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Ola Business And Revenue Model | How OLA Business Works

ola car business model

Ola started its on-demand Taxi Booking Service by acquiring a fleet of cars. Initially, they were providing services through call, and later with the booming digital industry, they took their business online. With this latest two-way model, they started serving the requirements of drivers as well as the customers.

Carpooling services, taxi rental services are currently a booming industry. More and more people are moving towards using taxi services to avoid traffic and long-distance driving. A concept like Ola works well with millennials as they look forward to convenience and comfort in their travel at the tap of a button.

Using the App as a medium to connect to users of taxi services is the most preferred option. The App has all the features right from booking a cab, tracking the cab, driver details, making payments and travel history, and much more.

All that is required for existing taxi rental business owners to expand their business is an App. For startups it is also a viable proposition as cost of infrastructure and resources is negligible.

We, as a web development and app development company, provide you with complete insight into the Ola cab business model & Ola revenue model. From this, you will get a clear idea about what you can integrate into your next rental App or carpooling app business.

But, before we explain the Ola business model, let's have a look at some of the most well-known facts about Ola.

Interesting Facts about Ola
  • Ola was founded by two IIT graduates: Bhavish Aggarwal and Ankit Bhati
  • In India, Ola is operating in around 125 cities offering online rental services through cabs, auto-rickshaws, and two-wheelers.
  • Ola started its services in Australia, New Zealand, and the United States in May 2019.
  • Ola obtained a Funding of USD 1.5 billion in 2015
  • As of May 2019, Ola's valuation is $6.2 billion.

As of now, the Ola model operates on the website, as well as a mobile application. To know in detail how Ola became successful, let's have a look at the company's business model.

Ola Business Model: How does Ola work?
ola car business model

Primarily, Ola entered into the market as a Taxi Rental Fleet Business. They acquired a group of cars and hired drivers. Customers had to call Ola's call center to book cabs, and cabs were made available for them at their desired place & time.

In 2015, they saw a great opportunity in the online industry and moved their entire business into an app-based aggregation. With this change, Ola, rather than purchasing their fleet of cars, started working as a mediator between the customers and the cab drivers. Ola connects drivers and its passengers via a mobile application.

Here is the step by step process which explains how Ola app works:

  1. Once a user gets registered, upon login, there is an option where the App instantly detects the location of the user via GPS.
  2. The customer has to enter the drop location. The App shows different categories of cabs along with their price. Now, the customer can choose a taxi as per their requirements & preferences.
  3. After this, the customer's request is sent to the driver.
  4. As soon as a driver accepts the request, a confirmation message with details of the driver is being sent to the customer via message or mail.
  5. He driver picks up the customer from the pickup location and completes the ride by dropping off the customer at the requested location. There are multiple payment options like-Cash, Ola Money, Debit/ Credit Card, UPI Payments, and much more.
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This is how the Ola cabs business model works. Cab booking service is the primary revenue-earning source of the company. Apart from this, there are some other ways through which Ola generates revenue.

Ola Revenue Model: How Ola Earns Money?

Let's have a look at different revenue streams through which Ola makes money.

  1. Trip Commission

    Ola cabs revenue is the most integral part of the company. The company charges X% commission that varies between 15-20% of the total fare, based on the vehicle and location.

    Here, the total fair of Ola is based on different factors. These are given below:

    Base Fare: This is a flat fare that is charged in the beginning.

    Total Time of the Ride: Total time beginning from the pick up to the drop location is taken into account for calculating the entire fare. Calculation of the complete ride is done in just a few seconds.

    Waiting Time: If a customer makes a driver wait, then the waiting charges will be levied from him/ her.

    Fare Based on Distance per KM: This is charged as per KM and differs from one city to another and also on the type of cab booked.

    Demand for Cabs: The demand of the cab has a significant impact on the rate at that time. Ola raises the cost per km traveled. It is made to generate high revenue when there is more demand for cabs.

    Fee For Booking: Advanced charge is levied if the customer books the cab in advance.

    Convenience Fee: They charge more for the cabs, which provide in-cab entertainment. This is charged from the customer if they choose a pickup and drop to the airport.

    Toll & Parking Fee: This is charged depending on the toll junctions crossed and car parking service.

    Cancellation Fee: Ola imposes cancellation fee if a customer cancels a ride.

    Service Fee: Service tax, along with some other taxes, is levied on the overall cost of the trip.

  2. In-cab Advertisements

    Some of the advertisement tools like brochures, leaflets, and much more are shared with the passengers to promote different brands & products. Live ads are played during rides for promotional purposes.

    Ola receives a commission from all the companies for these kinds of promotions. This way, Ola generates an additional revenue stream.

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  4. Credit Card

    The company has made a collaboration with the State Bank of India and VISA to launch a Credit Card known as Ola Money SBI Card. The card provides various rewards to the customers. There is a zero joining fee and an annual fee of Rs 499 for Ola SBI Credit Card. Ola earns a certain percentage of commission for every person who pays through Ola Money SBI Card.

  5. Cab Leasing

    The company purchases cars and then leases them to the drivers. By doing this, Ola is creating an asset value and also creating a job market for drivers by helping them join the ola platform with a minimum joining fee of Rs X. So the joining fee here is the additional revenue for Ola.

  6. Corporate Tie-ups

    Ola proposed its Cab services to various corporates in the form of specialized packages and plans at a subsidized rate, which their employees can avail of.

    With this B2B tie-ups, Ola takes advantage of higher sales volume, which in turn helps the company to earn good revenue continuously.

  7. Ola Money

    Similar to PayTM, PhonePe, FreeCharge, etc., Ola has also released its wallet via which customers can easily make payments to different vendors and cab drivers. Ola has made collaboration with various online and offline merchants. The company earns a certain percentage of revenue, whenever a user makes payment through Ola Money on these merchants.

  8. Ola Prime Play

    Ola has formed a collaboration with Microsoft, Apple Music, Sony Digital, and much more to offer passengers in-cab personalized entertainment.

    During traveling, Ola makes sure to provide a comfortable and enjoyable experience to all the customers who are ready to pay a nominal fee. Thus, it plays a significant role in enhancing business revenue.

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Wrapping it up

Entering into different segments has been beneficial for the company. All the streams have helped the company to generate more revenue and attract customers to Ola's primary business segment, which is the cab booking service.

As of now, Ola has the most significant market share in the country. Moreover, the company's revenue has also increased 10X times in the last four years. Thus, Ola has become the leading on-demand cab booking service provider in India.

If you are looking forward to establishing an online car rental and carpooling App, then you can approach Infigic, a professional mobile app development company. We possess a highly talented pool of developers who will deliver the ultimate cab booking service app to derive an optimal ROI.

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