Business model of Ola and Uber flawed, says Zoomcar CEO Greg Moran

The business model of ride-share mobility firms such as Ola and Uber will keep them away from making money, says Greg Moran, the chief executive officer (CEO) and co-founder of Zoomcar, the country’s biggest self-drive mobility service provider.

According to Moran, these companies need to revisit their strategy.  “None of the mobility companies - Uber, Lyft, Didi, Grab or Ola — is profitable though they operate on a much larger scale (than Zoomcar). Their business model is fundamentally flawed,” he said, adding that his firm had managed to earn a profit in the third quarter of FY18.

Moran, who raised a funding of $40 million last month from investors including M&M, said the narratives in China and Indonesia were a good illustration where mobility companies were a proxy for something larger. 

“They are consumer service companies with high velocity transactions servicing everyday needs and not just mobility. If you just do a ride-sharing business you are not going to make money, you will never make money. That is pretty clear. Didi and Uber are at a much larger scale than Ola and none of these ever made money because you have a driver involved and you have a huge subvention,” Moran said. Ola, the homegrown mobility firm, reported a net loss of Rs 23 billion in FY16. An agency hired by Ola has, however, projected that the firm will turn profitable 

by FY19. 

Moran believes that the economics at ride-share firms can never become profitable because of heavy subsidies. “A ride share driver-based mobility can only become profitable if you eliminate the driver. That will happen in US and China with autonomous vehicles. Whenever you try to become profitable with the driver, there will be a tension. You need to build consumer facing service platforms along with mobility”.

Zoomcar has a fleet of 3,000 cars and plans to add another 5,000 vehicles in the next quarter. Moran is betting big on a subscription model launched by the company last year. It allows a user to subscribe to a car for two years without investing in down payment, registration, and insurance of a new car. 

Zoomcar Associated Program or ZAP allows a user to subscribe with a refundable deposit of Rs 20,000 for a car and a monthly charge of Rs 15,000 (for some small cars) and about Rs 35,000 for large SUVs. The car, when not in use by the subscriber, can be placed on the Zoomcar app. Returns will allow the user to partly offset his monthly subscription charge.