Meru – Car financing or Cab company

Recently, I was traveling to Delhi for a customer visit and had an early morning flight from Bangalore. Got into a cab at around 6:30 AM. I really hate this new government rule of check-in at airport 45 min prior to flight departure. On top of that Bangalore airport is 60 KM away from town. You almost spend equal time in cab from home to airport and then from Bangalore to Mumbai/Nagpur. Anyways, so I got into a MERU cab with a magazine in my hand but wasn’t able to concentrate on reading anything as my brain didn’t boot up properly and my body and head both were striving for some more sleep. Those last 10 mins in the bed..

So I was wondering what to do now? Was looking in and around the cab and I noticed rate card on the window glass. Looking at the rate card got me into thinking that Meru as a cab company have grown very fast, the way it expanded was really interesting. It was a really unorganized market (except for Mumbai, where we have cab driver association and theose black-yellow cabs run with proper meter). But there was no big brand or a single big player, and I think that was the business opportunity of creating a brand out of a very widely used service.

I started talking to cab driver. Wanted to get details about their operations and revenue model. And here is what I have, a small effort to put together their business functionality. If you know better than what’s written here, it would be great if you could put that in comments below. I am all ears.

MERU launched in 2007 and now have around 1000 cab in Bangalore and even more in Mumbai and NCR (Delhi, Gurgaon, Noida). They operate in four cities now. Mumbai, Delhi, Bangalore, Hyderabad. Bangalore and NCR launch was a big bang launch in 2 months with approx 200 taxis each.

Business of running a taxi company is not new in India. Lots of lots of people already operate in this space and not to mention we have taxi driver unions and associations, etc (at least in Mumbai, its very organized). So the question is how do you attract a taxi driver to run your cab under Meru banner and not take a loan from bank and run his own cab. In traditionally run cab companies, driver is just an employee of cab company getting either monthly salary or daily wages and per trip incentives ('bata' as its termed, which ultimately goes into customer invoice). MERUs have a very different model. MERU’s proposition to cab drivers was not employment, it was loan to buy a taxi and repay the loan by running the same taxi under MERUs banner. Sounds simple. This is how most big banner taxi company operation abroad.

Meru’s Basic Model
As part of the recruitment, a cab driver has to shell out around X amount (this differs from city to city, In Bangalore, its Rs 15000) and get registered with MERU. He undergoes a driving test and rule test for around a week form MERU trainers. He is given an Meru id and a car or a cab. (They are adding more and more new models to their kitty). Car is leased to the driver on a finance model wherein cab driver has to pay daily installment of Y (this differs from city to city, In Bangalore its Rs 900) and eventually shell out Rs 27000 on an average per month. A GPS based tracking terminal is provided by Menu where he gets orders for pickup and drop. A POS is also attached to the device with a thermal printer for receipt generation and credit/debit card swiping. After 3 years of such hefty installments, cab ownership gets transferred to the driver.

Customer Fare collection
All the daily earning form the cab goes to the driver, driver has to take care of fuel (All Meru cabs operate on CNG), by this MERU makes sure that the car is maintained in a good health with good mileage. Whatever driver makes in a day, goes into drivers pocket. All he has to pay back Meru is that Y amount per day.

Cab Maintain ace and insurance
MERU takes care of cab maintenance, its servicing and car (along with driver) accidental insurance. The extra charge in case of accidental insurance which insurance company do not take, MERU and driver has to share 50:50.

Call center and bringing new business
MERU has a call center and online portal to take on pickup and drop orders. These orders are routed using location intelligent software to driver in the proximity of the pick-up location. Meru guarantees some number of orders to its drivers on per day basis


Alternate revenue
As you can see, the basic revenue channel is installment from driver. MERU has alternate revenue sources like advertising. MERU advertises on their cab in around 4 to 5 ways. Roof-top posters, rare view top strip, side doors, and interior sitting of the cab.

Questions/Comments welcome. Thanks.