Uber Technologies, Inc. (UBER.US) faces resistance in expanding in India! Local ride-hailing unicorn Rapido stages a comeback with its unique model.

A little-known unicorn ride-hailing company outside of India is attracting users at a faster pace than Uber Technologies, Inc. disrupting the expansion efforts of the San Francisco-based giant in key growth markets. According to reports, Rapido, based in the southern Indian city of Bangalore, has completely changed the local transportation industry with its low-cost motorcycle rental service and unique pricing model. Last year, this startup's app downloads surpassed those of Uber Technologies, Inc. and another major local competitor in India, Ola. Rapido's co-founders said in an interview that the company has now become profitable for the first time, laying the foundation for a possible future IPO. Affordable prices and a large supply of drivers are key factors in Rapido's rapid rise. Unlike Uber Technologies, Inc., which takes a commission from each ride, Rapido charges drivers a very low subscription fee, disrupting one of the few remaining growth potential ride-hailing markets in the world. Rapido co-founder Pavan Guntupalli said, "Just as the US is dominated by four-wheelers, we believe that India's mainstream is two-wheelers. Even in a small village, you can see a farmer or farmer's son owning a motorcycle." Uber Technologies, Inc. sold its business in China in 2016 and exited the populous Southeast Asian market two years later. Therefore, India is critical to Uber Technologies, Inc. as its over 1.4 billion population offers an unparalleled expansion opportunity. Although most of Uber Technologies, Inc.'s revenue comes from developed markets like the US, billions of Indian consumers are gradually entering the digital economy, starting to transact online and build brand loyalty. Dom Taylor, head of Uber Technologies, Inc.'s Asia Pacific ride-hailing operations, said on Tuesday, "India is not only one of Uber Technologies, Inc.'s largest markets, but also one of our most strategically important markets." On the same day, Uber Technologies, Inc. held a launch event in Mumbai for new features, one of which allows passengers to wait longer for lower fares. It is worth noting that Ola, founded in 2010, entered the Indian market three years before Uber Technologies, Inc., and started operations five years before Rapido. After receiving billions of dollars in funding from top global investors, Ola and Uber Technologies, Inc. invested heavily to attract customers, spending money on advertising and expanding their driver networks, while expanding their businesses from cars to motorcycles and auto-rickshaws. Although these two companies traditionally made profits by taking commissions from each order, Rapido has introduced a new model. Its motorcycle drivers only need to pay a subscription fee as low as 9 rupees (about 0.11 US dollars) per day to use its platform. They can accept any number of orders, collect and keep the fees themselves. As a sign of Rapido's success, Uber Technologies, Inc. and Ola have also introduced similar commission-free driver options. Rapido has successfully attracted a large number of drivers to its platform, serving urban commuters, students, and shoppers who lack private cars. According to Appfigures data, Rapido's app had approximately 33 million downloads last year, exceeding Uber Technologies, Inc.'s 21 million and Ola's 19 million. Randy Nelson, director of insights at Appfigures, said that while Uber Technologies, Inc. and Ola have higher cumulative download numbers, Rapido is doing the best job in acquiring new users. Rapido stated that it completes about 4.3 million daily trips through motorcycles, auto-rickshaws, and cars, triple the number of Ola and about 40% higher than Uber Technologies, Inc. A spokesperson for Uber Technologies, Inc. said, "Our business is growing rapidly at a sustainable pace, and we are well prepared for long-term success." The spokesperson added that Uber Technologies, Inc. is the leader in the car ride-hailing business in India, with higher profitability in this area. So far, Rapido has raised $200 million from institutions such as WestBridge Capital, Nexus Venture Partners, and Prosus, reaching a valuation of $1.1 billion in its latest funding round. The company is currently investing in expanding its business to cover more than 250 cities it already operates in, targeting more small towns in India. When asked if they are considering taking the company public, Rapido co-founder Aravind Sanka gave an affirmative answer. However, he also stated that the company has not set a timetable yet, has sufficient funds at this stage, and is focused on long-term growth. However, Rapido also faces challenges. Last month, it suspended motorcycle rental services in Karnataka, where it is based, after the high court ruled that using private motorcycles for commercial services is illegal. A spokesperson for Rapido said that the issue is currently in the judicial review stage. Uber Technologies, Inc. and Ola have also suspended motorcycle rental services in the state and other regions. According to local media reports, Maharashtra has also banned non-electric motorcycle rental services. An unresolved issue is whether Rapido and other commission-free ride-hailing services should be subject to India's Goods and Services Tax (GST) for these commission-free orders. In addition to providing more affordable transportation options, Rapido's co-founders emphasize safety as a key concern. Rapido offers taxis operated by female drivers for women and has recently started installing seat belts on auto-rickshaws, which are usually not equipped with them. The two founders said that, along with another co-founder, Rishikesh SR, they understand the needs of local consumers more than their competitors, "we are India's middle class ourselves."