BluSmart’s bid to top India’s ride-hailing market with strategic capital

Hi friends 👋,

Happy Wednesday and welcome to the 5th edition of Weekly Olio.

Many thanks for all your support and feedback so far, we hope it continues the same in the coming days and weeks. 😊 

Now, back to the interesting stuff! 🤓

Today’s, Publisher’s Parmesan covers BluSmart, India’s largest EV-based cab operator, and its attempt to displace Uber/ Ola as the preferred ride-hailing service in the country.

For context, BluSmart is India’s first all-electric cab service. And, it fully owns its fleet of cabs - the complete opposite of the gig work-enabled model popularised by Uber. 🤯🤔

Blusmart started with the National Capital Region (New Delhi + Gurugram) and has recently expanded into Bengaluru - India’s tech hub. The company has so far delivered impeccable customer service with safe, reliable and affordable taxi rides, free of surge prices and cancellations.

Let’s get to it.

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Publisher’s Parmesan 🧀

BluSmart’s bid to top India’s ride-hailing market with strategic capital

After four years of focusing on Delhi-NCR, BluSmart expanded to Bengaluru in late 2022. EVs are being seen as the future of mobility in India, which makes investors more interested in the journey. Critics, however, believe that an asset-heavy approach can hinder the scaling of operations and hence the growth prospects are low.

The ride-hailing market in India has been dominated by Uber and Ola since 2014. Both these unicorns have burnt billions of investor money to win the Indian market. However, of late, their focus has shifted to profitability and hence, driver earnings are dropping. As a result, customer experience has also deteriorated - complaints of trip cancellations, overcharging and driver misbehaviour are increasing day by day.

With its superior customer experience, BluSmart, India’s first EV-only ride-hailing service, has emerged as a strong challenger to Uber/ Ola’s duopoly in the Indian capital. With an asset-heavy playbook, BluSmart has quickly become a customer darling with its clean, cancellation-free, surge-free cab service. Starting with airport trips between Delhi airport and Gurugram, they have slowly expanded services across Delhi NCR.

The Road Less Travelled 

Why would Blusmart go for an asset-heavy approach?

The asset-light approach adopted by Ola and Uber, where drivers or fleet operators own the cabs, is simply not possible for scaling an EV-focused ride-hailing business. Drivers are apprehensive about purchasing EVs since they are expensive (even with government subsidies) and technology is new and unfamiliar. As a result, BluSmart had to invest heavily in building out its own fleet. And, here is the playbook that it adopted.

1. BluSmart raised EV asset financing from development financial institutions (DFI) like Energy Efficiency Services Limited (EESL) and the Indian Renewable Development Agency (IREDA).

2. Then, it ordered EVs from Indian manufacturers such as Tata and Mahindra. While BluSmart places the order, the vehicles are owned by these DFIs.

3. BluSmart then leases the vehicles from the DFIs for a period of 4-5 years. They are on the hook for ensuring timely lease payments and proper upkeep of the vehicles.

Thus far, BluSmart has raised $120 Mn in EV asset financing to place orders for 13,500 cars from Tata. With manufacturers taking around 18 months to make good on these orders, BluSmart currently adds about 500 cabs to its fleet each month.

In addition to vehicles, BluSmart also maintains a roster of drivers who are paid a fixed monthly salary in addition to gamified incentives. This reduces the chances of misbehaviour like cancellations, rude behaviour or cab unavailability.

BluSmart’s core business has been built on the back of Airport journeys, which are typically longer and guarantee optimal utilisation of the cab. In Delhi-NCR, a quarter of BluSmart’s fleet is dedicated to airport trips, and brings in 30-40% of the company’s total revenue. The company has also signed an exclusive partnership to service airports run by the GMR Group. This includes Delhi’s Indira Gandhi International Airport, the country’s busiest airport. They have recently expanded to Bengaluru, India’s tech capital, with a similar playbook.

While customers in Delhi have given up a thumbs up to BluSmart and its anti-Uber playbook, there still remain concerns about how significant a player it can become.

• Since BluSmart is liable for monthly lease payments, vehicle maintenance and driver salaries, the payback period is longer. Hence, it will need to invest a significant amount of capital to become a meaningful player.

• While the adoption of EVs has seen a 155% year-on-year rise in the year ended March 2022, charging infrastructure only grew by 77%. As a result, BluSmart had to spend big on building charging infra to support its fleet as it expands beyond Delhi and Gurugram.

To become a significant player in the Indian ride-hailing segment, BluSmart will need to establish a strong presence in the top 8 markets that make up 80-90% of ride-hailing volumes. Its partnership with Jio-BP to scale up charging infrastructure might be the biggest weapon in its arsenal.

Speed Bumps & Strong Partners 

While BP led BluSmart’s last financing round through its venture arm BP Ventures, the Jio-BP joint venture has agreed to set up as many as 20,000 charging points for BluSmart to use over the next two years. With BluSmart’s early success attracting more players to this market, this partnership could help it maintain and grow its lead while building a competitive moat.

Given the reluctance of Ola/ Uber to burn more money in the Indian market, BluSmart could emerge as the unlikely winner in this space with a model that is not very different from the traditional taxi business. However, the company will have to ramp up incrementally, setting up infrastructure and seeding demand before actually scaling up operations.

Will everything come full circle? Let’s wait and watch.

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We’ll be back in your inbox 2 pm IST next Wednesday. Till then, have a productive week!

Peeyush and Mohit

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