Shared Mobility | Can Meru help M&M build its service vertical strong enough?

There’s a basic difference between the way Meru operates compared to how app-based cab-hailing companies like Uber and Ola operate. Majority of Meru’s business comes from institutional clients, including companies software and business process outsourcing firms, media, airlines and financial services. So, while Meru primarily deals with companies, Ola and Uber deal with customers directly. They do have corporate services that require employees to book, pay and then claim reimbursements.

Another area where Meru has a strong hold is the tourist space that has for long been dominated by tour companies’ travel fleets.

Meru’s advantage is premium pricing in both the corporate and tourist space. True that some companies and tourists have opted for Uber and Ola for lower pricing. But that’s the lower segment. The premium segment in both the areas still rely on cab services like Meru and private cab operators. This segment is unlikely to make a shift just for pricing. There are other things that matter more – things like quality of drivers, cleanliness of the car, and overall quality of service get priority over price.

So, M&M could not have get a better buy to make an entry into the shared mobility space, which also adds a service vertical to its core manufacturing business. Besides, being a carmaker M&M will always have its advantage of lower operational cost in the shared cab segment.

In any case, M&M probably has understood it needs more than selling cars to maintain growth in a sustainable manner, especially when India’s automobiles industry is facing a crisis. Sales of passenger vehicles hit a two-decade low figure in August with a straight nine-month decline trend amid slowing consumer demand and liquidity crisis.

M&M’s interest in the services space isn’t new. It already has a stake in self-drive car rental firm ZoomCar India.

The Anand Mahindra-led carmaker had in February launched Glyd – an App for electric vehicle sharing and personalized transportation needs aimed to help commuters utilize their time more productively. It has also launched Smart Shift -- a technology enabled logistics solution provider. At the time of the Glyd launch, M&M managing director Pawan Goenka had said that the company planned to launch “multiple e-mobility solutions, across cities”. Last year, Goenka had also said that if the company decided to get into mobility services that would be “the third business”, Mint reported.

In March, it launched Mahindra Trringo which is marketplace where farmers can rent tractors and farm equipment.

Interestingly, M&M is not the only company to show interest in the shared mobility space. In March, Hyundai Motor and Kia Motor invested in Ola. As part of the deal, all three companies will be co-creating solutions, electric vehicles that are better suited for India’s cab-hailing market as the carmakers aimed to expand into the fleet solutions business.

Ola was not the only company Hyundai invested in. It is a global trend. Last year, south-east Asian cab-hailing company Grab raised funds from Toyota and Hyundai. Also, Ola has a collaboration with Toyota through its largest investor Softbank. Toyota also has invested around $500 million in Uber for its self-driving cars wing last year.

M&M’s deal with Meru gives the carmaker a push in the right direction that could reinforce its service vertical. In any case, M&M has bought into a profit-making company which it can take to the next level.

The interesting question that remains  is will Meru be able to build M&M services vertical strong enough to help the Indian carmaker take the lead in the shared mobility space. We will have to wait for answers to see if Mahindra follows this equity purchase by investing more money in the cab company.