After a year of amazing highs and terrible lows, will 2015 bring taxi apps a license to ride in India?

On-demand car apps started the year in high gear, driving into one Indian city after another at breakneck speed. Drivers and customers loved them, and most city transport regulators who had only heard vaguely about Uber paid it no attention. Venture capitalists poured money into a business model that seemed like a win-win for everybody involved. Then it took a blind curve and stands teetering on the edge of a cliff as the year comes to a close.

Four Indian cities banned taxi apps following the rape of a young woman in Delhi by an Uber driver with a criminal record. Now the whole on-demand taxi and car service is in limbo. India’s transport authorities are insisting that Uber and others register with them. But the fact is that neither the Motor Vehicles Act nor the transport department’s commercial licensing system has rules or regulations on using taxi apps. This is a new business model connecting customers with vehicles they want to hire. Until the rape in Delhi, the transport regulators had ignored it. Now they’re scratching their heads to figure out if even their bans will stand up in court.

For regulators and users of on-demand car apps, the billion-dollar question is whether the new year will bring a new license for the use of these services. Ideally, a multi-disciplinary committee of experts should thrash out this complex issue, which combines questions of legality, transportation problems, disruptive online services, and public safety.

See: How the Uber rape could’ve been prevented, but wasn’t

The funding bonanza

How different the scene looked at the start of 2014.

Local taxi aggregators like Ola and TaxiForSure had already been around for a couple of years, providing a cool alternative to traditional taxis. There was also radio-linked fleets like Meru. But it was the entry of Uber into India, right after its quarter billion dollar funding by Google Ventures and others in August last year that brought mobile apps to the fore and scaled the services up rapidly.

Tiger Global-backed Ola ramped up the most, bringing in Matrix Partners first in a US$20 million funding round in November 2013, and then Sequoia Capital and Steadview Capital for US$41.5 million in July. Its mobile app, which had been on the backburner until Uber arrived, got a push.

Ola launched a luxury service right after the entry of Uber, which began with liveried, high-end limos in India’s tech hub of Bangalore. But Uber had other ideas, especially after its big US$1.2 billion funding in June. The launch of the more affordable UberX with compact sedans signalled its intention to go after the mass market in India.

Within a year of Uber coming to India, it became the American company’s second largest market. Last month, an India-only service called UberGo was launched with small cars. Another US$1.2 billion funding round followed, and Uber looked poised to add more names to the list of 11 Indian cities on its roster. That’s when the rape in Delhi exposed its regulatory blindspot.

Ola, meanwhile, had joined the high stakes game, with a US$210 million infusion from Japan’s Softbank, making it the third highest funded taxi app in the world after Uber and Lyft, until Southeast Asia’s GrabTaxi and China’s Didi Dache overtook it. Still, more than a quarter of a billion dollars in total funding made it one of India’s hottest startups and the leading taxi app in the country.