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Why Ola's electric leap of faith could be a boon for auto sector

Rukmini Rao     May 6, 2019

Ride-hailing major Ola on Monday announced that its electric subsidiary - Ola Electric Mobility Pvt Ltd (Ola Electric) - has received an undisclosed sum of funding from none other than Ratan Tata in his personal capacity. Ratan Tata is also an early investor in the parent company - ANI Technologies Pvt Ltd. The company said that his investment in Ola Electric would bring his deep experience and mentorship to the company's ambitions to make electric mobility viable at scale.

Endorsing the company's electric bet, Ratan Tata said, "The electric vehicle ecosystem is evolving dramatically every day and I believe Ola Electric will play a key role in its growth and development. I have always admired the vision of Bhavish Aggarwal and I'm confident that this will be part of yet another important strategic move into this new business area." Bhavish Aggarwal is co-founder of Ola Cabs.

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Two years ago, Ola had launched a pilot multimodal electric vehicle project in Nagpur for the use of electric vehicles in public and shared mobility. Currently, with over 200 electric vehicles running in the city, the company is also running several pilot projects involving charging solutions, battery swapping stations and deploying vehicles across two, three and four-wheeler segments. Ola Electric has raised close to Rs 400 crore from investors such as Tiger global and Matrix partners, among others. It has ambitious plans of introducing one million electric vehicles across all categories by 2021.

According to reports earlier this March, auto majors Hyundai and Kia have bought into the company's equity by investing $300 million. Both the companies are working closely with Ola to build customised electric vehicles (EVs) for the platform along with working on other aspects of the EV ecosystem. For a sector that has hit nearly an eight-year low on sales, this investment comes as an endorsement of what could be the sunrise segment for the auto industry. According to a news report by AutoCar India, in FY19, total EV sales in India across all categories stood at 7,59,600 units,  with two-wheelers at 1,26,000, electric three-wheelers at 6,30,000 and electric passenger vehicles at 3,600.

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KPMG Enterprise's Venture Pulse report, which acknowledges auto sector to be 'hot' for investments, expects the trend to continue in near future. Nitish Poddar, Partner and National Leader - Private Equity, KPMG India sees this as a long- term bet for auto companies.  "From a ride-sharing segment perspective, people have realised ride-sharing will be a big business in the future. It's still big now. But it will be far bigger than it is today." With auto companies picking equities in Ola, he thinks, the equity investments will help in sourcing of cars be it electric, hybrid or conventional in coming days, boosting sales. "It's a long-term agenda. Will something change fundamentally over the next couple of years? My view is no. I think everyone is planning for the next two decades instead of next two years," he adds.

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