Transport

Radio
A Cab
The Radio Cab business is all set to zoom on the fast
lane in India as operators are investing in thousands of
vehicles and advanced technology to meet the growing
needs of the market, writes R. Nagesh.
T
he radio taxi business is taking
off in a big way in India, with
several private operators
investing large sums in setting
up call centres, acquiring a fleet of new
cars, incorporating latest gadgets in their
vehicles and hiring trained drivers.
Demand for radio cabs is soaring in
the metros and large cities as compa-
nies, executives, international tourists and
affluent Indians opt for travelling in well-
maintained and modern taxis. They do not
mind paying a slightly higher fare to travel
in the comfort of air-conditioned taxis.
The radio cabs business has emerged
as one of the fastest growing businesses
in the Indian transportation sector. In
the past, passengers at airports, railway
stations and bus terminals, or those
wanting transport at odd hours of the day
had to depend on unreliable public taxis,
often having to pay much more than the
stipulated rates. Cabbies often fleece
out-station passengers landing at airports,
many are rude and some even join hands
with criminals to loot the newcomers.
In recent years, many companies,
especially in the information technology
and ITeS (information technology enabled
services) sectors, have hired a fleet of
cars to transport employees from their
homes to the work place and back. But
those travelling to airports and railway
stations – both on work and vacation –
had to depend on unreliable public taxis.
A few entrepreneurs had started the
radio cab business in cities such as Delhi
and Bangalore about eight years ago, but
the service did not catch on. It was only
about two years ago, when a handful of
operators entered the scene, that the
business gained momentum. Today, nearly
a dozen operators run efficient radio cab
services in cities such as Delhi, Banga-
lore, Mumbai, Chandigarh, Hyderabad and
Pune. They operate under brands such as
Meru, Megacabs, Easycabs and Metro
Cabs.
Many state governments are encour-
aging radio cab services by issuing permits
for fleet operators, as they believe that
efficient transport services are essen-
tial in a modern economy with a fast
emerging market. At a time when the
government is attracting international
and domestic investors, offering them a
slew of incentives, or promoting tourism
Transport

in a big way, the need for organised taxi are old. For example, Premier Automobiles
services is inevitably growing. Ltd, a Mumbai-based automaker, stopped
For the small- State governments are keen to issue producing Padminis in 2000, but a majority
licenses to operators of radio cabs. The of Mumbai taxis are of this model.
time investor the Delhi government, for instance, wants Environmentalists have been urging
to triple the number of radio taxis on the the government to phase out such old
franchise route capital’s streets to 5,000. The Maharashtra vehicles as they add to the city’s pollution.
government is also encouraging operators Says Debi Goenka, president, Bombay
would be the most to expand their fleet, even urging owner- Environmental Action Group: “Many of
advisable, since drivers of the yellow-and-black taxis to
switch over to the modern vehicles.
the taxis are old and look as if they will
fall apart. They should be replaced with
it takes care of Rajiv Vij, ceo, Carzonrent India Pvt Ltd modern vehicles that provide protection
– a Hertz licensee in India that operates to passengers.”
technology and Easycabs in Delhi – notes that the next Mumbai has the largest number of
decade will see about 450,000 taxis public taxis (besides the 55,000 taxis,
infrastructure. and auto-rickshaws being replaced in there are 30,000 auto-rickshaws) in India
major Indian cities, presenting an over and provides tremendous opportunities for
US$2 billion opportunity for the radio cab operators of radio cabs. Other cities have
business. far fewer public taxis and auto-rickshaws
In Mumbai, for instance, the high court – Delhi has about 4,000 taxis and 30,000
recently endorsed a move by the state three-wheelers and Kolkata around 5,000
government to phase out 7,000 yellow- taxis – but radio cab operators see good
and-black taxis that have been on the roads potential for growth.
for more than 25 years. There are about The dozen-odd operators, besides
55,000 taxis in Mumbai, but most of them aggressively expanding their fleet, are also
planning to start operations in other cities
including Chennai, Jaipur and even popular
tourist destinations such as Goa.
By 2010, about 200,000 radio cabs will
be operating in nearly a score of Indian
cities. About a dozen operators have got
the license to operate radio cabs in Delhi
alone. The operators see huge potential
for growth in not just Mumbai and Delhi
– both cities have relatively efficient public
transport systems – but in other Indian
cities, including tier-I and tier-II ones.
“The demand for our services is
rising steadily every month,” explains
Mark Pereira, ceo, Meru Cab Co Pvt
Ltd. “Currently, we offer a fleet of nearly
2,000 cabs in Mumbai, Delhi, Bangalore
and Hyderabad. We plan to deploy an
additional 2,000 cabs in all the operational
markets over the next three months. By
March 2011, we plan to operate about
12,000 cabs,” he adds. The company is
injecting US$20 million into the business
and expects a turnover of nearly US$85
million by 2011.
Meru Cabs currently operates on a
pure B2C (business-to-consumer) model,
but plans to enter into strategic tie-ups
with corporates. It has already estab-
lished corporate travel programmes with
three firms in Delhi. “We are observing
the needs and requirements of the corpo-

