How an Australian startup plans to take on Uber

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How an Australian startup plans to take on Uber

Hop uses a different business model which will allow it offer both drivers and passengers a better deal, according to the founder.

Hop is a ride-hailing service founded by Zeryab Cheema. Although he is only 20, he founded Taxi 24/7 five years ago to connect taxi drivers and passengers, and it has become the leading payment system among London's black cabs, Cheema said.

While Uber has established a significant market presence, Cheema noted that Lyft was able to gain traction against Uber in the US by treating drivers better, showing that "multiple players can exist in one market".

"Drivers are the biggest asset to a company," he said. So Hop drivers keep 100 percent of the fares they charge. At the same time, passengers pay less – about 40 percent less than a taxi ride, whereas Uber charges around 20 percent less than taxis, according to a Hop spokesperson.

Since Hop doesn't take a commission, drivers can earn more, even though passengers pay less, said Cheema.

So how does Hop make any money? Rather than drivers using their own cars, they rent from Hertz from as little as one hour up to 90 days, and Hop gets a commission from Hertz.

For example, a Nissan Dualis costs $6 an hour plus $0.20 per km or $66 a day for the first 200km, including insurance. (Hourly rentals will start in April.) If you want to drive something fancier, an Audi Q5 is $78 a day.

Renting allows drivers to use a near-new car without the capital cost of purchasing or the long-term commitment of a lease.

To mitigate the risk that drivers won't make enough in fares to cover the cost of renting the car, but Hop currently offers a "commission swap", Cheema explained. For example, it gave drivers the option of a $300 payment for being on the road between 6pm and 2am on the night of Thursday 19 January.

Hop has been piloted in Sydney, and the company has had promotional staff on the streets every day in certain locations to help people get their first rides. The plan is to extend this to particular venues and outlets, and to encourage operators - including bars, clubs and restaurants - to sell prepaid Hop vouchers.

The pilot will extend to Melbourne and Brisbane in the next two or three months before going into full operation in those three cities and spreading around the country.

The Hop app is currently only available for iOS, but an Android version is in beta test with release expected in February.

The Hop app in driver mode
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