Mumbai: Auto maker Mahindra and Mahindra Ltd has struck a deal with ANI Technologies Ltd that operates ride-hailing service Ola to finance vehicles for more than 40,000 of its drivers by 2018.
The alliance between India’s largest utility vehicle maker and its biggest shared transportation platform, announced on Thursday, is worth Rs.2,600 crore.
“It’s a collaboration of the two ecosystems—what we have created is a package called One-Mahindra, which brings the strength of our federation,” Anand G. Mahindra, chairman of the $17.8 billion Mahindra Group, told reporters.
In striking the deal, Mahindra and Ola are following the brick-and-click model that combines offline and online. “Even investors have realized that they are better off banking on companies that are not only purely virtual but also have a strong offline presence,” Mahindra said.
Bhavish Aggarwal, co-founder and chief executive of ANI Technologies, who spoke of Anand Mahindra as his “personal hero”, said that Mahindra’s strong brand and reach in the hinterlands will help Ola create a unique value proposition.
“We don’t see ourselves just as an online disruptor of mobility. Our philosophy is that of creation and collaboration,” said Aggarwal, adding that the mobility industry is set to see many more such collaborations between new-age platforms and old, experienced companies.
The partnership enables Ola drivers—part of a $10 billion ride-hailing market—to tap into an integrated Mahindra-Ola package, which includes offers of discounted Mahindra vehicles, attractive financing with zero down payment and low interest rates, and comprehensive maintenance packages.
It will also support drivers with accident insurance and scholarships for their children.
Ola has a presence in 102 cities, with close to half-a-million drivers registered on its platform, and the deal is expected to help it take on rival company Uber more effectively.
The alliance “seeks to encourage micro-entrepreneurship among drivers to address India’s growing mobility needs,” Ola and Mahindra said in a joint statement. The tie-up comes barely a year after Mahindra conceded that taxi-hailing apps such as Ola and Uber are the biggest potential threat to the auto industry, pointing to the need for auto makers to create products that customers would seek to own and not just use as a means of transport.
V.G. Ramakrishnan, founder of Avanteum Advisors, a consulting firm, said that while it is imperative for auto makers to collaborate with ride-hailing firms who have been disrupting the traditional taxi market, there was a question mark over how sustainable the current boom was and how long these firms could continue to support low fares.
“They are ruling the roost,” said Ramakrishnan. “Moreover, driver stickiness (ability to retain drivers) is one of the biggest challenge for the online cab-hailing firms.”
The boom in the ride-hailing industry has been fuelled by improved Internet penetration, a shift in consumer habits towards convenience and on-demand services, and low prices, offering a relatively cheap and efficient alternative to an under-served public transport system.
“It’s a classic example of the collaborative approach which e-commerce firms have been adopting,” said Sreedhar Prasad, head of e-commerce at consultancy firm KPMG India. “It’s a win-win for both. While Mahindra gets a captive audience for their cars, insurance, finance and other businesses, Ola gets a larger alliance partner because of which they may be able to give better terms to the drivers.”
Bloomberg contributed to this story.