Uber recently agreed to sell its Southeast Asia business to Softbank-backed Grab.
While Softbank has indicated that both Uber and Ola should look at a merger or truce in India, both companies given their comparable size are reluctant to cede control. According to people in the know, Uber’s burn in India is at around $300 million annually, far less than what it was spending in China or Southeast Asia.
As the competition back home refuses to give up, Ola is now looking at expanding into markets where Uber has a presence and compete with it there. Having closed a $1.1 billion funding round last year, Ola is well capitalised to grow its business and despite Uber having access to far more capital, the US firm’s losses are already huge at $4.5 billion during 2017.
Moreover, as Uber looks to cut its losses in the run up to its planned IPO in 2019, Ola is wary that its rival isn’t going to be able to ramp up spending significantly to protect its turf. While Australia is Ola’s first home outside of India, the country also has among the most liberal laws for ride hailing players globally, which will help the company grow its business quickly.