Ola to invest Rs 5,000 cr in leasing arm

Firm expects leasing arm to aid in adding 500 cars a day, in addition to 1,500 a day it empanels in its network

Ola, India’s largest app-based cab aggregator, will invest Rs 5,000 crore in a captive leasing subsidiary to finance about 100,000 cars by next year.

The company expects its existing network of 250,000 vehicles will allow it to bargain with carmakers. It hopes the leasing arm will help add 500 vehicles a day, in addition to the 1,500 a day it empanels on its network.

The company, which raised Rs 1,478 crore from existing investors in September, will initially invest Rs 500 crore in the subsidiary.

WHAT LIES AHEAD

• Ola expects its existing network of 250k vehicles will allow it to bargain with carmakers
• It hopes the leasing arm will help add 500 vehicles a day
• It piloted the leasing concept with Maruti Suzuki, covering about 1k car owners across three cities

“Our growth is being limited by the availability of drivers (who can own cars),” said Rahul Maholi, vice-president (strategic initiatives) at Ola and the one driving the leasing initiative. “We will look at affordability for drivers by reducing the cost 20 per cent.”

Earlier, Maroli headed commercial operations at LeasePlan, the world’s leading vehicle leasing and fleet management company.

Ola piloted the leasing concept with Maruti Suzuki, covering about 1,000 car owners across three cities.

The high bargaining power of cab aggregators such as Ola and Uber could potentially be a threat to automakers and hit their sales, Mahindra Group Chairman Anand Mahindra had said last week. “The age of access being offered by taxi-hailing apps such as Uber and Ola is the biggest potential threat to the auto sector. Since these app operators have made transportation a commodity, (auto) sales could be hit and volumes impacted,” PTI quoted Mahindra as saying in Pune.

Ola’s strategy to lease cars to drivers will help it lock them for three years, helping it consolidate its business in a highly competitive market. While Ola dominates the organised cab hailing market, with a share of 80 per cent, most cab owners cater to multiple service providers, considering incentives by firms such as Uber to add more cars to their networks.

“We believe this first-of-its-kind leasing programme brings a unique benefit to driver partners to turn entrepreneurs. Through key partnerships with financial institutions and car manufacturers, Ola’s subsidiary will be able to bring in additional high-quality supply to address the unmet mobility demands of millions of users in the country,” said Bhavish Aggarwal, Ola’s co-founder and chief executive.