Ola to launch self-drive service, to invest $500 million
Ola to deploy nearly 10,000 cars, including luxury sedans and SUVs, in major cities in the coming months.
The move to enter the self-drive rental category is in line with Ola’s broader strategy of expanding its bouquet of transport solutions beyond just cabs to include scooters and electric vehicles with a view towards ensuring sustainability and positive unit economics.
Homegrown ride-hailing platform Ola will invest over $500 million to launch a ‘self-drive’ service aimed at broadening its portfolio of transportation solutions, according to two people directly aware of the company’s plans.
The investment will come from a mix of debt and equity over the next couple of years, according to one of the persons. Ola will deploy nearly 10,000 vehicles, including luxury sedans and SUVs, in major cities in coming months, said the person.
Confirming the plans to test a self-drive offering, an Ola representative said, “Basis market feedback, we will pilot (the service) in various formats such as rentals, subscription and corporate leasing in select cities in the coming weeks.”
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People aware of the company’s plans told ET that Ola was likely to raise debt via Ola Fleet Technologies to seed the new business.
So far, the multi-modal transport company has relied on equity capital from some of the world’s largest investors, including Japan’s SoftBank and US investment firm Tiger Global, to fund its rapid growth in the country.
The Bengaluru-based company, which has raised $3.67 billion till date, was valued at roughly $6 billion during a funding round in February.
Earlier this month, Ola, which competes with American ride-hailing major Uber in India, said it had raised $300 million from Hyundai Motor and Kia Motors, as it looks to collaborate with the South Korean auto majors to build India-specific mobility solutions.
“The (self-drive car rental service) will be launched in the coming weeks with a focus on top 5-7 markets,” a company executive told News Agency.
The scale of the proposed service will make Ola the largest self-drive car rental company in India. At present, the sector is highly fragmented with small regional players and some larger players including Myles, Sequoia Capital-backed Zoomcar, and Y Combinator-backed Drivezy.
With the self-drive business, the intent is to build subscription products for consumers and leasing services for corporate executives through the Ola Corporate offering, said one of the persons quoted above.
The move to enter the self-drive rental category is in line with Ola’s broader strategy of expanding its bouquet of transport solutions beyond just cabs to include scooters and electric vehicles with a view towards ensuring sustainability and positive unit economics.
In the last few years, the company has launched a slew of businesses that generate higher margins such as outstation rentals.
Last year, Ola started making money on each cab ride — a major milestone — after taking into account expenses such as driver incentives and customer discounts.
Experts are of the view that more commuters will choose from shared, self-drive rentals or subscription-based mobility options, rather than bothering with car ownership.
However, self-drive car rental services should have flexible hiring options, ranging from hours to days, and be available 24×7 through mobile applications, they said.
“They need to be far more affordable than they are now and offer local support with an ecosystem of convenient pick-up and drop-off points,” said Vinay Piparsania, consulting director at Counterpoint Research.
In February, Ola confirmed a Rs 650-crore funding from Flipkart co-founder Sachin Bansal. Steadview Capital and a cohort of US-based investors like Raymond S Cahnman, chairman of Transmarket Group, philanthropists Tina and Steven Price, J3T Ventures and Lyon Assets along with a bunch of Chinese funds also participated in the company’s latest round.
Separately, the company’s electric mobility arm raised Rs 400 crore from Matrix Partners India and Tiger Global, among other investors.
