Driving efficiency in the optimisation of underutilised assets for close to a decade now, it is only obvious for the ride-hailing giant Ola to expand to other markets in the mobility space such as self-drive that largely remains a white space.
Optimisation of existing resources has been among the key drivers for the internet and advanced technology-led new economy to drive efficient consumption of such resources. And transportation or mobility has been one of its prime examples that was triggered by Uber’s arch-rival Ola in India for reimagining use of under-utilised cars. Driving that efficiency for close to a decade now, it is only obvious for the ride-hailing giant Ola to expand to other markets in the mobility space such as self-drive that largely remains a white space, to particularly leverage its existing fleet of vehicles operated through its leasing arm Ola Fleet Technologies.
“We are currently running pilots of our self-drive service and plan to offer various formats like rentals, subscription and corporate leasing across cities in the coming weeks. This market is currently underserved and we are excited to build a superior experience for customers with this offering,” an Ola spokesperson told Financial Express Online. Pilots are currently running in Bengaluru and few other cities.
Apart from rentals where the user has to pay a certain amount on a pay-as-you-go basis, subscription service would allow users to use the car for said number of months for a subscription amount while under corporate leasing, companies would pay Ola for cars they have leased for their employees.
“Ola is one of the world’s largest car leasing company that has over 100,000 cars on its books even as vehicle leasing is a very complex business because while it is on your books you also have to manage the supply chain, maintenance etc. Since Ola has already been doing this from last three-four years, it puts them in a unique position, unlike existing players who don’t have fleet management experience,” according to two sources familiar with Ola’s expansion into self-drive segment told Financial Express Online.
While self-drive service would already be available on existing hatchbacks and sedans on Ola’s platform, the company is in discussions with premium sedan makers such as Audi, BMW, and Mercedes (which otherwise is available under its Ola Lux service) to extend the service on these cars, something that’s common in markets like the US where the automakers offer subscription services.
“Ola’s (self-drive subscription) service becomes an avenue for these car makers to have a subscription service that otherwise will not be possible for them as entry barriers to it is high in India as customers would rather buy these premium cars instead of paying a heavy subscription fee,” an industry expert requesting anonymity told Financial Express Online.
Since personal mobility market in India is still at its early stage, the opportunity hence is extremely large for multiple players to grow and innovate. Much like in any other market, there is space for around two large players along with multiple small players in other verticals. Expert suggests that smaller players focusing on rentals, subscription, corporate leasing might face challenges in growing ahead.
“Like in any market globally, there are one or two large players doing multiple things while smaller players are market specifics, vertical specifics or vertical agnostic such as focusing only on rentals or only on subscription etc and they won’t be competing directly,” the expert said.
Comments from Zoomcar, Revv and Drivezy who are also into self-drive car service will be updated as and when received.
Ola will be launching the self-drive service by around mid next month and is looking to invest $500 million via a mix of debt and equity, one of the two sources told Financial Express Online.
Entering into the market where “Ola will by default be the largest player by the sheer number of cars it has on its books — 100,000,” according to the source, also means that acquiring smaller players might be one of its strategies for scale.
“Partnering or having a stake or acquiring them can be one of Ola’s strategy even as it has to focus on ensuring availability of vehicle and quality of service 24×7 across cities. If a player is focusing only on let’s say performance cars as a niche category then it might not be very attractive for Ola to consider,” said Piparsania.
Path to Profitability
Expanding into other markets such as self-drive by Ola is also significant as it looks at all venues that can contribute towards its goal of profitability. For instance, its work towards electric mobility for which it had also reportedly raised Rs 400 crore from Tiger Global, Matrix Partners and others even as the government envisions electric mobility in coming years.
“Ola needs to be profitable. They need to look at all categories under the transport business including shared mobility, on-demand cab booking etc., for that. However, there the problem is lack of privacy and safety issue unlike in self-drive service. Also, self-drive removes all complications of leasing a car where there are so many terms and conditions. So diversifying into self-service is close to Ola’s skills,” Vinay Piparsania, Consulting Director at Counterpoint Research told Financial Express Online.
Ola reportedly reduced its consolidated losses for FY18 to Rs 2,842 crore from Rs 4,897 crore in the preceding fiscal year while its consolidated revenue increased to Rs 2,222 crore from Rs 1,380 crore in FY17.