Ola is looking to diversify its offerings. The Indian ride-hailing major is on the verge of launching a used car retailing business in Bengaluru, said three people aware of the details of the company’s new business line. This would be the first major product launch for the Bengaluru-based company in the last two years.
“Ola is likely to enter the segment with a full-stack model where it will buy cars from people and the company’s driver partners and sell them to buyers after glitches are removed,” said one of the sources requesting anonymity.
Sources further said that Ola has started building a team for the new vertical and it will start a pilot in Bengaluru by the second half of August. “The senior management at Ola sees it as a complementary business model to its core business — mobility,” said the second person who also requested anonymity, adding that the used car business will be called ‘Ola Cars.’
This move will pit Ola directly against companies such as Spinny which has been in this segment for years and CarDekho, which forayed into the used car retailing segment recently — a market that is expected to grow further. Per a report by Autocar, the number of used cars sold in the country may soar to 8.2 million in FY25 compared to the 3.8 million cars pre-owned in FY21.
The launch of the used car business by Ola also comes at a time when the company’s ride-hailing business has plateaued as a result of the pandemic. Sources said that unlike its cab vertical, the bike and auto verticals have actually registered significant growth in the past two years.
Queries sent to Ola didn’t elicit any immediate response. We will update the story as and when the company responds.
Ola is also preparing for a public listing and recently raised $500 million in a pre-IPO round from Temasek, Warburg Pincus and its co-founder Bhavish Aggarwal.
Aggarwal’s investment in this transaction is seen as an attempt to increase his shareholding in the decade-old firm. According to an ET report, the above investors will pick up secondary shares at a valuation ranging from $2.7 to 4 billion. Unlike most secondary deals (with 20-25% discount) in growth and late-stage companies, this is a significant haircut from its peak $5.6 billion valuation in December 2019.
It’s worth noting that US-based investment firm Vanguard Group had slashed Ola’s valuation by almost half to $3 billion in March 2021.
While Ola claims a strong recovery post the second wave of the coronavirus pandemic, experts tracking the mobility space estimate that Ola and Uber are still some distance away from regaining their pre-Covid peak. In May 2020, Ola had to slash a significant portion of its workforce as the company’s revenue declined by 95% due to lockdown imposed in several parts of the country.