After Uber, London Now Blocks Ola’s Journey

The story of how Ola was banned by the regulator in London and how this story looks similar to what happened to its rival a couple of years ago.

What Happened?

On 4th October 2020 (Sunday), London’s public transport authority, Transport for London (TfL) refused to grant a new license to Ola over safety concerns. The regulator was quoted by Reuters saying, it cannot grant the license as it “cannot find it (Ola) fit and proper to hold one after discovering a number of failures that could have risked public safety”. Ola on Monday said that it would appeal the decision by the London regulator.

The regulator added in a statement that unlicensed vehicles and drivers had made more than 1,000 trips on the app, and that Ola had failed to notify the regulator of the breaches when they were first identified. Ola on Monday said that it would appeal the decision by the London regulator.

The London Market

Despite entering the UK market in 2018, Ola entered London only on February 10, 2020 after receiving a 15-month license to operate in the city in July 2019. Three weeks after it announced plans to begin operations in London, over 10,000 private hire vehicle (PHV) drivers registered on its platform.

The ride-hailing firm entered London with a bang — only two days after its launch, downloads of Ola’s app in the country touched an all-time high of 44,337, showed a recent report by Boston-based app intelligence company Apptopia. When you compare it with the numbers of Uber, there is a wide margin since Uber averaged 13,471 daily downloads in February.

So, you get the picture. Ola placed a strong foot in London and it had big plans for the city too. In an interview with YourStory in February this year, Simon Smith, Head of International Operations of the company said, “Ola’s journey in the UK has already seen it completing three million rides through a network of 11,000 drivers across 27 regions in the UK. He went to say, “Ola will look to add more than one category/offering and will progressively look at expanding the range in the months to come”.

However, all of these future plans are now facing a huge question mark because of the move by the regulator. The important thing to note here is what is happening to Ola now has already happened to Uber in the past.

Uber & London

Earlier in 2017, London refused to renew Uber’s license, quoting several concerns including how the company responded to serious crimes. The regulator said that Uber was not “fit and proper” to hold a private hire operator license.

After a long battle with the city’s regulator, the company was granted permission to operate for 15 months. However, the regulator refused to grant the U.S company a license again in November 2019, raising a range of new safety issues. In the last week of September 2020, the firm has received a new license for 18 months and the license came with 21 conditions.

The Fierce Battle

We all have to understand one important thing here — London is a highly competitive market and every company that is operating in the city now is trying their best to become a monopoly.

Transport commentator Christian Wolmar told Evening Standard, “The firms cannot keep building themselves by throwing in more and more goodies, and giving more concessions, when, in the end, that is unsustainable so it just won’t work”. He added, “Their goal is to wipe out all the competition and become the monopoly.”

If you think about it, this makes sense. The strategy used by both Ola and Uber to become big in any market is to offer steep discounts. At the end, it becomes extremely difficult for the companies to become profitable.

When Ola was launched in London, it said that its drivers will retain 100% of their earnings for the first six weeks as an inaugural offer. It also said that passengers will get a £25 of ride credit for signing up in the first week. In short, this is a high cash-burning strategy to capture the city’s market. Ola’s operating losses are surging and this method to beat its rivals in London doesn’t sound that good.

We have to wait and see whether Ola will face a long legal battle like Uber and will it be able to beat its competitors in London and become profitable?

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