Ola is preparing to launch its operations in Kathmandu, Paro, Dhaka, and Colombo by the fourth quarter of 2017, according to current and former employees with knowledge of the SoftBank-backed company’s activities.
Expanding The Operations
The first city where Ola will launch new operations is going to be Dhaka, the capital city of Bangladesh. Soon after Dhaka, Chittagong, the next major city in the country, is on the to-do list. Colombo, the capital of Sri Lanka will follow Bangladesh. Kathmandu, capital of Nepal and Paro, a major city in Bhutan are going to be the last two in the current round of expansion. Operations in all of these cities are expected to kick off by January 2018 at the latest.
The new international plan comes on the back of a diktat by SoftBank, say senior Ola employees. “Asia has been split into four companies by SoftBank and it wants each of them to own their territories now,” says a senior employee who asked not to be identified as he was not allowed to talk to the press. “Didi Chuxing gets China, Grab is South East Asia, Careem is West Asia and Pakistan and Ola is the sub-continent,” he adds. SoftBank is a major investor in each of these companies.
The Indian subcontinent is an important market for SoftBank. The taxi-hailing market in India, according to reports, is set to grow to $7 billion by 2020. Bangladesh, meanwhile, is set to have 34 million affluent consumers by 2025, who are going to be aware of foreign brands. Sri Lanka, meanwhile, has seen a 123% growth in mobile phone usage in 2016. All of these users will want to take cabs. And SoftBank wants one of its companies present in that market.
Ola’s expansion, however, seems to be more than just a SoftBank diktat. “Going outside the country has been on the back burner for a while. Ola did not want to do it because it would be resource-intensive. But they have hurried up over the last two-three months,” says another employee who did not want to be identified.
There are two reasons for this sudden burst of activity.
Ola has been chasing Tencent since the last down round, with a view to lead the next round of funding. But this round, employees say, will come on the back of Ola showing ambition that extends beyond India. According to reports, the Chinese company has promised $400 million, which will be delivered to Ola in tranches over a year.
Employees within the company say that Ola, across all its categories, records about 1.5 million rides a day across 110 cities. But Uber is closing the gap, it records 1.2 million rides a day in 29 cities. Ola’s need to grow in terms of volume has become paramount.
“Ola has been slowly raising prices in its major markets over the past three months and cutting down on driver incentives,” says one of the senior employees quoted above. “Add to that the increase in cities and it will start to reflect on its balance sheet.”
And to show a positive effect on its balance sheet, Ola is employing two strategies: international expansion and a heavy focus on autorickshaws.
A detailed questionnaire sent to Ola did not elicit any response.
Sailing The High Seas
Dhaka is Ola’s first new market. And it has assigned Karan Singh Shekhawat to lead its international expansion. Shekhawat before this handled metros for Ola. He is currently shuttling between Dhaka and Bengaluru and is trying to set up an office and hire a team.
“One of the biggest challenges when going to a new country is trying to swing regulation in your favor. Ola won’t have too much trouble with that. Because of Uber,” says a former Uber executive. He asked for anonymity in exchange for candour.
Yes, Uber has been in Dhaka for the past nine months. It entered the country in November 2016. And since then it has been lobbying the government aggressively to ease regulations. And it did. The Bangladesh government has been loosening the strict control it has had over these laws and is drafting a new ‘ride-sharing regulation’.