South Korea-headquartered automakers Hyundai Motors and Kia Motors announced today that they will be investing $300 million in the electric vehicle mobility initiative of Ola, India's cab-hailing giant. Ola has a nearly $6 billion valuation and has raised $3.8 billion to-date. The company has been ramping up efforts to tackle Uber – a daunting task, particularly because Uber is at the threshold of its initial public offering and therefore will have greater liquidity to flex its muscle in India.
Hyundai, Kia and Ola will collaborate to develop fleet and mobility solutions, electric vehicles and infrastructure specific to the Indian market, they said in a joint statement. This is Hyundai's and Kia's biggest combined investment, and also is Hyundai's first venture into fleet vehicles.
"We're very excited about our partnership with Hyundai and Kia, as Ola progresses to build innovative and cutting-edge mobility solutions for a billion people. Together, we will bring to market a new generation of mobility solutions as we constantly expand our range of offerings for our consumers," said Bhavish Aggarwal, the co-founder and CEO of Ola. "This partnership will also significantly benefit driver partners on our platform, as we collaborate with Hyundai and Kia to build vehicles and solutions that enable sustainable earnings for millions of them, in the time to come."
Though India has a population of over one billion people, the country has a very low level of vehicle ownership. India has less than 50 vehicles per 1,000 people; in the United States there are over 800 vehicles per 1,000 people. That said, India is also the world's fastest-growing economy, pulling 44 people out of poverty every minute, which will eventually put pressure on its poor national and metropolitan area road infrastructure.
With global concern around carbon emissions and the impact that private vehicle ownership has on the atmosphere, India cannot afford to seek a future where every Indian owns a gasoline-powered vehicle. To curb emissions and because of the poor road infrastructure, it would be prudent for India to push the alternative of mobility as a service (MaaS) and if possible, to make sure the vehicles are electric.
One of the other factors that detrimentally affects the Indian automotive landscape is the original equipment manufacturers (OEMs). Most OEMs in India are primarily concerned with ramping up their sales figures and work on a vehicle-as-a-product ideology rather than vehicle-as-a-service, which is more typical across the West.
Thus, the $300 million investment of major OEM companies in Ola's electric mobility program is seminal and will help foster growth in the segment. Investing in this initiative will help increase sales of electric vehicles (EVs) for shared mobility, and because private EV sales in India have remained negligible till date, this move makes sense for automakers. Also, there is virtually no electric charging infrastructure in India, and thus getting private users interested in buying an EV in the near future may be difficult.
"India is the centerpiece of Hyundai Motor Group's strategy to gain leadership in the global mobility market and our partnership with Ola will certainly accelerate our efforts to transform into a Smart Mobility Solution Provider. Hyundai will proactively respond to market changes and persistently innovate to deliver greater value to our customers," said Euisun Chung, executive vice chairman of Hyundai Motor Group.
Meanwhile, Ola has set a target of creating over two million jobs in the mobility space by 2022. Then again, its ambitious EV program has encountered numerous hurdles over the years, particularly in the area of vehicle charging. Drivers of Ola's electric taxis are reportedly frustrated with the long queues at the EV charging stations, with some of them switching back to diesel due to the hassle.
The capital infusion in Ola may ease this problem. For one, the Mahindra electric cars that Ola used in its pilot run only had a range of about 60 miles, which can be increased at least two-fold by opting for cars with bigger batteries in them. The problem of charging also may be alleviated by introducing vehicles that charge faster and also by building out a more extensive charging infrastructure across cities where Ola EVs provide service.
The scope of the Ola-Hyundai partnership is to jointly develop solutions to operate and manage EV fleets, with end-to-end operations planned out – including manufacturing and vehicle sales, and operating in the on-demand mobility sector. Hyundai will also be providing financial services to Ola drivers, through attractive lease and installment payments for buying an EV. Apart from building an EV that would be tailor-made to suit the Indian roads, Hyundai has also promised to work on improving its vehicle after-sales service based on the data it collects from mobility operations.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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