Uber may restrict auto taxi services to certain parts of Bangalore, says 10% commission cap unviable

Ride-hailing giant Uber may restrict its auto taxi services to certain parts of Bangalore as the 10 per cent commission structure in the state makes the vertical operationally unviable. 

“Currently, our commission in Bengaluru is capped at 10 per cent of the fare collected. This is not financially sustainable. If our costs cannot be covered through commissions, we will have to find ways to offload costs that could impact the experience of drivers and riders. In the face of these commission caps, we may have to make the difficult decision to limit Uber Auto to select parts of Bengaluru where the service is viable,” the company said in a blog post on Tuesday. 

The move comes after the Karnataka High Court placed a 10 per cent cap on commissions, exclusive of GST, on October 14, as an interim arrangement to find a consensus between the state’s transport department and app-based ride-hailing firms operating in the state. 

Uber said the commission it charges is used to cover costs of value-added services including GPS tracking, safety helpline, 24×7 phone-call and in-person support, rider and driver on-trip insurance and law enforcement response assistance besides investing to build and operate the platform which includes tech and engineering expenses and marketing spends to onboard more drivers and riders. 

“Facilitating a market is not free. Commissions are used to cover our costs and make the business model viable. To be absolutely clear: Our commission ≠ our profit. A flexible commission structure, and one that ensures a fair margin for aggregators, will ensure the sustainability of e-hail autos and also encourage investment in the space, leading to the introduction of new features and services,” the blog post read. 

According to the company, more than 50,000 auto drivers use its platforms and over 10 lakh people in the city avail Uber Auto every month. It said the current fixed metered fare does not adequately compensate drivers for the additional distance travelled and time spent in picking up a passenger from their doorstep.