The virus is spreading fastly and is claiming its wave all over the world. Social distancing is the key to move forward. People are moving contactless with the passage of time. The worst-hit sectors today might be the cab rental sector. People have stopped booking cabs because of the fear of being infected by the virus. When it comes to traveling, it is said that people will start purchasing affordable hatchbacks and sport utility vehicles so that they do not have to resort to cabs. It has been predicted that individual car buying might go up after the pandemic since the customers might not be In favor of sharing a cab with unknown people. The consumers who were earlier using Ola or Uber will now choose their own vehicle.
The automobile industry will feel a huge change in customer demand. People will start valuing health and hygiene over money. The Indian middle-class will definitely contemplate owning a vehicle but will go for it because of health issues.
According to a survey, 70% of the Indians will try to avoid public transport and 62% of Indians will ditch Ola and Uber. There are dark days ahead for these companies. They might be having proper sanitation facilities but you cannot win the trust of people when it comes to their health. India was always a favorable market for these companies because of the large number of drivers available. But consumer behavior will now be changed because of the pandemic and it will lead to a huge challenge for these firms.
All the big corporations used Ola and Uber for transferring their employees from the office to their house. People used cabs for shopping, movies, and eating out. All these activities will fall at a very sharp rate until the time a vaccine is not developed. If all the users of the cabs will dwindle down, so will the demand of the cabs. The consumers will prefer staying indoors and not going out.
Public transport will not be used by the people till the time their health issues are assured of. It is also found out that Ola and Uber have earned a lot of money and they can sustain themselves through this tough time. The companies valuation might be reduced significantly.
HEALTH OF THE DRIVERS
Zomato and Swiggy have launched contactless payment and delivery but for Ola and Uber, this is not possible. Social distancing in the cab segment means people won’t have to face the driver. This is a very bizarre scenario and cannot happen.
The drivers of the cabs are already struggling to make money because of the huge loans they have of the cars. Now their livelihoods are at stake with the pandemic. Some of them are worried about losing their jobs if they are caught with the virus. These companies need to protect their workers and drivers. Uber has said that they will temporarily suspend the accounts of the drivers isolating due to a suspected infection. The concerns have grown tenfold since the lockdown came into effect.
When we say that the people who are coming from the airport might contain the virus, we must know that these people come firstly in contact with the cab drivers who are prone to this infection. The protection of every employee in these organizations is the prime concern. The drivers are complaining that their queries are not been taken care of by the companies.
Since there is no revenue for the company but the expenses are soaring high, the companies are resorting to laying off employees. It is said that revenue declined by 95%. The company owner has decided to let go of its 1400 employees and this will be a one-time exercise. The CEO has also said that no more layoffs will be done after this. Uber is laying off 3000 people globally and they have also removed people from India.
Both companies are saying that they are increasing their investment in research and development to incorporate innovation and engineering or fighting of this crisis. The workers who have lost their job at Ola will receive a minimum payout of three months of their fixed salary. Employee stock options will also be available for the employees. Insurance Will also be provided to them till December. The talent team of Ola is also helping these people in finding new jobs.
The stock valuation of Uber fell more than 12% while ago. The company also said that a pandemic poses a material risk to their business. The company has taken up measures to save got its implies and have given them the option to work from home. Till the time work from home continued for all the firms in the country, the cab sector won’t see a boost.
Shared mobility service providers may witness the demand shock for another nine months after this scenario of the pandemic is over. It is a big challenge for these firms to revive growth as they know that demand for their products might not come for a large span of time. Various sanitation issues have been taken into account as the use of masks, disinfectants, sanitation of cars after every ride.
In the near future, to increase the demand discounts and cutting of fares will Not really increase the demand. Also, the companies are into a high cash burn business and they would not be able to subsidize their fares further on. The overall COVID impact will hamper its valuation. According to a leading economist, Ola and Uber will see 30 to 40% valuation dipped in their next round of funding.
When it comes to funding, the funding companies will also prefer to invest in companies that will show returns after the pandemic. And it has been proved that these cab delivery companies might not have a smooth future right now which will result in lower funding for them. The whole concept of unicorns like Ola is solely dependent upon funding. If there is no money, how will these companies sustain?