Companies
Rapido takes on Ola, Uber with ‘low-cost’ guarantee airport cab service
Summary
- Rapido expects its services to airports to contribute 20% of its revenue, a top executive said.
After launching cabs last year, ride-hailing startup Rapido is expanding its services with low-cost airport taxis, expecting the segment to contribute 20% of revenue, a top executive told Mint.
Rapido started the service in Surat last week and it will go live in all the metros in this quarter, according to Aravind Sanka, co-founder and CEO. He said airport routes have potential for cab services because air passenger traffic is rising and there are few alternative transport options.
“With the rapid increase in airport traffic, we expect the airport business to contribute upwards of 20% to our overall revenue in the coming years, solidifying its importance in our growth strategy," Sanka said.
The growing number of air passengers presents promising opportunities for ride-hailing services. Late night and early morning cab availability remains a challenge, particularly when airports are located farther from the city, according to Soumen Mandal, a senior analyst at Counterpoint Technology Market Research.
“Setting up booking kiosks within or near airports, as seen with Ola, Uber, and BluSmart, could also boost Rapido's presence in the airport market. Moreover, collaborating with airlines to offer carpooling and transport services for airline staff could open new revenue streams for the company," Mandal added.
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However, the large fleets of Ola, Uber, and BluSmart in certain cities present challenges to Rapido's expansion plan, said Mandal.
Up to 30% of all BluSmart’s taxi rides comprise airport pick-ups and drops, signalling a crucial area of growth for the Gurgaon-based company, Anirudh Arun, co-founder and chief executive officer of BluSmart Fleet, told Mint.
“It’s an important and growing area of focus for us and has scope to contribute significantly to the overall revenue," Arun said. BluSmart currently offers airport rides in Bengaluru and New Delhi and will expand to other cities, in line with its vision to cater to premium consumers.
Lowest price
Airport rides tend to cost almost double of average city rides, according to Arun, making revenue from the segment an interesting proposition for companies. An average airport drop costs ₹1,000-1,100, including airport parking charges, tolls and pickup charges in both cities.
However, Sanka said that with the surge in airport traffic, the key differentiator will be providing the best customer experience and cheaper fares.
“Our primary differentiator will be our lowest price guarantee for cab rides, coupled with well-maintained vehicles and additional convenience features," he said.
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The biggest challenge, Sanka noted, will be consistently managing the availability of high-quality vehicles while ensuring the lowest prices.
Arun of BluSmart said the airport cabs segment has massive scope for expansion mainly because taxi rides will always remain the preferred mode of transport for airport transfers and taxi rides are also growing in share compared to other forms of transport.
These rides are expected to become costlier. Earlier this year, Bangalore International Airport Ltd increased the fees charged to ride-hailing platforms for usage of Kempegowda International Airport’s premises, resulting in an increase in airport pickup fees, according to media reports.
India’s air passenger traffic is expected to grow 8-11% year-on-year and hit a record 407 million-418 million passengers by the end of FY25, according to estimates by rating company ICRA, indicating a clear growth path for ride-hailing companies.
Bengaluru-based Rapido raised $200 million in its series E funding round led by WestBridge Capital at a valuation of $1.1 billion last month.
Beyond metros
While Rapido has a presence in the metros across vehicle categories, Sanka said it still has much to achieve in tier 2 and tier 3 regions. Currently, about 35% of its two-wheeler and three-wheeler orders come from non-metro cities including Mysuru, Vijayawada, and Jaipur.
This number will go up to 45% in the next 1-2 years and about 55% in the longer term, according to Sanka, who added that the company is present in 100 non-metro cities and wants to launch in 250 additional cities in the next 1-2 years.
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“We have seen some of the tier 3 and tier 4 cities reacting well to our two-wheelers and three-wheelers service because people there already move frequently using these modes. There is already sufficient supply in these cities, and we see merit in digitising the supply," he said.
Rapido plans to change its offerings based on local demand and consumer behaviour. Some parts of north India such as Uttar Pradesh have only e-rickshaws, making it crucial to introduce 100% electric three-wheelers right from day one, according to Sanka.
“In some cities that see heavy migrant movement, we have made rides easily available at bus stands and railway stations by setting up dedicated pick-up points," the executive said.
The ride-hailing company plans to charge lower subscription fees to three-wheeler drivers in tier 2 and tier 3 markets as compared to metros. Driver fees start at ₹15-20 per day in metro cities, while it may be slashed to as low as ₹5-10 in other regions, according to Sanka.
Rapido’s revenue from operations surged to ₹443 crore in FY23 from ₹145 crore in FY22 as its loss widened to ₹675 crore from ₹439 crore during this period. Sanka said the company aims to grow 40-50% year-on-year on the back of new experiments, city launches, category expansion, and going deeper into existing cities.
