First, a quick programming note. I’ll be on my annual vacation from today, and so I won’t be publishing the next couple of editions of The Nutgraf. You’ll still hear from me though, and I’ll share updates of my quest to find the most desolate beach in Thailand. So if you have any recommendations (or if you live there and want to say hello), just email me. 

I expect to get back to the usual schedule from 5 November.

Second, I got a ton of feedback (and several new subscribers! 👋) for last week’s edition: CRED and UPI—an illustrated love story, which I’ve still not been able to finish replying to. Thank you so much for all the kind words. Please do remember to send some to Aishwarya as well, who made the fantastic graphics that all of you loved so much. 

And yes, I hope to do more of these visual stories, schedule permitting.

With all of that out of the way, on to today’s edition. 

So, it seems like autos are banned in Bengaluru on apps like Uber and Ola. 

This is complicated, messy, and hilarious. But also, there’s a larger point here which I’ll get to by the end. 

Here's what happened. Last week, the Karnataka Transport Department issued a notice to Ola, Uber, and Rapido in Bengaluru to stop auto rickshaw services on their apps, ostensibly because of rising complaints about fare prices from consumers. Essentially, there are two provisions that the department is invoking for the ban: 

1. The first is based on the pricing. The rates for auto rickshaw fares are fixed and determined by the department (presumably along with the auto unions). And both Uber and Ola were charging higher prices. According to the transport department, this was a bad thing and had to immediately stop.
    
2. Ola and Uber don’t have the license to run autos. So, the department claims that according to the Karnataka On-Demand Transportation Technology Act 2016, aggregators like Ola and Uber have a license to provide taxi services only, and not autos. You’d think that they know a little bit about this, because they practically wrote the law. 

You may have your point of view. Perhaps you think that the department is being unnecessarily overreaching. Or, if you live in Bengaluru, you’ll know that fixed fares on Ola and Uber make no sense, because auto drivers don’t follow those fares anyway. Or maybe you are also tired of fare prices on Ola and Uber and you support this move. 

Well, I’m here to say that none of this matters. 

That’s because the Karnataka transport department’s relationship with Ola and Uber is weird, twisted, and immensely messy. Forget autos, technically neither Ola or Uber have a regular license to operate cabs in the city. In the past, it’s precisely this kind of legal ambiguity around cab transportation that companies like Ola, and especially Uber, exploited to enter into cities all over the world to disrupt local taxi services. 

And right now, there’s a new player that’s trying to use this ambiguity to provide a viable alternative to incumbent ride-hailing services. 

Chaos is a ladder. 

The story is about who is climbing it. 

Let’s dive in.

A few months ago, I explained how Ola and Uber were running in Bengaluru.

Last week, after the transport department sent a notice to Uber and Ola to halt auto rides, they invited them to a hearing to present their case prior to issuing an order. It’s not clear what exactly transpired in the hearing, but we do know a few details. We know that the aggregators revised their pricing and changed it to Rs 30 for the first two km and Rs 15 per km after that—which is in line with the current government-established fares for auto rickshaws. However, the aggregators also said that they’d charge a convenience fee of Rs 40 per ride and 5% GST on the fare amount, which they’d collect on behalf of the drivers. Oh, and above this, they’d also charge 18% to customers for the service. 

All of these add up. 

And that’s partly why consumers are seeing higher fares for autos on their app.

Basically Ola’s and Uber’s defence is—these are not just generous terms, but also mandatory. They are operating a service to a driver. Hence a GST is charged. Also a service to a rider. More GST. Oh, and a small convenience fee for our trouble. Just Rs 40 per ride. 

Who can argue that this isn’t reasonable?

Well, the Karnataka Transport Department did. They listened to all this and said, no, none of this matters because autos are not cabs. So, please just apply for a separate licence to operate three-wheeler autos. 

Except there’s one small problem.

If you went tomorrow to the Transport Department of Karnataka and said, “Hey I have an app that will make it super easy for anyone to book an auto. Can you share the document that lists out all the requirements I need to meet so I can get a licence from you?”, the person on the other side of the table will probably stare at you like you came from another planet. 

That’s because there are no rules or regulations for aggregating autos. 

Doesn’t exist. Not thought of. Not written down. Nothing. 

So even if Uber and Ola applied for one, there’s no document to look at to determine whether or not these companies should be granted one.

Anyway, these companies got fed up and went to court and asked them to intervene. 

And they made a bold, audacious argument:

Who says that autos are different from cabs?

I’m serious. 

Have a look.

Well, yes, an auto does not seat more than six passengers (some may disagree strongly based on traumatic personal experiences), and there’s a public service permit on contract. So, according to the laws—again, I can’t stress this enough—written by the Karnataka government themselves, an auto is technically a taxi.

The court considered all these arguments, and essentially said, listen this is starting to feel like we are watching an existential play at Rangashankara so why don’t you two please go, talk this out, and come back with a resolution among yourselves. It’s worth remembering that the whole reason why Ola and Uber are still running in Bengaluru despite not having a licence is because the court had earlier passed an interim order to the transport department not to take any coercive action against these companies if any rules were flouted. So, the transport department can huff and puff, but it can’t blow the house down. 

Meanwhile, emotions are high amongst auto-drivers. 

Strikes.

Reparations.

Anyway, while all this messiness unfolds across Bengaluru, there’s a new contender that’s emerging from the chaos. 

The auto-drivers are coming up with an app of their own, called Yatri. 

Look, this has happened many, many times before. For nearly a decade, taxi drivers and cab drivers have been trying to build an app of their own to compete directly with Uber and Ola. This isn’t necessarily a bad idea. 

Remember that Uber and Ola are fundamentally hyperlocal apps, both on the demand and on the supply side. As a consequence, they don’t really get too many benefits from their global presence, unlike say, other two-sided matching platforms like Airbnb. Also, from a product standpoint, it’s quite easy to build an app that does what Ola and Uber does. Most of the APIs and integrations are practically open-source. A teenager could build a decent version of their app. 

And yet, historically, cab companies have never succeeded. That’s because while building an Uber-like app is easy, matching Uber on convenience, service, and pricing is not. That’s the real moat around ride-hailing companies. It’s not the tech. 

But in Bengaluru, that moat is gone. 

For the last several months, both Ola and Uber have lost their edge on both convenience and service.

And now, they’re losing on price as well. 

Plus, there’s the fact that Yatri is being built using Beckn, an open protocol that claims to reimagine digital commerce from the first principles. In many ways, Beckn wants to be to commerce what UPI was to payments. 

No app has ever beaten Ola and Uber. 

But this time feels a bit different.

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