Unstoppable: Behind Rapido's ride to maintain bike-taxi market supremacy (2023)

If you’re one of the millions of IPL fans relishing the high-octane excitement of the cricket tournament on JioCinema, chances are you’ve seen Rapido’s ‘Bike Wali Taxi Sabse Saxi (bike-taxis are the best)’ advertising blitz. One of the ads features a young woman ditching a dreadfully crowded bus in favour of the nimble two-wheeler taxi service that arrives in moments. The underlying message is clear—bike-taxis are affordable, convenient and safe.

“But which city are they advertising it for?” asks a senior executive at the bike-taxi vertical of one of the leading cab aggregators, who wishes to remain anonymous. “In Delhi and Maharashtra, they are banned. In Bengaluru and many other cities, they are a risk because auto unions wouldn’t let their riders operate.”

The ad campaign has been launched amidst a challenging time for bike-taxi service providers, even as they confront bans in important markets like Delhi and Maharashtra, and encounter significant operational challenges in several other states, such as Karnataka and Tamil Nadu. “But they don’t care,” says the executive. “They will continue to operate until cops show up at their doors. Then they may take a pause, but will resume in no time. That’s been their strategy.”

The rules change in every state... But that doesn’t mean, we have been involved in illegal activity. We are generating lakhs of jobs by virtue of Captains already owning a bike

Aravind Sanka
Co-founder
Rapido

Rapido and other ride-hailing platforms have been facing severe legal troubles for over a year now. For instance, Karnataka had asked the platforms to stop three-wheeler services, accusing them of overcharging and harassing customers. Separately, Rapido—that also has autorickshaws on its platform—was refused a licence to operate in Maharashtra. Even Delhi banned bike-taxis for violating the Motor Vehicles Act, while Madurai city police warned Rapido riders of strict action.

Clearly, the battle isn’t just about Rapido. The whole bike-taxi industry—where regulations vary by city and state—is impacted. While some states such as Goa and Haryana have legalised bike-taxis, in other regions, they largely operate in a legal grey area. Major players such as Rapido, Uber Moto and Ola Bike have struggled to navigate this uncertain terrain, with frequent run-ins with autorickshaw unions and government agencies.

“They [Rapido] have gained significant market share over the other two [Ola and Uber] by running their operations when others shut down to comply with government regulations,” says a former senior executive at Uber, wishing to remain anonymous.

It’s no secret that start-ups often leverage regulatory ambiguity to disrupt traditional industries. First, they establish themselves as market disruptors by offering convenience and better pricing; then they lobby for regulatory changes to legitimise their operations. Rapido has been driving such a disruption for bike-taxis in India. Today, their story—similar to how Uber’s cab-hailing business navigated the initial legal challenges it faced in India for not complying with local laws, but whose convenient services sparked a public debate on the need for regulatory changes that forced the government’s hand to establish guidelines for the operation of ride-hailing companies—is more or less developing along the same lines.

“Travel and transport is a part of the Concurrent List. So, the rules for it change in every state and union territory. But that doesn’t mean we have been involved in illegal activity. After all, we are generating lakhs of jobs by virtue of them [riders, called Captains] already owning bikes,” says Aravind Sanka, Founder of Rapido.

As per unverified estimates, Rapido currently enjoys a 65 per cent market share in India’s fledgeling bike-taxi industry, and it didn’t reach there just by dodging the many regulatory bullets.

Bike taxis... [are] affordable, convenient and safe. We were convinced about the business from day one. We knew it is going to be a multi-billion-dollar opportunity in the long term

Kunal Khattar
Founding Partner,
AdvantEdge Founders

Since its launch in 2015, Rapido has had a steady but frugal journey. The company was so undercapitalised that it chose not to expand beyond Bengaluru in the first three years of its existence. During that time, it created awareness, built its product, improved customer experience and established a category. Its first large round—of Rs 52 crore in Series A funding—came in its fourth year. This frugal mindset has helped it survive even as dozens of peers have wound up between 2015 and 2018.

