Uber’s desperate attempt to turn India into its next big market isn’t chugging along smoothly.

On top of regulatory hurdles that Uber has faced in nearly every region it operates in, the company is struggling in "right-sizing" its business model in India even as it nears completing five years since arriving in the country, Sanchit Vir Gogia, chief analyst at Greyhound Research tells Mashable India.

Its local rival Ola's fate is no different.

Over 50,000 drivers with Uber and Ola this week have participated in a mass strike in Bangalore, India’s Silicon Valley and one of the biggest markets for both the companies in the country. This is the second strike in the city this month.

The strike comes days after Uber and Ola drivers went on another strike in the national capital region, and Hyderabad earlier this month. Those strikes, too, are still underway even as if some of the drivers have returned to work.

Much like the complains that Uber and Ola drivers have in other places in India, drivers who logged off the app in Bangalore this week are demanding the companies to relieve them of the commission they charge on each ride.

A number of Uber and Ola drivers we have spoken to over the last few weeks have insisted that the cab companies have stopped providing them "incentives" that they previously used to offer at the end of the day.

Incentives have played an instrumental role for both the companies in expanding their networks in India. Both Uber and Ola undercut existing taxi companies by offering fares as low as Rs 6 (9 cents) for a kilometer. It made up the shortfall for drivers by offering them incentives on the basis of either the number of trips completed during peak and off-peak hours or the distance they travelled.

Most drivers were not earning by running their cabs but by earning incentives. With lesser, or as in this case no incentive, drivers are not earning as much as they were earlier. Struggling to make terms with this, drivers are asking both the companies to kill the "25 percent" commission they charge on each ride, said a driver who spoke on the condition of anonymity.

(A source, who has a fleet of Ola and Uber cabs on his network, says both the company charge 20 percent — not 25 percent — as commission. Additionally, Uber deducts 4.5 percent service tax, while Ola shaves off one percent as tax.)

Image: RAJAT GUPTA/EPA/REX/SHUTTERSTOCK

But for Uber and Ola, any such waiver isn’t viable anymore, Gogia said. "When the companies started in India, they were focused on 'land-grabbing'" he added, noting that the goal of the companies was to get as many drivers on their platforms as they could and expand to all the big cities. "And they both have done very well on that front," he added.

Uber operates in nearly three dozen cities in India, while its competitor Ola offers cab and auto-rickshaw rides in three times as many places. "The land-grab phase is over, and now is the time to right-size their business models to make more money and meet the function of demand and supply," Gogia said.

Monthly earnings of drivers have dropped from $1,200 to $450, many say.

When they were in the "land-grabbing" phase, both the companies were offering lucrative incentives to the drivers. Making as much as Rs 80,000 ($1,200), nearly four times an average Indian living in an urban city earns, was common for drivers on either of the platforms. That number has dropped to Rs 30,000 ($450) now, many drivers say.

The drivers have joined unions in several places to protest against the companies, demanding a range of things including better pay, round the clock customer service, car insurance, among others that they feel an employee would be entitled to. They are also hoping the government to intervene.

But so far, the state governments have only ordered the drivers to get back to work. "For drivers who are hoping that the government would take their side, they are in for a big disappointment," Gogia said, adding that there is "no ethical issue" at play here, and the practice by Uber and Ola are "fair".

Honeymoon period is over

Some drivers say that the number of rides they used to get on either of the platforms — "duties" they call them — have dwindled over the past few months. Many complain that there are way too many cars on the networks now and hope the government will put a cap on the number of cars Uber and Ola can have on their networks.

Some say that both the companies are favoring the drivers who have leased cabs using their programs. Both the companies have struck deals with carmakers in India to offer somewhat enticing leasing programs to their drivers.

As we wrote earlier this month, drivers are reporting sharp drop in their daily earnings. "When they started their operation in India, I was able to make as much as Rs 3,000 ($45) everyday, sometimes even more" a driver told Mashable India.

"But now my daily earnings is close to Rs 1200 ($18). In addition to fewer duties, both the companies are now offering much less incentives," he added.

A driver who has decided to stop participating in protests — as much as he "supports the cause" — and was back at work starting earlier this week said he has to pay monthly instalments for car and rent, "everyday I don’t work I lose money" he said.

Amid all of this, cab services from the companies remain disrupted and neither of the companies are showing signs of folding, a driver said. Both the companies are planning to have a discussion with drivers in New Delhi to address the issues on Feb. 28, according to two drivers, though neither were expecting anything major to come out of it.

Something's gotta give

The strikes come at a time when both the companies are scrambling for ways to make money.

The hands of both the companies are tied, it appears, which have already spent too much money in grabbing the market in India. According to the chief of a rival company, both Uber and Ola are losing as much as $50 million in India each month.

Ola and Uber declined to comment on the story, but shared statements in which they have apologized to customers who are facing issues.

While it's nothing new for Uber to lower the incentives of its drivers, the number of strikes it is seeing in India should be alarming to the company.

The biggest challenge the companies are facing is their unwillingness to increase the base fare — which is as low as Rs 6 (9 cents) per kilometer for some of their services — in India. In a price conscious market like India, analysts and drivers believe it will be difficult for both companies to drastically increase their tariffs and retain customers.

It seems Uber and Ola are caught between a rock and a hard place. They risk losing customers if they increase tariffs and cannot hope to make money if they go on passing incentives to drivers. They will have to find a middle ground but it is unlikely to be setting either company on the path to profits anytime soon.