App-based cab services, such as Ola and Uber, have had phenomenal success in India in the last decade. Their competitive pricing, door-to-door service, and ease of availability have attracted millions of urban commuters. Furthermore, surge in smartphone penetration, rise of the BPO industry, and increasing traffic and parking chaos in Indian cities have only accentuated the appeal of these cab services. To become a driver for either of these two apps in India, however, you would need at least Rs 350,000 to Rs 600,000 to get a small-to-mid sized car with commercial registration cost. Not only that, high interest rates of car loans add further burden, pushing many prospective drivers to prefer renting from Ola or Uber instead of purchasing a car. Then, just how much do you have to work to break even on your rental (or ownership) cost of a car? We've analyzed the numbers to calculate how much you actually have to work as a driver to breakeven on your rental cost.
How Much Does It Cost to Rent an Ola/Uber Car?
According to Ola’s and Uber’s websites, it costs between Rs 700 to Rs 1,150 per day to rent a car from them, including the daily commission to be paid to the platforms. Over a year, this would add up to about Rs 2,73,750 to Rs 4,19,750, which includes other annual costs like insurance premiums and registration costs. However, this cost is rather high considering that it is almost 2-3 times more than the per capita income in the country. In fact, most people who become Ola and Uber drivers are likely earning a monthly household income of about Rs 12,153 to Rs 21,462. Given this, just how much do you have to drive the Ola or Uber cab to break even on this cost?
|Security Deposit||Rs 21,000-31,000 based on the type of car + Rs 4,000 Non-Refundable Deposit||Rs 21,000|
|Rental Cost||Rs 700-1,150/day depending on your city and the car model||156 weekly payments ranging of Rs 4,926 to Rs 8,000 depending on your car model|
|Lease Termination||Renew your lease or have your security deposit refunded||Lease terms are up to 36 months with flexible return policy|
|Inclusions||Insurance, registration, scheduled service maintenance||Insurance, registration, scheduled service maintenance|
|Exclusions||Challan payments, damage to the car due to driver negligence, toll taxes||Challan payments, damage to car due to driver negligence, toll taxes|
Breakeven Point: Drive At Least 3-4 Hours Per Day
According to our calculation, you need to drive at least 3-4 hours every day in a metro city to break even on your cab rental. Here's how the math works. A 2018 press release by Uber claimed that over 80 percent of its drivers earn between Rs 1,500 to Rs 2,500 after working eight hours a day, which roughly translates to Rs. 190 to Rs. 300 per hour. This income excluded the fee charged by the company at the time. Given the market share and competitive dynamics between the two companies, it would be safe to assume that an Ola driver gets almost the same. In cities like Delhi, Mumbai, Chennai, Bengaluru, Hyderabad, and Pune, a driver covers 20 km in an hour on an average considering the traffic conditions and spends Rs 1.5 to Rs 3.50 per kilometre on the fuel cost. Based on these figures, a driver has to work between 3 and 4 hours a day to break even, as we illustrate in the table below.
|Small Cab||Medium/Sedan Cab|
|Average Income (20 km/hr)||Rs 280||Rs 290||Rs 320||Rs 340|
|Fuel Charge (CNG)||Rs 30||Rs 40||Rs 40||Rs 50|
|Gross Income/hr||Rs 250||Rs 250||Rs 280||Rs 290|
|Daily Cab Rental Cost||Rs 750||Rs 750||Rs 1,150||Rs 1,150|
|Hours Needed to Break Even||3 hours||3 hours||4 hours||4 hours|
Cost excludes toll taxes, which are charged extra.
Is It Worth the Effort?
Renting a car from Uber or Grab to drive part time can be a savvy way of getting your own car for private use for cheap. Just driving it for 3-4 hrs per day (or 20-30 hours per week) will allow you to “own” a private car while also avoiding various financial burdens like the Rs 40,000 to Rs 2,00,000 of initial down payment, car insurance, annual maintenance services, and car loan interest. Even better, you could drive 8-10 hours a day to earn a handsome Rs 30,000 to 40,000 a month after paying the rental. If you have siblings or friends that you can work with, you can further leverage this strategy to double the income by driving the same rental car in shifts. Given that the median earning of an low-middle class household in India is about Rs 15,000, Ola & Uber could turn out to be a great opportunity for many. According to a media report, many Ola and Uber cab drivers in India earn more than what an entry level-techie is paid.
Tips to Earn More with Ola and Uber
While doing the math provides a clear answer that renting a car from Ola or Uber could be a great way to gain access to private car or to earn extra income, there are also many ways of optimising this economics even more. For example, driving during peak hours could increase your income because both companies increase their pricing (i.e. “surge pricing”) when rider demand is high. Also, longer-routes tend to be more lucrative as the per-kilometre cost increases by 50% after a certain distance. A simple strategy to implement this would be to focus on trips to and from airports. Furthermore, you should aim to fulfil a minimum number of rides required to join Ola or Uber’s incentive schemes every day, which can help lower the commission they charge and increase your earnings. Lastly, renting a CNG vehicle can help you lower your cost compared to a petrol or diesel cars, while Best Fuel Credit Cards in India will lower this cost even further with points and discounts on your fuel purchases.
The article Driving for Ola or Uber in India: How Much Do You Need to Work to be Profitable? originally appeared on ValueChampion’s blog.
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