App-based ride sharing aggregator has formed an alliance with veteran national automaker Mahindra & Mahindra for cars, financing and sales.
Anand Mahindra, the Chairman and MD of Mahindra Group said that the Indian economy is moving towards a set of sharing dynamics, therefore, investing in Ola is going to help the country grow.
He also said that the launch of Jio would have affordable smartphones and data at the disposal of every Indian. Thus, the alliance with Ola will be very useful.
On one hand, this alliance will give Ola access to the first choices of Mahindra Finance, insurance and resale help. On the other hand, this deal has the potential to earn Mahindra $400 million in the next two years.
Reportedly Ola spent almost double the amount it had earned, trying to fend off competition from the US-based aggregator, Uber.
This year saw three similar deals taking place globally. Volkswagen promised $300 million to Gett; GM put in $500 million for Lyft, and Toyota did an undisclosed amount of investment in Uber.
Right now the two biggest cab aggregators in India, Ola and Uber, almost solely function on third party cab owners for providing transport.
The compensation system for the drivers from both are exuberant, and just like the cheap rides, they are meant to destroy the competition. Backed by Didi, Ola has been the center of a lot of criticism in India, just like its counterpart Uber. Interestingly enough Uber has a 17.7% stake in Ola. There is no saying as to how much significance this has on the market dynamics.
Currently, Ola is present in more than 120 cities in India, wheras Uber operates in close to 30. The market share of Ola is much higher. Under such circumstances, an alliance with Mahindra to get Ola owned cars can help the company consolidate their position.
However, the most valued startup in the world, Uber, which is valued close to $70 billion, has the potential to put up a good fight for a better market share in India.
Analysts say that the market dynamics in India is quite different from that of US and Europe. The alliances mean differently to companies from either country.
Growth is usually the primary objective in an economy like India. Carpool services have become the linchpin for this industry and has caused major changes besides attracting investments.