BluSmart, an Indian ride-hailing startup, is betting on an all-electric taxi fleet to take market share from Uber and Ola.

Prime Minister Narendra Modi’s clean energy program is expected to transform India’s transport business, affecting ride-hailing companies.

Uber (UBER.N) and SoftBank-backed Ola struggle with driver retention and consumer satisfaction, so a full switch to EVs may be a huge undertaking.

BluSmart, a new entry, hopes to top combustion engine-powered competition on electrification, cleanliness, and dependability by directly managing its fleet and drivers. Drivers cannot cancel BluSmart app bookings.

“BluSmart delivers clean, on-time automobiles. “Having your fleet allows you to do that,” said Jasmeet Khurana, a WEF mobility decarbonization initiative leader. “It used the transition to electric to get its foot in the door.”

Uber’s difficulties have helped BluSmart attract investors.

Reuters said that “Uber is losing drivers, riders and market share in India” and that its growth model of driver-owners is “crashing” due to rising gasoline prices.

Uber did not comment on this report, but its India president Prabhjeet Singh told Reuters in February that the business was adding drivers and vehicles each month and will continue to address service issues.

Uber entered India in 2013 with low fares and substantial driver incentives. Ola began in 2010.

Both brands grew in India, but riders canceled frequently, and drivers were disgruntled with lower financial incentives, causing many to resign. Ola ignored a request for comment.

BluSmart, supported by BP’s (BP.L) venture unit, began offering Delhi airport rides and planned bookings in 2020. It expanded to Bengaluru.

BluSmart owned 80% of Delhi’s 2,750 new electric taxis between January and October 2022. Redseer statistics revealed 25% of new city cabs were EVs, up from 3% in 2019.

BluSmart offers 22 charging and parking hubs across the city, including one on the top floor of a multi-level car park in a premium neighborhood where over 100 cars are cleaned each night.

According to Statista, India’s ride-hailing sector is valued at $13.4 billion, a tenth of China’s, with a 7% penetration.

Some states want more green taxis, and Modi wants 30% of cars sold by 2030 to be electric.

BluSmart CEO Anmol Singh Jaggi told Reuters that the company plans to add 14,000 taxis next year and 100,000 in five years, expand to four additional cities and offer instant bookings like Uber.

By June, its fleet will comprise bespoke, compact EVs from Indian business Gensol Engineering (GENO.BO) that will lower fares.

“The mass market can only be captured with a small EV,” Jaggi added.

That approach has drawbacks.

BluSmart, with 5,000 vehicles in two cities, claims 9% of Delhi’s ride-hailing industry. Uber has 300,000 in over 100 Indian cities and a 43% market share.

BluSmart’s fleet includes MG Motor and BYD (002594. SZ) EVs, although Tata Motors (TAMO.NS), India’s only inexpensive EV maker, limits its supply.

Jaggi says 40% of BluSmart’s drivers are Uber or Ola. Nearly two dozen drivers contacted by Reuters joined for higher income, but some are frustrated charging takes up too much of their daily driving time, and incentives are dwindling.

Last year, BluSmart incentivized drivers if they made at least 7,000 rupees ($85) each week. Drivers said this starts at 8,000 rupees ($98).

“If I get better earnings elsewhere, even at Uber, I will leave,” stated BluSmart driver A. Kumar. “After all, I have to feed my kids.”

Ola announced in January it would introduce 10,000 EVs on its marketplace but gave no date.

Uber’s India boss Singh dismissed BluSmart concerns in February, saying Uber offered more travel options, including scooters and autorickshaws.

An industry executive with intimate knowledge of Uber’s thinking said the business internally recognizes BluSmart as a contender, and its EV push is part of its fightback.

According to a LinkedIn job ad, Uber targets a 100% EV fleet by 2040 and more than 1 million EVs in India and South Asia as “a key piece” in its regional expansion strategy.

Uber announced in February that it would deploy 25,000 Tata EVs in India and cooperate with fleet operators to manage them.

“In a way (BluSmart) has forced Uber to reimagine how it wants to play in India,” WEF’s Khurana added.