“Bike-taxi is the only option that gives all the three features that people look for in public transport—affordability, convenience and safety,” says Kunal Khattar, Founding Partner at AdvantEdge Founders, which is an early investor in Rapido. “We were convinced about the business from day one. We knew it is going to be a multibillion-dollar opportunity in the long term. We just wanted to make sure we back the right team.”

Khattar’s investment mantra might be on point with his focus on affordability and convenience, but safety remains a deep concern. Plus, there’s the cultural component, especially for women commuters. Firstly, two-wheelers are seen as less safe than their three- and four-wheeler counterparts. Then comes the hesitation among women in riding pillion with a stranger due to its unfamiliarity and safety concerns. Adding to this challenge is the glaring lack of female riders. For instance, on Rapido, there are currently only around 200-300 female Captains out of over 1.1 million registered Captains. The company plans to increase their numbers to 1,000 within the next six months.

“I don’t prefer bike-taxis because it’s weird sitting behind a random dude. The proximity is too close and it seems unsafe,” says Sneha Sharma, a frequent Rapido autorickshaw user. “I’d rather take an autorickshaw and sit alone behind, where I am at a safe distance.”

However, Rapido’s founders—citing the 22 per cent women commuters on the platform—insist that insurance and a vigilant tech mechanism have made bike-taxis equally safe for women.

Despite these challenges, experts say Rapido’s strength is in its nimble evolution and single-product focus.

Khattar, who first backed Rapido in its second seed round in 2016, says the company’s single-product focus has helped them beat the odds. “There were several discussions at the board including getting into food delivery or becoming a super app; all of them have been shot down. Of the 120 cities, they don’t have a physical presence in about 100. They manage and monitor operations remotely from Bengaluru. That is how they built a very cost- and capital-efficient business model,” he says. “That is what has allowed them to become a clear market leader.”

On the other end, Ola and Uber—that have raised and spent billions of VC dollars to build their respective businesses around big-ticket products—offer an average ride price of about Rs 300. In contrast, Rapido is tailor-made for the bike-taxi segment, which is a small-ticket business. In its eight years, the company has raised a fraction of its competitors’ funding, with its largest round of $180 million coming in April 2022.

Once you create a circuit of bikers, you can create a subscription model. I feel these services will come down to this model, where drivers will pay a monthly subscription to use the app

Ashutosh Johri
Co-Founder
Baxi

“They [Ola, Uber] are the Mercedes of shared mobility. For them to deliver a 50-60-product, profitably, is impossible. When you are over-capitalised, you throw money at every problem, which is what is happening with subsidised rides and heavy customer-acquisition costs. Therefore, it is very difficult for them to become capital conscious,” says a VC investor who has made bets on the mobility space, and who wishes to remain anonymous.

Meanwhile, Rapido’s dominance in the bike-taxi space is undeniable, with it being the backbone of its entire business. This is precisely why they can’t afford to halt operations. However, as the demand for convenient and affordable transportation continues to rise, the bike-taxi market is ripe for the picking. With three players—Rapido, Ola and Uber—in the race, it’s clear that everyone understands the immense potential of this evolving segment.

Ashutosh Johri, Co-founder of now-defunct bike-taxi service provider Baxi, says the winner will be the one that creates the biggest supply network. And he believes that the commission-based model may not be the most suitable and sustainable one for bike-taxis. “If you try to take a cut on every ride, it is not a valid model. The reason why they [aggregators] are surviving is because they are giving incentives. That’s the reason they are not making money as well,” he says. “Once you create a mega circuit of bikers, you can create a subscription model for them. I feel these services will ultimately come down to this model, where the driver will pay a monthly subscription to use the app.”

While this type of model has not been experimented with, it could potentially offer a better deal to the riders and incentivise more riders to sign up on the platforms. Commuters would also stand to gain as in the cities, where most trips are short and solo, two-wheelers offer a fast and affordable solution—especially for the younger crowd—who prioritise cost-effective travel options. Also, they solve the first- and last-mile challenge, while maintaining a steady stream of commuters for the riders.

But not too long ago, the pandemic had hit the urban mobility industry hard, leading to a sharp decline in the number of cabs on the roads. And now, cabs have become increasingly unaffordable and unreliable. Take the example of Bengaluru where, once thriving, the number of taxis on the city’s roads has dwindled to 35,000-40,000 vehicles, from 100,000-125,000 in 2018, says Tanveer Pasha, President of Ola-Uber Cab Drivers’ Association. As a result, service levels have sunk to an all-time low.

