Taxis, Tariff & Trouble Case Study

Introduction:- Cab aggregation is a highly competitive industry and has seen monumental growth in India over the last decade. Today we have cab aggregators Agg1, Agg2, Agg3 (Names used are fictional but each represents a practical underlying scenario). These aggregators, compete not only to provide better service to customers but also to design consumer friendly price structures and offerings. Gone are the days, when the cost of our trips solely depended on the number of kilometres travelled. Today the fare of cabs associated with cab aggregators depends on a host of parameters making it confusing enough to puzzle both customers and the drivers.

Here are a few charges you might have observed on your hired taxi's invoice:

1. Base Fare: Initial amount billed to sit in a cab

2. Excess km fare: Billed amount on distance after complimentary ride

3. Time fare: Billing on the time spent in the cab

4. Minimum fare: This is the minimum amount you will be billed

5. Tolls and excess fee: This is the excess charge you need to pay to compensate for the long distances outside main city

6. Premium multiplier: In crowded/congested time, you will be bill something like 1.4 - 2.5 X of the actual bill amount.

travelling in India has become a lot more convenient and that too at highly competitive prices with a wide array of options available. Yet, cab aggregation companies have found subtle ways to get compensated well and mask costs. However, when one looks at all these cab aggregators with the varying cost components holistically, with an aim to reduce one's monthly travelling expense, we realize how difficult and mind boggling it is. Considering the populous city of Bengaluru can we make this puzzle easier? Let's crack this puzzle for once and for all.

The Cab Dilemma Mayank is a sales representative of an MNC company. His job profile demands to travel a lot, in and around multiple cities. His company gives him a travelling allowance and he can book cabs to travel inside a city. The company also allows employees their balance travel allowance as a bonus component to their salary. As a regular traveller, Mayank knows how these cab aggregator charge. You are given the pricing criteria and multiple scenarios which Mayank faces in his daily commute. You are to help Mayank decide on how to save his allowances.

Basic parameters of Taxi Aggregators

There are four categories of taxis:

1. Micro: Super small taxi like E2O etc.

2. Hatchback: These are hatchback options like Tata Indica

3. Sedan: These are Sedan options like Toyota Etios

4. Luxury: These are super luxurious cab options like Mercedes, BMW, etc

Here are the various cab aggregators you need to consider:

Aggregator 1 Agg1:

They have three categories for Taxis:

Category Minimum Bill Extra km Charges Ride Time Charges

1. Battery Cars, Rs 40 Rs 6 per km Rs 1 per Min

2. Hatchback, Rs 80 for first 4 km Rs 10 per km Rs 1 per Min (post 5 min)

3. Sedan Rs 100 for first 4 km Rs 13 per km Rs 1 per Min (post 5 min)

Aggregator 2 Agg2:

They also have 3 categories of Taxis as shown:

Category Minimum Bill Extra km Charges Ride Time Charges

Battery Cars Rs 35 Rs 5 per km Rs 1.5 per Min

Hatchback Rs 49 Rs 6/km after 2km Rs 1.5 per Min

Sedan Rs 75 Rs 13/km after 2 km Rs 1.5 per Min

Aggregator 3 Agg3:

It does not have electric car option and have luxury in addition to hatchback and sedan.

Category Minimum Bill Extra km Charges Ride Time Charges Cancellation fare

Hatchback Rs 35 Rs 7 per km Rs 1 per Min Rs 50

Sedan Rs 40 Rs 8 per km Rs 1 per Min Rs 75

Luxury Rs 100 Rs 17 per km Rs 2 per Min Rs 150

In addition to this, minimum fare of Hatchback is fixed at Rs. 50.

Questions

1. Mayank needs to make multiple short distance trips, which range from 2 to 6 km. What would be the best aggregator in Electric class vehicle in such condition?

2. What would be the solution if Mayank decides to take a Hatchback class vehicle for a uniform distance range of 2 to 6 km?

3. For the same distance if Mayank had been offered an upgradation by Agg1 from Electric to Hatchback for no additional cost, would it be cheaper than Agg3 Hatchback service considering everything else remains the same?

4. During the peak hours, Agg3 had a surge of prices by 2.2 times and at the same time, Agg1 also had the surge of prices by 1.5 times for their Sedan class vehicles. Which of them wold cost Mayank less?

5. Mayank had pre-booked Agg3 Hatchback at a surge rate of 1.2 and at the time of trip, Mayank observed that he could get an Agg1 Hatchback without hiked prices. Now the problem is that, if Mayank cancels his pre-booked trip, he will face a cancellation price. However, if Mayank chooses to cancel, he would stand a chance to save on hikes prices for Agg3. At what feasible distance will Mayank break even on the cancellation charges on Agg3, in case he chooses to go ahead with Agg1?

**Explain every answer and if possible then make charts and display answer with graphics.

Assumptions

1. For all trips assume that every km of journey will be completed in 4.5 minutes.

2. No toll to be assumed in all the trips.

3. No Taxes are applied for simplicity.

4. Multipliers are applied on final bill amount.

5. Cancellation charges cannot be waived off if the booking has been made