Ola plans to take on Uber in India by flooding the streets with cars

Smile for the selfie.
Smile for the selfie.
Image: Reuters/Danish Siddiqui
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Uber’s chief competitor in India is partnering with one of the nation’s biggest automakers to grow its pool of drivers.

Ride-hailing company Ola said today (Sept. 8) that it has teamed up with Mahindra to offer discounts on Mahindra cars, vehicle financing, and maintenance plans to Ola drivers. The so-called “Mahindra-Ola package” will start at zero down payment and also include accident insurance and scholarships for the children of drivers, the two companies said in a release.

Early last month, Uber sold its China business to Didi Chuxing, China’s most popular ride-hailing service, abruptly ending what had been a $1 billion-a-year war for riders and drivers. Many suspected that India would replace the Middle Kingdom as Uber’s main battleground outside of the US, and the company admitted as much earlier this week. In a letter sent to investors on Sept. 7 and obtained by Reuters, Uber said India is now its biggest international market, with 5.5 million car trips completed each week across 28 cities. (Uber claims that it is as big as Ola in the market, with a 50% share.)

“Some of our fastest growth is in India, and the merger with Didi frees up resources for additional investment in our customer experience and technology there,” Reuters quoted the letter as saying.

Uber last summer described itself as “extremely bullish” on the Indian taxi market—now an estimated $12 billion—and said it planned to invest $1 billion a year there. At the same time, the rate of car ownership in India is low, at about 24 cars per 1,000 people. Ride-hailing companies like Uber and Ola rely on independent contractors with their own vehicles to make the service run. They are also highly sensitive to changes in supply and demand, all of which makes the rate of private car ownership an important variable.

Sales of private vehicles in India are projected to increase significantly by 2020, but getting more cars on the road in the meantime could be crucial to Ola’s success as it defends against renewed competition from Uber. It’s not a new tactic. Last September, Ola spent Rs 5 billion (about $750 million) to establish a wholly-owned subsidiary that would lease cars to drivers. Both Uber and Ola have also spent heavily on subsidies to attract drivers to their businesses.

“We are delighted to work with an iconic Indian brand like Mahindra to further our mission of building mobility for a billion Indians,” Bhavish Aggarwal, Ola’s co-founder and CEO, said in a statement on Thursday. “Our alliance with Mahindra will help build significant scale by innovatively building more mobility options and newer use cases in the time to come.”