To beef up its own fleet, cab-hailing major Ola has invested ($15.5 Mn)Rs 100 crore into its leasing subsidiary Ola Fleet Technologies. The company’s decision to invest in fleet comes at a time when Ola is struggling with decline of number of drivers at its platform.
The proceeds will allow Ola Fleet to onboard more drivers and compete fiercely with Uber, which had pumped in about Rs 250 crore last year into its leasing subsidiary, Xchange Leasing India. Importantly, so far this is the largest capital infusion into Ola Fleet. Four months ago, the company had invested about Rs 50 crore into it.
Ola acquired Gurugram-based radio taxi service provider GCabs in 2015 and rechristened it Ola Fleet.
Ola and Uber don’t lay much emphasis on leasing service but higher taxation under GST for cab finance could hurt drivers badly, who are already hit by low incentive and falling income.
Meanwhile, in a separate development reported by Business Standard, Ola had signed loan deals of up to $1.4 billion (Rs 9,500 crore) in 2016 to finance cars to drivers in 2015. The company utilised Rs 5,769 crore ($ 850 million) of its total term loan limit by December 2016.
The massive utilisation suggests Ola’s aggressive play in leasing out maximum number of cabs to drivers to outplay Uber.
The company’s decision to rely on leasing car was a way to retain drivers while competing with Uber. While Uber was throwing incentives to retain drivers, Ola took different route and helped drivers to lease cars. The strategy appears to be played well for Ola as it’s close to fulfill a target of leasing one lakh vehicles last year.
Earlier this year, Ola and Uber had witnessed a 25 per cent drop in the number of cars listed to their platform due to drop in drivers’ incentives and incomes. According to a report by Redseer Management Consulting, on-demand cab industry, which had always reflected positive growth, recorded a negative growth in the first quarter of 2017, owing to the shortage of cabs.