And while autorickshaws serve as the most affordable transportation option, they stand to lose the most, should bike-taxis get regulatory approval. Per Pasha, the advent of bike-taxis has caused a decline of around 40 per cent in the incomes of autorickshaw drivers, but they are now starting to recover some of their lost revenues due to a reduction in the number of cabs.

Meanwhile, commuters across cities are looking for affordable and efficient transportation options that cover the first- and last-mile commute. With most docked and rental bike start-ups like Bounce, Vogo and Ontrack having pivoted or shut shop, the bike-taxi market is wide open for the persistent player to capture. And while ride-sharing platforms saw a slump during the Covid-19 pandemic, as lockdowns ended and cabs didn’t return on roads, bike-taxis have managed to capitalise on it.

“The [bike-taxi] industry has really seen acceptance over the years. It was quite small till CY19, and de-grew in 2020, but since last year, growth has been phenomenal. If you compare CY20 with CY22, bike-taxi rides have grown 2.5 to 3x,” says Ujjwal Chaudhry, Partner at RedSeer Management Consulting.

The [bike-taxi] industry was quite small till CY19, and de-grew in 2020, but since last year, growth has been phenomenal. If you compare CY20 with CY22, bike-taxi rides have grown 2.5 to 3 times

Ujjwal Chaudhry
Partner
RedSeer Management Consulting

In all this, Rapido’s vision is crystal clear: don’t let the empty back seat of a bike go to waste, when it can be a source of income. “It’s economical and ecological,” says Sanka. And this focus on efficiency doesn’t stop at ferrying people around the city. The ride-sharing platform has expanded its services to include food and courier deliveries, an area where competitors Uber and Ola have yet to make any significant inroads. It has partnered with Swiggy—that is an investor in the company—and Amazon and JioMart, to allow its fleet of Captains to switch gears and become delivery agents, whenever the need arises. From ferrying office-goers and college students in the morning and evening, to fulfilling lunch and dinner-time food deliveries, to handling e-commerce shipments in the slower afternoon hours, Captains on the platform have the option to stay busy all day long.

“A majority of its [Rapido’s] Captains work part-time. Without food delivery and bike-taxi being complementary, they won’t make enough money as a full-time rider. The strategic partnership with Swiggy has really helped them. Rapido is the only one with tight integration with food and e-commerce players,” says a former bike-taxi founder who wishes to remain anonymous. “It’s a superb business. There is no fixed cost, no customer acquisition spends. It is their biggest competitor moat right now.”

Rapido is looking to enhance the efficiency of its fleet. Per sources that BT spoke to, the company is considering transitioning its fleet from traditional internal combustion engine (ICE) vehicles to electric two-wheelers. This would align with new regulations in Delhi, where the government is reportedly considering allowing only electric two-wheelers for bike-taxis. Shifting to electric vehicles would also result in cost savings for everyone involved.

“Rapido has about half a million registered Captains and knows which vehicle they use and how old they are. Assuming that a person keeps his bike for five years, 20 per cent of the Captains on the platform will buy a new bike every year. That’s 100,000 bikes. Today they all buy ICE vehicles. Rapido is trying to influence that decision,” says an industry insider aware of the plans.

Rapido will act as an intermediary that brings together EV makers, financiers and insurance providers to help its fleet transition to EVs. Given the magnitude of the requirement, the company is seeing significant interest from players willing to offer the platform a commission.

Despite the regulatory vacuum, Rapido has tied up with TVS for supply of electric two- and three-wheelers. Apart from this, it has also tied up with RACEnergy—a battery swapping network provider—to deploy e-autos supported by RACEnergy’s network, in Hyderabad.

Amidst the evolving landscape of the bike-taxi industry, the business models of today will see many iterations before the platforms find firm ground. However, one undeniable truth remains—the sheer convenience and economics of this model is fuelling its demand. And in the midst of it all, Rapido has not only emerged as the winner, but also the ultimate game-changer rewriting the rules of engagement.