It’s raining big bucks on India’s mobility startups.
Having raised a fresh round of $300 million from South Korean automakers Hyundai Motor Co and Kia Motors, Ola announced it would invest over $500 million (~Rs 3,750 crores) to launch a “self-drive” service in major Indian cities.
This latest investment, which will see Ola deploy some 10,000 vehicles including SUVs and luxury sedans for users to drive themselves, is aimed at broadening its portfolio of transportation solutions. The self-drive car rental service will be launched for testing in the coming weeks, with a focus on top 5-7 urban markets, a company executive reportedly told media.
The homegrown ride-hailing platform, which was recently banned (later reversed) in Bengaluru, has also been in the news for launching a fleet of Bajaj Piaggio “tuk-tuks” in the UK.
What happens now
According to an Economic Times report, this investment will come in the form of debt (via Ola Fleet Technologies) and equity over the next couple of years. The first test for the self-driving service is scheduled to take place in the top 5-7 Indian markets in coming days.
“We will pilot (the service) in various formats such as rentals, subscription, and corporate leasing in select cities in the coming weeks,” an Ola representative was quoted as saying in the report.
With the self-drive business, Ola plans to build a subscription service for consumers and leasing services for corporate executives through the Ola Corporate offering. Incidentally, one of the largest players in the sector, Zoomcar, is also focusing on subscription and electric mobility this year.
Market check
The Bengaluru-based company, valued at roughly $6 billion just before a funding round in February, is ready to take on more rivals besides Uber Technologies Inc. India’s car rental sector is already rife with services and regional players like Sequoia-backed Zoomcar, Y Combinator-backed Drivezy, Avis, and Myles. There are other bike-oriented services like Rapido, Vogo, Bounce, and Quik Ride as well.
Ola itself offers outstation rentals and bike share services (Ola Bike) but with Hyundai’s investment to boot, it can properly pump its war chest to consolidate a competitive edge in the largely undermined and fragmented sector. The scale of the proposed service will make Ola the largest self-drive car rental company in India, claims ET Tech.
What’s in it for Hyundai?
Hyundai’s statement announcing the investment said it would go into developing fleet and mobility solutions, as well as build India-specific electric vehicles and infrastructure.
For the South Korean company, it marks a decisive foray into India’s thriving cab-aggregator business, following in the footsteps of Toyota and General Motors which have invested respectively in Uber and Lyft, while Ford and Mahindra back Zoomcar.
Hyundai also invested in Indian self-drive car rental startup Revv last year, but the deal with Ola is the biggest combined investment by Hyundai and Kia.
How does this help drivers?
Bhavish Aggarwal, co-founder and CEO of Ola, said Hyundai’s investment will help the ride-hailing company bring to market “a new generation of mobility solutions” as it expands its range of offerings.
As part of the deal, Ola and Hyundai will co-create solutions to operate and manage fleet vehicles that offer Ola drivers a range of financial services, including lease and installment payments, besides vehicle maintenance and repair services.
With the self-drive service, it will further help relieve drivers from the yoke of working ungodly hours.
What’s next for Ola?
Ola has raised $3.67 billion, including nearly $15.6 million from foreign investors including the TransMarket Group, New York-based philanthropists Tina and Steven Price, J3T Ventures, and investment firm Lyon Assets. In February, Ola pocketed Rs 650 crore ($92 million) from Flipkart co-founder Sachin Bansal, and Rs 520.79 crore ($73.97 million) from existing investor Steadview Capital in January. All this is in line with Ola’s broader strategies to expand away from ride-hailing and towards higher-margin businesses. A food pickup and delivery system to take on Uber Eats is also in the pipeline, going beyond its investment in food-delivery business, Foodpanda.
Earlier this month, Ola’s electric mobility arm raised Rs 400 crore from some of the ride-hailing unicorn’s existing investors, including New York-based hedge fund Tiger Global Management and venture capital firm Matrix Partners India.
Ola’s electric vehicles arm known as Ola Electric Mobility recently raised Rs 400 crore from its earliest backers, Tiger Global and Matrix India, marking the first external investment into Ola’s fledgling EV business. While electric vehicles are plying in various capital cities and metropolitans around the world, it has largely failed to take off in India so far.
The new infusion is predicted to aid Ola in its objective of bringing one million electric vehicles on Indian roads by 2022. Ola is likely to include EVs along with scooters and bikes in the upcoming self-drive subscription service, with a view towards ensuring sustainability and positive unit economics.
Ola also recently entered the UK market, with an autorickshaw service in Liverpool. A fleet of bright green Bajaj and Piaggio autorickshaws was rolled out on March 22 in Liverpool, and the company reportedly offered customers free rickshaw rides, on the launch day, around the Liverpool city
Why should this matter to you?
Self-drive car rental services are extremely convenient for business trips and well as for vacations. The lack of flexible hiring options and 24×7 availability through mobile applications has restricted this market from cashing in on the general frustration with India’s broken public transport infrastructure. Moreover, studies show that millennials are giving car ownerships a miss due to hassles ranging from maintenance to availability of parking.
For Ola’s self-drive service to truly succeed, however, it has to be far more affordable than its competitors are right
Popularisation of this mode of conveyance would likely eliminate a lot of pressure on Ola drivers to meet their targets and earn meagre commissions. However, it is to be noted that it was only last year that Ola started making money on each cab ride—a major milestone—after taking into account expenses such as driver incentives and customer discounts.
Uber and Ola already run an estimated 4-5 million rides each day. With investors betting on declining car ownership and growth in these sectors, a huge chunk of the future is self-driven cars and scooters, although it has failed to scale up its Ola Bike operations, due to different state government regulations and alleged licence violations. It even resulted in a 6-month ban on Ola Cabs from the Karnataka government, which was later reversed upon the payment of a fine to the tune of Rs 15 lakhs.
“We have been closely working with the authorities on this topic, responding to queries and making proactive representations to the ministry. Despite other companies continuing to operate illegally, Ola halted [our] bike taxi experiment weeks ago, instead [of] seeking the state’s cooperation to develop a legal framework for a pilot that will continue to take advantage of emerging opportunities in the mobility economy,” said Ola Cabs responding to queries in an earlier statement.
Prarthana Mitra is a Staff Writer at Qrius
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