Car makers and cab-hailing companies in India want to be best friends.
On Oct. 24, luxury carmaker BMW said it has teamed up with Ola to offer cheaper financing and better support for drivers of the Bengaluru-based startup. “The way people move is changing and this is also true for the premium clientele,” Frank Schloeder, acting president at BMW Group India, said in a statement.
Only last month, Ola announced its partnership with one of India’s largest automakers, Mahindra and Mahindra, for discounts, vehicle financing, and maintenance plans for its drivers. It also has a cab-leasing partnership with Nissan.
Moreover, Ola is not alone.
In September, rival Uber signed a deal with Maruti Suzuki for driver training. Under the deal, the carmaker, with 370 driving schools, will train 30,000 Uber drivers over the next three years.
This trend has picked up even though private car ownership in India has not fallen in recent years, thanks to low level of penetration at about 24 cars per 1,000 people. In fact, demand for private vehicles is set to rise significantly by 2020.
Why the rush?
Such tie-ups between carmakers and ride-hailing firms could be a win-win for both, experts say.
Ola and Uber have been fighting neck-to-neck in Asia’s third-largest economy. Discounts, better warranty, training drivers, and easier finance could go a long way in expanding fleets and gaining market share.
Carmakers, on their part, will sell more. Over the last 18 months, the number of taxis in Delhi alone has increased by over 45%, according to Valoriser Consultants, a firm that provides research services for transport operators.
“Automobile experts have predicted that technology players will drive demand in future. The companies are looking at this as an opportunity to sell vehicles,” said Jaspal Singh, co-founder, Valoriser Consultants.
As of now, Singh believes these tie-ups are more of a “public relations exercise” to show that carmakers are abreast of new trends.
“In the US and Europe, automobile companies are making investments in transport technology companies for strategic reasons… In India, these partnerships have still not reached a high level of engagement,” Singh said.