$300 million funds raise: Ola electric

A year and a half after it got SoftBank to invest $250 million, or about  ₹ 1,725 crore, at a billion-dollar valuation, Ola Electric is planning to raise $300 million from existing and new investors, multiple people aware of the development said.

This part of a larger strategy by the electric vehicle arm of leading homegrown ride-hailing company Ola Cabs to become a full-range electric vehicle maker by adding motorcycles, three-wheelers and other modes of last-mile transport to its product portfolio, they said.

Having set up the world’s largest scooter factory of 2 million units in Hosur at a  ₹ 2400 crore investment, Tamil Nadu, Ola Electric will be rolling out range of electric scooters within a couple months to challenge mainstream petrol-powered scooters and disrupt the nascent yet adrenaline-packed personal electric two-wheeler segment in India. “Funds will be used for brand building, distribution,” an official said on condition of anonymity. “But unlike peers like Ather that relies on open source, Ola believes its secret sauce will be its own battery management systems, software. It’s looking at making India a global manufacturing hub.”  The business is capital intensive, the person said.

In 2019, Ola had spun off its EV business into a separate entity. It also had acquired a Dutch start-up Etergo BV. The company is 45 per cent owned by Bhavish Aggarwal, co-founder of Ola; 10 per cent by Ola’s holding company ANI Technologies another 10 per cent employees stock option pool while another 35 per cent is held by existing investors — Ratan Tata, Munjal family, Hyundai, Matrix Partners, Tiger Global and SoftBank. 

Its existing investors include Softbank, Tiger Global, Matrix Partners, Ratan Tata, Munjal family, and Hyundai among others. Likely to be priced within 5-10 per cent of petrol powered scooters, Ola is hoping to trigger a shift in consumer preference. Electric two-wheeler sales had slipped 5 per cent in 2020.  The company claims what is currently available in the market is twice the price of mainstream scooters, which is against the economics of affordability and Ola aims to bring in its range of scooters very close to petrol engine scooters. Varun Dubey, executive director at Ola Electric, said the market is an “inflection point”, the acceptance is higher, technology has evolved, and the company is trying to bridge the “affordability gap”. 

The industry is poised for disruption, and it will come from outside.  Dubey refused to talk about any fund-raising plans. The company also declined to give a price point or the riding range. 

“We remain fully capitalised for our electric vehicle ambitions, including the setup of our global manufacturing facility in India,” Dubey said. “Once finished, this will be the world’s largest scooter factory with an initial capacity of 2 million units a year. We look forward to bringing this mega-factory online rapidly and putting our first electric scooter in the hands of customers in the coming months.” He emphasised that Ola’s e-scooters will do away with the need for frequent charging and will have a uniquely removable battery to carry it anywhere. “The nature of the scooter is changing. The engine is not the core of the product,” Dubey said. “Technology will be the soul of this category and it will be far more tech-driven product. With all the exposure to the world of technology around us, we believe the market is already ready for the switch.” Keeping its manufacturing foray in mind, Ola has hired a large number of auto industry veterans from General Motors, Ford and Korean original equipment manufacturers, preferably with EV experience, to lead this initiative. 

Former Hyundai India head BVR Subbu is the chairman of the venture. Kia Motors’ sales head in India has also joined forces recently.  Global investors like Blackrock or Saudi sovereign fund PIF have backed large global EV plays such as Arrival and California-based Lucid Motors. Ola Electric’s fund raise is coming at a time when Ashok Leyland’s UK arm Switch is the market to raise funds for its electric buses.

CHANGING PARADIGM

While electric cars have broken into the mainstream, two-wheelers have lagged behind, Ola Electric believes sustainable mobility can’t be complete without a large two-wheeler penetration. The company aims to “fundamentally reimagine” how a scooter “is made, sold and experienced”, including service using technology as its core.“Ola Electric is very much a new age automotive company or a tech-centred automotive company,” Dubey said. “We are aspiring to be the world’s largest two-wheeler maker.”

The company plans to ride on scale by targeting India as well as global markets like Europe, Australia, New Zealand and Latin America to arrive at the right value proposition for the buyers. “It is going to be India’s most advanced manufacturing set up with autonomous robots, with our own AI-powered systems,” Dubey said. “We are building the right scale to enable these innovations and ecosystems.” 

The initial 2 million capacity, as per his estimates, could be achieved within 2-3 years though industry players argue it would be an audacious target, given the fact that only 25,735 electric two-wheelers were sold in India – the world’s largest two wheeler market – in 2020. It is just 1.25 per cent of the total capacity set up by the Bengaluru-based unicorn. The company is likely to integrate itself on the infrastructure front as well, high on local content with the entire supplier ecosystem, including battery.