Japanese tech conglomerate Softbank wants its Indian investee company and cab-hailing platform Ola Cabs to pivot into becoming an electric car manufacturer working together with Toyota, the world’s second largest car maker, said a source close to the development.

While Ola will expand and continue its cab-hailing business, the proposed move into electric car manufacturing underscores the electric vehicles opportunity in India — one that Masayoshi Son, chief executive of SoftBank, wants to bet on. India, already the world’s fourth-largest car market by volumes, wants to become an all electric car nation by 2030.

Electric car maker Tesla Motors is in talks with global component makers for its India project, which looks like it is delayed.

Also read: Tiger Global in talks to sell Ola stake to SoftBank for $700 mn: Source

In December, Son had told Mint that Ola would deploy a million electric vehicles in the next five years in partnership with a carmaker and the government of India. The possibility of Ola itself turning into an electric carmaker was not disclosed then.

Details of Ola’s plans for electric vehicles are sketchy but the source said it was going to be a big, three-way bet between SoftBank, Ola, and Toyota. “Ola is also in talks with Toyota to give them the car bodies, and the companies will work together on electric cars… Ola will be the largest electric car company in India,” the source said, requesting anonymity.

When asked for comment, SoftBank spokesperson directed FactorDaily to Ola. “It is an Ola story and they should comment, not us. We regard Ola to be a very valuable part of our portfolio,” the spokesperson said on email. Ola and Toyota did not comment on a set of questions sent on mail.

According to the source, Bhavish Aggarwal, founder and CEO of Ola, had met Masayoshi Son, chief executive of SoftBank, some time ago to discuss Ola’s electric vehicle strategy. Son asked Aggarwal to test some special batteries in India, which seems to have set off this plan.

The Japanese company already has partnerships with car makers such as Toyota and Honda, though not in electric vehicles.
SoftBank has led two rounds of funding at Ola — first in October 2014 ($210 million) and in February 2017 ($330 million).

FactorDaily reported on Friday that SoftBank is in talks to buy Tiger Global’s share in Ola for $700 million. It has also been reported that SoftBank is eying a 60% stake in Ola.

These multiple rounds of funding makes it clear that SoftBank is doubling down behind Ola, one of its biggest bets in its India portfolio, after Snapdeal went bust. Son is playing an important role in merging Snapdeal with Flipkart, where Tiger Global is the largest investor.

A small step forward at Nagpur

Meanwhile, Ola and Mahindra announced a pilot project in Nagpur on Friday where they will deploy 200 electric vehicles — e-cars, e-buses, e-autos and e-rickshaws —for public transport. Mahindra is deploying 100 e2O Plus electric vehicles, and the remaining 100 vehicles will be sourced from Tata Motors, Kinetic, US electric vehicle maker Build Your Dreams (BYD), TVS, among others.

On the launch, Ola’s Aggarwal said he looked forward to “building the electric vehicle ecosystem grounds up for India.”

The push into electric car-making will be a big shift for Ola, which is in a closely-fought turf war with Uber for over two years and is bleeding over discounts to drivers and passengers. Ola’s revenue in 2015-16 was Rs 758.23 crore, but losses were almost triple of that at Rs 2,313.7 crore, reported with the Registrar of Companies.

The move into electric cars could potentially help Ola enter a less punishing business, especially given India’s ambitious targets for 2030. So far, Uber has not disclosed any plans for electric cars in India. “The idea is that by 2030, not a single petrol or diesel car should be sold in the country,” Piyush Goyal, minister of state for power, coal, new and renewable energy and mines, has said.

Electric vehicles, apart from having environmental benefits, saves cost, believes the government. This was detailed in a report earlier this month by Niti Aayog, the government’s policy think-tank, and Rocky Mountain Institute, “India leaps ahead: transformative mobility solution for all” listing the requirements and the impact of electric mobility.

“A rapidly developing India is at the cusp of making such a transition to new mobility solutions,” wrote Arvind Panagariya, Vice Chairman of NITI Aayog.

The report further said that policies need to be modified to “permit all intermediate public transit modes — from two-wheelers to public buses — to pick up and drop off travellers at these transport hubs, with priority lane access and parking for shared electric vehicles (EVs) and private taxi EVs.”

The report had recommendations on batteries, too: “standardized, smart, swappable batteries may also be important enablers of other high-impact use cases, especially in electric taxis and buses.” Smart, interchangeable batteries is an area that companies such as SUN Mobility, started by Chetan Maini, founder of Reva, an Indian electric car, are betting on.

Electric vehicles will reduce the cost of travel, especially for taxis, the report says. A comparison shows that the capital cost of an e2O, the new generation of Reva after Mahindra took it over, is Rs 700,000 and operating cost is Rs 2 for a km, while for a Maruti Swift it ranges from Rs 480,000 to Rs 740,000, with an operating cost of Rs 3.50 per km. If swappable batteries are introduced, Maini believes, the cost of an electric car can be reduced by 30% to 50%.

Another benefit will be the impact on the environment as every electric four-wheeler will save 28 tons of carbon dioxide emissions every year. India releases about 2.5 million kilotons of CO2 emissions annually, ranking it fourth after China, United States, and European Union. Some of this could be reduced with electric vehicles. Three million cars get registered every year, though they account for a fraction of overall vehicle sales, which is dominated by motorbikes. India had a total of 182 million vehicles registered, 132 million of which were two-wheelers, government data of 2013 shows.

---