Ola Plans $500 Mn Boost For Ola Drive Self-Driving Service To Enter Next Phase Of Growth

Ola Plans $500 Mn Boost For Ola Drive Self-Driving Service To Enter Next Phase Of Growth

Ola Plans $500 Mn Boost For Ola Drive Self-Driving Service To Enter Next Phase Of Growth

Ola’s self-driving service Ola Drive will available on Ola app, starting with Bengaluru

The company has major plans to take on rival startups such as Zoomcar and Drivezy and is looking to undercut the competition on pricing

India’s self-drive car rental is estimated to be valued at over $100 Mn with major investment coming in from auto giants in this sector

Riding on the unicorn status or its core ride-hailing business and Ola Electric, SoftBank-backed Ola has now forayed into the self-drive car rental market with the launch of ‘Ola Drive’. 

The company that transformed daily commuting for Indians is now setting sights on the consumer auto market, which is reeling from slowing sales and the drop in consumption thanks to the credit crunch in auto loan providers as well as among citizens. Thanks to this drop, the market size for self-drive rentals and car subscriptions has increased tremendously. 

A Mobility Insights 2019 report estimates self-driving market to be a $100 Mn opportunity in India, which is currently highly under-penetrated. Plus, there’s a huge gap between driving license holders and car owners in India as one of the major driving factors for the self-driving market growth. India is said to have 127 Mn driving license holders as compared to the ‘cars to people’ ratio of 22:1000 in 2019. Also, the consumer preference for renting bigger, safer and powerful cars for intercity trips has added to the market size.  

That’s exactly why Ola is stepping into the field. “The paradigm shift from ownership to usership has created a tremendous business opportunity in the car-sharing space,” an Ola spokesperson told Inc42.

To tap into this huge market opportunity, Ola has planned to invest around $200 Mn initially with the aim of increasing it to $500 Mn over the next couple of years. Currently hosting a 500 cars-strong fleet in Bengaluru, the company aims to expand its fleet to 20K cars by the end of 2020. 

Ola Drive Competes On Price

The rental period proposed for Ola Drive is between two hours to three months, along with Ola’s claim to offer its services at 30% lower rates than the existing players. Ola Drive will initially be launched in Bengaluru, accessible through pick-up stations located across the city. The Bengaluru launch will closely followed by other metros such as Hyderabad, Mumbai, and New Delhi. In addition to the rental costs, Ola Drive will also charge a security deposit starting at INR 2K.

Ola will also be standardising the services in all Ola Drive cars to include GPS, Ola’s connected car platform ‘Ola Play’, media playback, and bluetooth connectivity along with access to the platform’s support and safety features such as a 24×7 helpline, emergency button (which prompts an immediate call from Ola’s dedicated safety response team), roadside assistance, and real-time car tracking. 

Ola was founded in 2011 by Bhavish Aggarwal and Ankit Bhati as a cab-hailing service and since then expanded its services to include electric vehicles, micro-credit, food delivery and micro-insurance and now, self-driving car rentals. Till now, Ola has raised around $3.28 Bn in funding from prolific investors such as Ratan Tata, Sachin Bansal, Steadview Capital and more. 

“With over 200 Mn subscribers, Ola Drive has the largest user base for a car-sharing service in the country,” the company said in an official statement. 

How ‘Ola Drive’ Compares To India’s Self-Driving Players?

The two major players in the India’s self-driving market are Sequoia-backed Zoomcar and Y Combinator’s portfolio Drivezy. 

Founded in 2013 David Back and Greg Moran, Bengaluru-based Zoomcar collaborates with automobile manufacturers such as Volkswagen and Mahindra, to onboard rental cars on its platforms. Till now, Zoomcar has raised a total of $111 Mn in funding from investors such as Sequoia Capital, Ford Motors and more.

Earlier this month, Zoomcar was reported to have over 10K cars, with plans to own a fleet of 20K cars by the end of 2019. Since its launch, Zoomcar has expanded to 42 Indian cities including Delhi, Mumbai, Kochi, Bengaluru, Pune, and others. In July 2019, the company claimed to have a customer base of 15 Mn users. 

The rental period on Zoomcar is between one hour to six months, with one day rental for a hatchback car on Zoomcar costing around INR 1500 to INR 1600 without fuel on weekdays (weekend charges can be higher by 15-20%). Further, the customers also have to deposit a security amount of INR 5K. Zoomcar services are accessible from both pick-up points and home-delivery model, where the company levies a service charge of INR 300. 

Furthering the company’s vision to enable urban mobility solutions, Zoomcar had added over 500 Mahindra and Mahindra’s electric car model E20 plus to its fleet in 2018. The company also used to operate a dockless electric bike sharing service PEDL, which was later shut down in December 2018.

