Indian rideshare Ola faces crowded field to go beyond Uber playbook

A few days ago, the Indian rideshare company, Ola, which has zero experience in manufacturing, complex supply chains, battery technology, consumer products, mobility, or anything in the general area of electric vehicles (EVs) delivered its first 100,000 electric scooters in what will undoubtedly become one of the largest EV markets in the world.

The scale of Ola's ambitions in the Indian EV space is so towering that it would involve attempting to sell 2 million electric scooters within a year to a country that currently has just 121,900 EVs. While most of those EVs are indeed scooters, the total number of EVs sold comprise just 1.66% of India's 20 million annual automobile sales, according to the Delhi-based think tank Council on Energy, Environment and Water.

But Ola founder and CEO Bhavish Aggarwal's ambitions don't stop there. Aggarwal has said he expects Ola's brand new factory in Tamil Nadu, spread across 500 acres, to up production to an unfathomable 10 million electric scooters by 2022 before starting development on electric cars too.

It may appear to be one of the greatest magic tricks in corporate history, but the real feat here lies in the magical power of money. For a while now, the entrepreneurial game that global capital has flocked towards has been somewhat predictable. Looking back at history, a long-standing passion for a product or a genuine innovation has seldom been the winning formula for attracting money from the SoftBanks and Tiger Capitals of the world.

Instead, it's been about leveraging massive cash stocks to finance huge funding rounds, which are then used in nascent markets to bully one's way into market dominance. Rivers of red ink running all over profit and loss statements have almost always been collateral damage for reaching IPO glory.

Flipkart's eventual acquisition by Walmart is one such successful example, where the company became a cash cow for its founders even though it bled money for more than a decade as it was eventually bought for $17 billion.

And Agarwal has followed this model to a tee by copying Uber's rideshare model. But while he was spending and losing money like everyone else, the pandemic undeniably took a lot of the wind out of Ola's sails. In 2020, Ola was forced to fire 1,400 employees, or over 33% of its employees.

But as Ola's rideshare business took a hit, reports have suggested Ola Electric is still hiring. 

Ola's electric dreams apparently began a few years before the pandemic. Ola had decided to try and electrify its entire fleet of 10,000 cars but that effort tanked. Ola previously noted that the lack of charging infrastructure had something to do with it but there were also widespread affordability issues. Ultimately, the drivers found the cars to be too expensive.

Yet, through the calculus of new age economics, Ola Electric still became a unicorn -- a billion-dollar enterprise -- just two years after this false start. Aggarwal seems to be a composed, determined CEO who, like Flipkart's Sachin Bansal, is determined to steer the ship until the big payday. 

Indeed, under Aggarwal's helm, the rideshare giant Ola's payday may well be next year when it plans to come out with a $1 billion IPO.

With Ola Electric, Aggarwal has been savvy enough to spot the climate change wave and jump onto the electric bandwagon a few years before anyone else, at least to this scale, but will he be able to cruise towards a stable business model?

To get there, however, Ola will have to negotiate a few twisty chicanes.

Infrastructure is a biggie. India has less than 2,000 charging points versus close to a million in China. It also has zero capability in recycling batteries. In terms of cost, the cheapest EV car is 1.2 million rupees compared to an average petrol model of 700,000 rupees.

Plus, India has proven to be a tough automotive market to manufacture from. Both Ford and GM have drawn their shutters and Harley Davidson recently announced that they would be closing down as well.

The local competition aren't exactly pushovers either. A legacy brand such as Bajaj, for instance, recently converted its iconic middle-class steed, the Chetak, into an electric vehicle as a sign of things to come.

According to industry reports, HeroElectric is the market share leader at 36%. HeroElectric is a purveyor of one of the cheapest electric scooters in the market, the Photon, which will be a tough rival considering its deep roots in the market.

There's also the Gurugram-based Okinawa, whose six lines of scooters have grabbed close to 20% of the market. 

Looking further down the market list, at double the price of the Photon, is Ather's eponymous electric scooter. Ather is currently set to produce 110,000 units of its scooter, along with 120,000 battery packs and plans for a 41-state rollout.

With all these players in the EV game, it's become a waiting game. When will the point of inflection come? With ecommerce it took close to two decades. Maybe this time around, it will take governmental policy changes to supercharge things. 

All considerations aside, the Indian consumer is notoriously price conscious and at some point the superior economics of the electric scooter will prevail, as will the sheer disgust at the soaring price of petrol. Saving close to $500 annually in petrol costs would allow users to afford an electric scooter's 7-year battery replacement in year 2 or 3 itself. An EV scooter would also only need a third of the maintenance costs of an internal combustion engine vehicle.

Granted, for Ola to design, engineer, and then finally make batteries, motors, motor controllers, and software without any experience in the field, while providing a superior product than competitors, this is something that will take all kinds of doing.

Ola will have to develop serious R&D and manufacturing chops, perhaps by acquiring a leader in this field like it did with the acquisition of Dutch electric scooter firm Etergo, before hunkering down for what will be a winter of spending boatloads of investor money until it can see a capital market reward for its grind.

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