INSTITUTE OF MANAGEMENT, NIRMA UNIVERSITY

MBA- FT (2018-2020)

Case Study of Entrepreneur

Individual Assignment-1

Bike Taxi Start-ups

Submitted by: Submitted to:

Nitesh Sharma – 181141 Mr. Shahir Bhatt

Date of Submission: 24th October,2019

Article 1: Bike Taxi Start-ups think out of the box to succeed in
tough regulatory environment, but for how long?
Bike taxi hailing facing legal challenges, official crackdown by transport authority or tough
competitions. However, there are always some gaps and these firms are exploiting those gaps
for example redefining business model to hyperlocal delivery services. Using white plate
private vehicle to safeguard oneself against regulatory uncertainty. Regional transport service
has seized many of the vehicle accusing them of violating the Indian Motor Vehicle Act.
The issue in the legal aspect is that there is no law regarding “Private bike owner sharing their
pillion seat with the customer” and some of the states thus interpret it as legal whereas some
considered as illegal such as Tamil and, Karnataka, Madhya Pradesh .There was a statement
by Madras High Court stating that these services are illegal until and unless state legislature
makes the law to regulate these services. Motor Vehicle Act ban uses of private owned vehicle
to be used as taxi however the bike taxi service firm remodified their business model. However,
in the place where the bike hailing is legal, there are some other legal aspects where getting
yellow plated vehicle is cumbersome process and takes long time. As mentioned in the article
in cities like Jaipur everything is done in 16 days whereas in some other region it may take 6
months.

How they work

The working process is similar to the cab services such as Ola and Uber. Suppose a customer
want the bike service , he will mention the pickup and the destination point in the app and the
app will show the ride status , these are different than start up like Bounce and Vogo where the
person can hire the scooter for ride and the customer can ride the bike for himself. There is
issue in getting funding for those start-ups who are operating in the region where such firms
are illegal to run.

There is a reason why bike hailing service is going to be new face of the commutation, the
traffic congestion in the metro cities specially at the peak time, since there are only few taxis
when compared to the number of two wheelers in India, creating
The reasons why bike-hailing is the new face of commutation in the metro cities are :
1. Increasing traffic in metro cities.
 2. According to Credit Suisse Report, there are about 155 million two-wheelers in India
compared to 5 million taxis.
3. Two wheelers take much less time when compared with other mode of transportation
in peak hours of traffic.
4. There are many bike-hailing services emerging in the Indian business ecosystem and
many of the state traffic regulation bodies have given permission to such services in the
country.
In the bike taxi space, the largest player in the country is Rapido. It is competing in terms of
ride-hailing frequency with Uber because of very low Average ride value of the bike-hailing
service by Rapido. It is being downloaded 2 million times on iOS or android devices. It is
operated in 16 cities of the country. It has around 5000 daily drivers and 10,000 monthly
drivers.
Table: Comparison of Average Ride Value
Sr. No Taxi Service Average Ride Value (in
Rs.)
1 Rapido 36
2 Ola 200
3 Uber 207
(Source: Kalagato Report)

Finance option for the bike rider:

These start-ups have tied up with automobile manufacturer to help their driver to new bikes
and they are 100 % financed through the firm partner and they have to pay a fixed amount
through their app to the automobile partners.
Challenges
1. Getting the permit for bike -taxi is difficult as in some state it is illegal whereas in the
states where it is allowed, it can be a lengthy problem.
2. Getting fund from angel investor is tough, as the legal aspects are not very clear, thus
getting investor in these ambiguous legal environments is tough.Hiring a bike taxi
driver for full time is an expensive process as it is a fixed cost on the firm where the
firm may not get enough rides to utilise their human assets fully.
3. Since the industry seems lucrative for bike-taxi, there are many entrants in this segment
and thus competition gets tough
  Three are various operational challenges that these firms have to address and thus they
are diverting or making the model hybrid. (such as Baxi, a bike taxi start-up has tied up
with mother dairy and Patanjali for FMCG goods delivery)
 The cultural issue where bike taxi driver has to be female for a female customer, in
country like India, woman usually stay away from riding bikes.
 The cost of fuel, high EMI and lower profit prevents bike taxi service to scale up at
higher rate

URL:https://yourstory.com/2019/08/bike-taxi-startups-regulatory-hurdles-operating-environment-
workarounds
Article 2: Why Bike Taxis in India haven't had it easy
Legal Regulations in the country

 Section 53 (1)(B) of Indian Motor Vehicle Act states that any private vehicle or the one
with the white board license plate, can face suspension of their registration if it us used
for the purpose of hiring or rewarding without getting permit for using vehicle as such.
 Many of the state government put the curb on bike service company, accusing them of
operating illegally.
 The guidelines which were issued in the month of December 2016 empower state
government to license the bike taxis. However, many of the Indian states have not
introduced regulation for the bike taxis yet, due to which the bike taxi service is
considered illegal.
There are many bike services, who are operational in the country ( as mentioned below)
 Rapido:

Got recent funding of Rs. 390 Crore by Westbridge Capital. The taxi service is present
in tier-1 and tier-2 cities. there are 40 cities in which it is operational in the country.