Y Combinator-backed Drivezy was founded by Ashwarya Pratap Singh, Hemant Kumar Sah, Vasant Verma, Abhishek Mahajan, and Amit Sahu in 2015. The Bengaluru-based company has till now raised $39.45 Mn in total funding from a clutch of investors including Y Combinator, Das Capital, White Unicorn Ventures and more.

Drivezy is a peer-to-peer bike and car sharing service, which means the company does not depend on automobile companies to source its fleet. All of 4K cars and 14K bikes listed on the platform are said to be customer listings. Further, the company also offers a subscription and business leasing service to its 1.5 Mn registered customers. 

One day rentals for a hatchback car on Drivezy is priced between INR 1400 and INR 2K without fuel for weekdays (weekend charges can be higher by 15-20%). Interestingly, Drivezy does not have  a security deposit in any city except Goa (where it charges INR 5K as the security deposit). It also offers home-delivery of rental vehicles at a service charge of about INR 250. 

Ola Drive vs Zoomcar vs Drivezy

In terms of business models, Ola Drive bears more similarity to Zoomcar than Drivezy. While features like roadside assistance and real-time car tracking are also being offered by Zoomcar, the major differentiator between existing players and Ola Drive is the low rental prices offered by Ola.

Commenting on the significant price difference enabled by the company, an Ola spokesperson said, “The price mechanism is dependent on the users’ needs and requirements. When booking the service on the Ola app, they have the option to select the number of hours, as low as two hours, and also any number of kilometres.” 

“By giving them the flexibility to tailor-make their package, we can guarantee that customers pay for what they use and have the best value per ride in the segment,” they added. 

Ola was earlier reported to be running a pilot of its self-driving service in Bengaluru at rentals ranging between INR 300 – INR 400. 

Further, talking about Ola’s plans to offer rentals of electric cars and two-wheelers, the spokesperson said that the company is currently focussed on building scale in the market and creating a seamless rental and driving experience for users. However, they did agree to the existing potential in electric vehicles and the two-wheeler self-ride segment.

“Our electric mobility arm, Ola Electric, is continuously working towards deploying electric vehicles and charging solutions to enable sustainable mobility for everyone and our participation in the two-wheeler market is currently limited to our existing investment in Vogo. We will continue to track both spaces and work towards creating a credible alternative in the space” they added. 

Given Ola’s brand recall and economies of scale advantage, the company does have the capability to acquaint new users to the self-drive rental space and hence, boost the market potential. It also has the most number of users when compared to the competition and the acquisition costs can be split between its many services. 

To its credit, Ola does have the right business partners in Hyundai and Kia to help it get that all-important fleet growth. Here, Drivezy’s peer-to-peer sharing model might fall short against Zoomcar and Ola’s marketplace model. For Ola, the self-driving model represents a big bet as it is trying to cross over from its core business and the risk of getting distracted by the competition in the new arena is ever present. 

You have reached your limit of free stories

want to read the full story?

Unlock This Story & Enjoy All Members-Only Benefits With Inc42 Plus.

Unlock 60% OFF
Cancel Anytime
Unlock 50% OFF
Cancel Anytime
Already A Member?

Discover Startups & Business Models

Unleash your potential by exploring unlimited articles, trackers, and playbooks. Identify the hottest startup deals, supercharge your innovation projects, and stay updated with expert curation.

Ola Plans $500 Mn Boost For Ola Drive Self-Driving Service To Enter Next Phase Of Growth-Inc42 Media

How-To’s on Starting & Scaling Up

Empower yourself with comprehensive playbooks, expert analysis, and invaluable insights. Learn to validate ideas, acquire customers, secure funding, and navigate the journey to startup success.

Ola Plans $500 Mn Boost For Ola Drive Self-Driving Service To Enter Next Phase Of Growth-Inc42 Media

Identify Trends & New Markets

Access 75+ in-depth reports on frontier industries. Gain exclusive market intelligence, understand market landscapes, and decode emerging trends to make informed decisions.

Ola Plans $500 Mn Boost For Ola Drive Self-Driving Service To Enter Next Phase Of Growth-Inc42 Media

Track & Decode the Investment Landscape

Stay ahead with startup and funding trackers. Analyse investment strategies, profile successful investors, and keep track of upcoming funds, accelerators, and more.

Ola Plans $500 Mn Boost For Ola Drive Self-Driving Service To Enter Next Phase Of Growth-Inc42 Media
Ola Plans $500 Mn Boost For Ola Drive Self-Driving Service To Enter Next Phase Of Growth-Inc42 Media

You’re in Good company