Meru set to launch inter-city ride-sharing services

3 Feb, 2016

After the successful rollout of ride-sharing services in Delhi, radio taxi company Meru Cab Company Pvt Ltd is now gearing up to launch similar services for its inter-city operations.

The company, which runs inter-city operations connecting 23 cities, said it expects to launch inter-city ride-sharing services on two routes initially – Mumbai-Pune and Bangalore-Chennai. It intends to finish the test pilot by the first quarter of FY 2016-17.

"Once our pilot is successful, we will start ramping up and launch the service across the country by the end of the fiscal," Siddhartha Pahwa, CEO, MeruCabs told VCCircle. "We will launch the service across the country wherever a concept of metro and a satellite town exists. For example, Bangalore-Mysore, Delhi-Chandigarh, Delhi-Jaipur, Mumbai-Surat and Ahmedabad-Vadodara."

Across the globe efforts are being made on how to utilise assets and infrastructure better, thereby reducing the load on infrastructure and getting better value addition for everybody, explained Pahwa. "The shared economy is expected to account for almost one third of the global economy in 10 years' time. And in the inter-city taxi space, ride share is going to be the future," he added.

Explaining the concept, the Meru CEO said people today take at least 3-4 modes of transport to reach one city from another, making the entire journey arduous. With rapid urbanisation, this trend is bound to increase. People will start working either in satellite cities or people from satellite cities will start coming to main cities for work. "Keeping this scenario in mind, Meru's ride-sharing service will chart the route of the car, pick up the first, second, and third passenger on the way and then drop them in the next city," he said.

"The advantage is that people will get a convenient ride right up to their destination, and will be able to optimise cost. At the same time, Meru will be able to serve a larger number of customers with the same capacity," Pahwa added.

According to Meru's estimates, the taxi market in India stands at about $15 billion, out of which the inter-city taxi market accounts for $4 billion while the intra-city market's share is about $11 billion. Pahwa, however, says more than competing with online inter-city taxi service providers, Meru's target audience is bus and train passengers – a market which he puts at "a good another $10-12 billion".

For both Mumbai-Pune and Bangalore-Chennai routes, a ticket for a decent bus service would cost Rs 1,100-1,400. "In contrast, the ride-sharing service should cost customers 10-15 per cent less than a bus or train journey which also includes travel by rickshaw, taxis and autos," he said.

And still Meru would be able to maintain a gross margin of 15-25 per cent, he said. Meru, which last year raised Rs 300 crore ($50 million) from its existing investor India Value Fund Advisors (IVFA), claims it is growing at 35 per cent CAGR.

Meru could, however, see other players adopting the same strategy soon.

As Pahwa said, "Whatever Meru does, at some point of time Ola and Uber start copying." He further added, "Over a period of time, we expect three to four players will develop this market. Inter-city ride sharing would be an attractive market for any serious player."

Ride-sharing has been slowly picking up in India. Accel Partners- and European VC firm Index Ventures-backed European inter-city ride-sharing startup BlaBlaCar entered India last year in January. It raised $200 million in a Series D investment round at $1.6 billion valuation from Insight Venture Partners, Lead Edge Capital, and Vostok New Ventures.

Rocket Internet-backed inter-city carpooling firm Tripda, which raised $11 million in Series A last year. In April 2015, online travel group Ibibo launched a carpooling app named Ryde that lets users share rides.