Ola Electric gets a thumbs up from SoftBank

Ola Electric Mobility, ride-hailing service Ola’s electric mobility arm, has become India’s newest unicorn following an investment of $250 million ( ₹1,723 crore) from SoftBank, the biggest investor in its parent firm.

“Celebrating 5 years of strong partnership, looking forward to the years ahead! I’m personally inspired by @masason vision for the future of humanity. Very excited about our partnership to build Mobility & Electric Mobility for India and the world!” tweeted Ola founder Bhavish Aggarwal.

Earlier in March, Ola Electric had raised ₹400 crores in a Series A funding round which saw participation from Tiger Global Management and Matrix Partners India. In May, Ratan Tata, too, invested an undisclosed amount in it.

Ola Electric whose Mission: Electric project aims to put one million electric vehicles on Indian roads by 2021, is currently running many pilot projects on key aspects such as charging and battery swapping. Fortune India spoke to Anand Shah, senior vice president for strategic initiatives, Ola, about the progress of the mission and its viability. Shah says since there is demand, there are no concerns about viability. “How do I get electric to be a viable way of delivering demand? And the answer to that is that first we’re going to focus on two-and three-wheelers,” he says.

Edited excerpts:

Does it make sense to electrify cabs and buses in India first?

The customer who cares most about cost per kilometre tends to be a commercial customer. If one buys a scooter or a car, they buy it for design choices, what [style] statement it makes—there are many different things. But most commercial customers buy it thinking over three-four years, how much is it going to cost them? What resale value does it have? How much is the cost per kilometre? How much do the parts cost? The reason they are low-hanging fruits is that they are most likely to be a buyer of an electric car first. The reason for that is an electric vehicle is much cheaper to operate. There are much fewer moving parts and the cost per kilometre from the fuel perspective goes down.

As a ride-hailing company getting into electric mobility, is the lack of local battery manufacturing a big challenge?

I don’t see that as a big challenge or a risk. It is a risk only if we fail at creating demand. If we create demand, we will have access to the know-how we need. We know how to make parts. Battery cells, we need to grow in but that’s not impossible to achieve. I think the first impediment is that there are not enough options. The second big impediment which is being resolved is that the policy was not clear. Things like cost, taxation, and subsidies on electric vehicles, etc. have become clearer. The impediment now is that it’s a chicken-and-egg problem. If I’m on Ola platform and I want to buy a car, I want to go for the one which has least risks associated with it. If I have to buy an electric car, I can only use it where charging is available.

What are your lessons from the pilot project in Nagpur with Mahindra in 2017?

In the Nagpur project we were trying to figure out how viable electric vehicle is. We attempted cars, e-rickshaws and buses. The lessons that we learned were that there needed to be more products. Right now in India there are only really two choices of electric car—Mahindra e-verito and Tata Tigor. When Ola started electric which was in Nagpur two years ago, we thought that if we as a company can do our part in climate change mitigation, cleaning the air and making smarter mobility decisions, we should. So, that was an experiment to figure out if we can be an early mover in making electric viable. The lesson that we have learnt is that electric can be viable currently in selected places—like two- and three-wheelers. If we had not done what we were doing in 2017, we would not have the confidence today for doing this in 2019. Nagpur in 2017 was the beginning of a journey. The only thing we regret I’d say is that we didn’t do it earlier.

You have recently received investment from Ratan Tata. What will be your prime focus after the investment?

Anywhere in the world, every government in every city is talking about cleaner mobility. It is now inevitable that electric comes. I think where there is a big opportunity now is the two- and the three-wheeler space. And because the distances are not so long and the size of the batteries is not so big, the cost differential is not as significant. As a company very focused on mobility, we feel that when the future becomes electric, we need to be capable and ready to get strong advantages as a company prepared for that future. The first priority is to make customers comfortable in buying electric two- and three-wheelers. So, we’re focusing very heavily on charging and swapping infrastructure.

Your target is a million electric vehicles in India by 2021. How would you make sure that there’s enough demand for that?

That’s where we as a company have a unique position. So, in Ola as a company, we don’t have a demand problem. Everyday people open their phones and take a ride from one place to the other—whether that vehicle is electric or petrol doesn’t matter. We are delivering kilometres in high demand every day. I don’t have a problem in demand. I have a problem in making the supply viable. How do I get electric to be a viable way of delivering demand? And the answer to that is that first we’re going to focus on two-and three-wheelers.