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 Transport

a unique business model

The radio cab business operates on a unique business model. Radio cab firms operate on a 24x7 basis. Customers can
The driver (known in some firms as a ‘subscriber’) cruises book a vehicle even a day or two in advance. The vehicles
around a city, his (or her – as some companies have started are clean, air-conditioned and well-maintained, the drivers are
hiring female drivers to attract women customers) ears alert well-groomed, polite and hired after a thorough check of their
for any messages on the global positioning system (GPS) or credentials.
the general packet radio service (GPRS). The government-fixed fares are transparent (calculated on a
kilometre basis, and not fixed – or haggled – arbitrarily as often
happens at airports and railway stations), the meters are digital
and tamper-proof and the customer gets a printed receipt on
payment.
Radio cab operators plan to install equipment that
would enable them to accept credit or debit card payments.
Importantly, the vehicles are tracked by the call centre,
so customers are assured that it is safe to travel even long
distances late at night.
Even for the ‘subscriber’ the business appears to be
attractive. The driver (or franchisee) has to pay about US$10 or
a little more a day for the vehicle and the rest of the income
is his.
Some drivers in Mumbai and Delhi now take home around
When a customer dials the call centre of a radio cab firm, US$400 a month, more than double their previous earnings.
the operator locates vehicles that are closest to the caller and Of course, some of them have taken a bank loan to put in their
seeks the driver’s response. Once a driver confirms with a share of the initial investment, but for now it appears to be a
‘bid’, the vehicle’s number is flashed back to the customer. lucrative investment.

rate sector, and will decide on the future car-rent firms, garages and even petrol that radio cab fleet operators select their
tie-ups,” adds Pereira. pumps. The franchisee has to invest vehicles. Maruti Suzuki, for instance,
Mega Corp of Delhi, among the first around US$8,000 for a vehicle; the returns offers discounts on some of its models for
to launch radio cab services in India, aims can be as high as US$10,000 a year in the taxi operators. Toyota Kirloskar Motor Pvt
to increase its fleet size from 1,000 cars major cities, where demand for radio cabs Ltd plans to offer a compressed natural
at present to over 20,000 in about three is high. gas (CNG)-based variant of its multi-utility
years. Easycabs plans to expand its fleet Besides passenger fares, there are vehicle, the Innova, to radio cab opera-
to over 12,500 vehicles in the near future. other revenues streams including adver- tors. The running cost of a CNG vehicle
The system of franchises is making tising. “It is a good outdoor medium is a third of that of a petrol version, so
the radio cab business more popular and for advertisers,” explains Kunal Lalani, the company expects a surge in demand
profitable. Many of the cab operators are managing director, Mega Corp. Besides for the new variant, says Sandeep Singh,
keen to rope in taxi owners and drivers ads within the vehicle – on the back of deputy managing director (marketing),
to become their franchisees. Meru in seats, headrests, or even through small TV Toyota Kirloskar Motors.
Mumbai has already got many cabbies sets – there are opportunities on the sides The radio cab business has tremen-
to transfer their licenses to the company and on the roof of the vehicle. dous potential for growth in India as the
and operate new vehicles under a profit- But a company that starts a radio cab transport needs of the corporate world
sharing scheme. business has to make huge investments – and even of middle-class and affluent
Firms such as Easycabs and Megacabs – in vehicles, sophisticated gadgets, Indians – grow more sophisticated. With
are also encouraging cabbies to take up the telecom equipment, call centres, training most cities facing enormous parking
new franchise model. “For the small-time programmes for drivers and even parking problems, many residents would prefer to
investor, including an existing cabbie, the lots. In cities like Mumbai, Delhi and Banga- call up – or SMS – a call centre to summon
franchise route would be the most advis- lore, parking a fleet of 20,000 cars can be a radio taxi for the purpose of visiting a
able, since it takes care of technology, an expensive proposition, especially at shopping mall, a beauty saloon, or even
infrastructure and marketing,” explains Vij. international airports where the charges to attend a late-night cocktail party. This
Some of the operators are also looking are high. option scores higher points over wasting
at other potential investments from small The linkages of this business to the time in search of parking space for your
and medium firms in related businesses, rest of the automobile sector are unpar- own vehicle, or negotiating treacherous
including owners of private taxi services, alleled. Automakers are obviously eager snarls on a leisurely weekend.

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