BluSmart, an Indian ride-hailing startup, is aiming to compete with Uber and Ola in the country's market by relying on an entirely electric taxi fleet and a bold strategy to attract dissatisfied passengers and drivers away from the established competitors. The transportation sector in India is expected to undergo a substantial transformation in the coming years as a result of the clean energy drive by Prime Minister Narendra Modi's administration, which could have significant consequences for ride-hailing companies.

Uber and SoftBank-funded Ola, the dominant players in the ride-hailing industry, are expected to face significant challenges as they attempt to shift entirely to electric vehicles, especially given their current struggles with driver retention and customer satisfaction. Meanwhile, BluSmart, a new entrant, aims to take advantage of the moment by outperforming its combustion engine-powered rivals in terms of electrification, cleanliness, and reliability. The company manages its fleet and drivers directly and has implemented measures to ensure drivers cannot cancel bookings received through the BluSmart app. According to Jasmeet Khurana, who leads a mobility decarbonization initiative at the World Economic Forum (WEF), "BluSmart has succeeded in delivering high-quality service with clean, punctual vehicles. Managing its fleet allows it to achieve this. It has leveraged the transition to electric vehicles to establish itself in the market."

BluSmart has capitalized on Uber's difficulties to attract backing from investors.

Uber entered the Indian market in 2013, offering affordable fares for passengers and lucrative incentives for drivers, while Ola, a homegrown competitor, was established in 2010. Both companies enjoyed widespread success throughout India, but more recently have encountered difficulties as riders have faced an increasing number of cancellations and drivers have become dissatisfied with shrinking financial incentives, leading to a high rate of attrition. Ola did not respond to a request for comment.

Backed by BP's (BP.L) venture unit, BluSmart launched in 2020 with airport rides in Delhi before expanding to include scheduled bookings. The company has since expanded to Bengaluru. In Delhi, BluSmart accounted for 80% of the 2,750 newly registered electric taxis between January and October 2022, according to data from consultancy Redseer. Electric vehicles represented 25% of the city's new taxis, up from just 3% in 2019. BluSmart has established 22 charging and parking facilities in the capital, including one in a multi-level car park in an upscale neighbourhood where over 100 vehicles undergo comprehensive cleaning every night under the supervision of private security personnel.

EXPANDING IN SIZE OR SCOPE

According to Statista, India's ride-hailing market is presently valued at $13.4 billion, which is one-tenth of China's market.
With just a 7% penetration rate, the country's market of 1.4 billion people presents a profitable opportunity. Prime Minister Modi has set a goal of having 30% of all cars sold be electric by 2030, and some states are pushing for an increase in the number of eco-friendly taxis. BluSmart intends to grow its taxi fleet to 14,000 vehicles next year and 100,000 vehicles over the next five years, expanding to four additional cities, and introducing more immediate booking options, similar to Uber, according to CEO Anmol Singh Jaggi.
In June, BluSmart will integrate custom-made small EVs built by Indian company Gensol Engineering (GENO.BO) into its fleet, enabling the company to reduce fares. "A small EV is the only way to capture the mass market," stated Jaggi. Nevertheless, this strategy is not without its obstacles.

BluSmart operates in just two cities and possesses 5,000 vehicles, yet it claims to have a 9% market share in Delhi's ride-hailing market. Uber, which operates in over 100 Indian cities and has 300,000 vehicles, controls a 43% market share across the country. BluSmart's fleet includes more expensive EVs from MG Motor and BYD (002594.SZ), but the company is constrained by a lack of affordable EVs from Tata Motors (TAMO.NS), the only EV manufacturer in India at present. Jaggi claims that 40% of BluSmart's drivers have come from Uber or Ola. While almost two dozen drivers stated that they joined BluSmart for better pay, some are unhappy that charging their EVs consumes too much of their daily driving time, and incentives are becoming less lucrative.

BluSmart previously offered incentives to drivers who earned a minimum of 7,000 rupees ($85) per week in trip revenue, in addition to their hourly wage. However, the company has since raised the threshold to 8,000 rupees ($98), according to drivers. Some drivers expressed that they would leave BluSmart for better earnings elsewhere, including Uber, in order to provide for their families. Driver A. Kumar said, "I have to feed my kids."

REVITALIZATION

In January, Ola announced its plan to introduce 10,000 EVs on its platform, without providing a timeline. In February, Uber's India head, Singh, dismissed concerns about BluSmart, citing Uber's diverse ride options such as scooters and autorickshaws. However, an industry executive familiar with Uber's strategy revealed that the company internally acknowledges BluSmart as a competitor, and its own EV expansion is part of its fightback. Uber aims to have a 100% EV fleet worldwide by 2040, with over one million such vehicles in India and South Asia, according to a LinkedIn job ad, considering it a significant aspect of its regional growth strategy.

In February, Uber stated that it will deploy 25,000 Tata EVs in India and collaborate with fleet operators to manage them, a strategy similar to that of BluSmart. "In a sense, BluSmart has compelled Uber to rethink its approach to the Indian market," said Khurana from the World Economic Forum.