 Bounce- Swiggy
Bounce is a bike rental firm who has tied up with food delivery firm swiggy, to run bike
taxis in two cities which are Indore and Ahmedabad, these two cities have lenient
regulations from RTO.
 Ola Bikes
Ola has launched its bike service since 2016 and its bike service is operational in 150 cities
of the country. According to Ola, it is the largest player in bike taxi service in term of
number of cities, bikes and bookings. It is spreading its service rapidly in the country.
However, in the beginning of the year, its license got cancelled by Karnataka transport
department to run its bike taxi service in Bengaluru. however, the state government has
reinstated the license after the fine of Rs. 15 lacs.
 Dunzo
Dunzo has launched its bike taxi service which is called as ‘pillion in the city of Gurugram
and is now targeting to launch in tier-2 and tier-1 cities.

URL:https://tech.economictimes.indiatimes.com/news/startups/why-bike-taxis-in-india-
havent-had-it-easy/70861394
Topic of the Article 3: Legal Regulation to Start Bike Taxi Business
in India

For the bike taxi there are no clear regulatory aspect in the country. In many of the states of
India there have been attempts to clarify the state’s take over the issue. Goa became the first
state to “allow commercial use of bike” followed by Haryana which relaxed their rules
regarding the same.

However, there are many states such as Maharashtra, Karnataka who are not in favour to license
bike taxi start-up. Further added by the Additional Transport Commissioner and Secretary of
State Transport Authority, Bangalore “Companies like Uber are not authorized to carry
passengers on private bikes. Uber and Ola are the major culprits and nobody should operate
without a proper license. These companies in order to run their bikes have gotten their vehicles
registered as private vehicles and therefore, are in violation of the law. Further, since they also
do not carry proper registration certificates that justify their activities as a commercial taxi
vehicle, no claims in relation to insurance shall be entertained in case of any accidents.
“However, within a couple of days Bangalore Authority changed their stance on the issue.

Legal points for Bike- Taxi Service

 State Allowance: RTO department permission is important to run the business

 Compliance with business regulation: Registration of business entity is required for
one-person, public, private company or limited liability partnership.
 Compliance with the motor vehicle act 1998
 Compliance with Information technology law: Most of the bike taxi service have their
own website or app and to host these, firms have to abide by Information Technology
Act 2000.
 Other Ancillary Law: Other laws regarding the operation, environment should be taken
care

URL:https://wazzeer.com/blog/start-bike-taxi-business-india/
Conclusion:

From three articles I conclude that there is a big scope for bike taxi service in India because of
various factors such as high pricing by Ola and Uber, easy availability of Bikes compared to
Cars and serpent movement of bike in traffic reducing the significant time for the commuter.
However, as we have studied in Strategic management, PESTEL analysis is important. One of
the biggest resistance bike taxis are facing is legal aspect where many of the states have made
such type of services as illegal in their states. Central government has given freedom to the
states to make legislation on the subject, many of the states have allowed it, however then the
process of getting license is a major hurdle as it can be very lengthy depending from one RTO
office to another one. To tap the opportunity some of the services are operating illegally, some
have modified the business model. Apart from that there is huge competition rising up as
getting funding has gone easy in these days. There are many start-ups build on this concept
with some modification in their model. There is a big race to compete in the market and to woe
the Indian audience, these bike services are giving huge discount, giving offers on referrals, all
in the one motive to increase the market share. Some of the companies have even make strong
strategic partnership with bike manufacturers so that bikes can be provided easily, a move to
attract and retain the drivers for the bike taxis.

There are many threats these bike services are carrying , one of the most important is legal ,
second issue is the sustainability as these start-ups are operating with huge cash burn and
making it difficult for them to get the fund in the time when they are in cash crunch situation
resulting into the shut-down of the start-ups.
 UNDERTAKING

To Whom It May Concern:

I, Nitesh Sharma hereby declare that this is my original work and is not copied from
anyone/anywhere. If found similar to other sources, I shall take complete responsibility of
the action, taken thereof by, CSE team

Signature:

Name: Nitesh Sharma

Roll no: 181141

Batch: MBA-FT (2018-20)

Date: 24 October 2019