If the alliance works out as planned, it will give a big boost to Mahindra, as it has been struggling with its only car model Verito, managing to sell around 200 units a month
Cab aggregator Ola, on Thursday, partnered with the Mahindra group that will help foster entrepreneurship among drivers as well as boost the latter's earnings by around Rs 2,600 crore (Rs 26 billion) over the next two years.
While Mahindra follows its rival Tata Motors which has joined hands with Uber, for Ola this is the second such alliance having tied up with Nissan India to buy and lend cars to its drivers.
These alliances come on the heels of a string of tie-ups between online taxi services and automakers both globally as well as here, to cash in on the rising demand and popularity of these services.
The domestic taxi market is worth nearly around Rs 80,000 crore or around $12 billion.
Under the alliance, M&M and its group companies in the financial insurance and its used car/bike arm Mahindra First Choice, will sell products (its sole car brand Verito to begin with) and services to Ola.
With this, it will earn an additional Rs 2,600 crore over the next two years when it hopes to sell around 40,000 units, Mahindra Group chairman Anand Mahindra told reporters announcing the tie-up.
If the alliance works out as planned, it will give a big boost to Mahindra, as it has been struggling with its only car model Verito, managing to sell around 200 units a month.
The Verito has originally come from its erstwhile French partner Renault.
Asked whether the tie-up is only for Verito, the company officials did not offer a clear answer.
Mahindra said the company has set a target of selling 20,000 units this year through this alliance and double it over the next two years.
Ola, on the other hand will get access to a one-stop-shop for vehicles and services for its drivers under which the company hopes to foster entrepreneurship.
The alliance will provide 100 per cent financing to buy Mahindra cars or used cars through its platform Mahindra First Choice, apart from providing parts and after sales at discounts.
Earlier this year, Mahindra had expressed concern over the growth of ride-sharing and cab aggregators, terming them as disruptors detrimental to automakers as this will lead to lower car/vehicle ownerships.
However, clarifying the statement, Mahindra, on Thursday, said what he meant was going forward both will have to work together to create a shared ecosystem for mobility and this demand for shared ecosystem will only increase, which will also see faster adoption of electric vehicles following the massive drop in battery prices.
Globally also, auto companies are sewing up such alliances. In May this year, the world's largest auto maker Toyota had said it would invest in Uber Inc to create flexible vehicle leasing terms.
The second largest auto major Volkswagen had signed a $300-million agreement with Gett to develop self-driving cars apart from boosting car-sharing, limo rides and taxi services.
General Motors had also pumped in $500 million in Lyft to develop self-driving cars.
Ola co-founder and chief executive Bhavish Aggarwal said going forward electric vehicles will drive the urban markets as cheaper batteries can bring down prices massively.
Aggarwal said this alliance is not exclusive and that his company will look at more such alliances to attain its goal of over a million drivers under its platform.