Softbank and Ola to Change the Face of Indian Taxis

Softbank through its company Ola has an ambitious plan to run 1 million Electric Vehicles in India. As part of the pilot, the company had said that it would roll out 1000 EV taxis in some Indian cities and is already working with Mahindra and an electric two-wheeler maker. The company is also doing a pilot run in some places. EVs are an inevitable evolution of the normal cars and will happen in India as the government is also giving it a strong push. Ola and Softbank are being smart about it by being an early mover in this space. This will further give them an edge over their powerful USA rival Uber which has not announced any big EV initiative.

Mahindra’s EV Rewa

As part of its plan, Softbank and Ola announced that they would form a new company Ola Electric Mobility Pvt Limited which would lease electric vehicles such as cars and buses and two-wheelers to its partner drivers. Note Ola already runs a finance auto leasing company which helps the driver by giving credit for buying cars in India. Note the India taxi space has been facing a major churn with both Uber and Ola substantially reducing the wages given to their drivers leading to a big blowback. The substantial cut in wages has led to massive strikes and protests. But given the massive cash burn that these companies were facing on account of the discounts, this was inevitable. It was impossible for the Indian economy to be able to sustain driver monthly salaries of around $1500 when India’s per capita income is $1700 (for the whole year). This had led to a huge supply glut of taxis leading to the inevitable reduction in the wages.

It remains to be seen how successful Ola will be in running EVs in India without substantial incentives given by the government as EVs are still quite high priced as compared to normal cars. Also given the cutthroat competition in the India cab market where taxi companies are still losing money, it will be interesting to see how the higher costs of EVs will be funded by Ola and Softbank.