Cab-hailing company Ola’s Mission: Electric has just got a charge-up. The taxi aggregator has raised nearly $250 million, that’s over Rs 1,725 crore, for its electric vehicle arm Ola Electric Mobility from Japan’s Softbank, its single-largest investor.
Softbank’s investment in Ola’s electric mobility arm was expected. Masayoshi Son, founder of Ola’s largest financial backer, in December 2016 had revealed his intention as much. He has plans to give away one million electric cars to Ola drivers all for free as part of his dream to transform the company into a clean mobility one, in collaboration with Japanese carmaker Toyota.
This will be the second external funding for Ola’s electric vehicle unit. In March, Ola said it raised close to Rs 400 crore in its first ever external financing for Ola Electric Mobility that leads the cab aggregator’s Mission: Electric – a venture for developing solutions to make electric mobility viable at a commercial scale. For this, Ola has partnered with a clutch of vehicle makers, battery manufacturers and its own network of drivers. In the first round, Ratan Tata, Tiger Global and Matrix Partners invested in the venture.
Interestingly, Ola has been experimenting with electric cars for the past couple of years. It started the electric vehicles pilot in 2017 in Nagpur. The project included electric cabs, auto rickshaws and buses, setting up solar installations and charging stations, among others. The project kicked off with an initial investment of $8 million with a target to deploy around 10,000 electric vehicles in a year from April 2018.
But this reportedly did not progress as planned, and Ola had to scale back. The first round of Rs 400 crore was just too little to take it anywhere. But now, with an additional Rs 1,725 crore, with expectations of more to flow in, Ola could actually give its Mission: Electric some definitive shape.
The money was needed indeed. Especially because the government has got serious with clean mobility, with an agenda to turn India into a 100 percent electric vehicle nation by 2030, from a state when the country only bought 3,500 units of electric cars in the year to March 2019. To give that context, some 3.3 million diesel and gasoline cars were sold in India during that period. In comparison, around 1.3 million electric cars were sold in China in 2018.
Soon after the Narendra Modi-led NDA retained power, it has indicated plans to mandate cab aggregators such as Ola and Uber to “convert 40 percent of their fleet” of vehicles into electric by April 2026. This, undoubtedly, is the first big practical step the government is going to take, besides other policy measures.
In any case, the Modi government during the first term had said there was no need for a comprehensive EV policy and decided to go in for an action plan amid lack of infrastructure for electric vehicles. According to a May 2018 report by EY, there are only 222 charging stations with 353 charging points in India.
The government’s support on this count leaves a lot to be desired. The poll-bound Modi government on March 5 had laid bare details of the second phase of FAME (Faster Adoption and Manufacturing of Hybrid and Electric vehicles), entailing an investment of Rs 10,000 crore over three years from April 1, 2019, which would be spent on infrastructure development and encouraging faster adoption of such vehicles.
Under FAME-I, only Rs 895 crore were allocated in April 2015. In the second phase, the government will invest in setting up 2,700 charging stations across metro cities and top towns, offer incentives to 10 lakh two-wheelers, five lakh three-wheelers, 55,000 four-wheelers and 7,000 buses.
That clearly is not enough. According to a report by The Economic Times, the cost of setting up a slow-charging station is about Rs 1 lakh that takes 6-8 hours to charge a car fully. To set up a fast-charging one costs about Rs 25 lakh, which would fully charge a vehicle in 45 minutes flat. Besides, there is cost of land to take into account.
The truth is, the government wants companies – carmakers, battery companies and cab aggregators, among others – to pump in money for infrastructure development, much like the developed nations.
So, Ola’s long-term plan to transform itself into a clean mobility company coupled with the government push come with the fact that it’ll have to make huge investments in infrastructure development. The Softbank funding is in line with that. Ola will be investing not only in setting up charging stations, but also battery swapping points, apart from buying electric and hybrid vehicles in large numbers.
It will cost the company a bomb, but this is the way to go if Ola wants to revolutionise India’s shared mobility market, for one more time.
The truth is, Softbank’s investment is not enough for Ola’s ultimate goal on electric vehicles. But it is undoubtedly a good start, especially because it has a bunch of deep-pocketed investors who swear by Ola’s Mission: Electric.