The famous ride-hailing platform Ola has decided to shut down its used cars division, Ola Cars and its quick commerce business, Ola Dash.
At a time when the quick commerce segment in India is expected to reach $5.5 billion by 2025, growing 15 times its current size, why did Ola decide to close Ola Dash operations?
Ola Cars which allowed customers to buy and sell second-hand cars is also being closed down within one year of its launch. For what reasons Ola Cars was shut down? Find answers to all of these questions in this article.
Why Did Ola Shut Down Ola Dash and Ola Cars?
Ola said that they decided to shut down both of their businesses since they wanted to focus more on Ola Electric. But, is that it? Or is there something more to it? Let's uncover the exact reasons that led to the closing down of Ola Cars and Ola Dash.
No Laser-Sharp Focus
Ola originally started with a ride-hailing business model. In that sector, Ola became very successful. Although the company has always tried to enter new sectors. This is not the first time that Ola is closing one of its startups.
In 2015, the company founded a food delivery service Ola Cafes, a similar service to UberEats.
The company also launched a grocery delivery service Ola Stores. Both of these businesses were shut down a year later because the company was not able to attract a lot of customers.
In 2019, the company again tried to jump into the food delivery service by acquiring Foodpanda. However, the company was not able to gain the expected revenue and the company was shut down.
Even after shutting down 3 of its subsidiaries Ola's will to experiment didn't stop. In 2019, the company launched Ola Foods, a cloud kitchen business where the company planned to build 500 facilities across the country. But, only 50 cloud kitchens were set up in 2020.
Unfortunately, Ola Foods also failed and now the company is selling its cloud kitchen equipment at a 30-50% discount.
This year Ola tried to leverage the rapidly growing quick commerce segment with Ola Dash but, as you know, this business failed as well.
All these things show us that the company lacked the laser-sharp focus that any business needs in order to be successful in the market. There is nothing wrong with entering different markets but, you should first understand the market conditions.
Ola has 4 failed startups because the company never understood the competition and market conditions. When Ola tried to enter 3-4 different markets where the company didn’t have any expertise the company was not able to properly strategize and allocate resources to different sectors.
On top of that, Ola's primary ride-hailing service was incurring heavy losses as well. A lot of drivers were leaving the company due to huge salary cuts. Customers as well were not using Ola due to a surge in prices.
Due to all of these reasons the company had no option other than closing down Ola Cars and Ola Dash.
Uncertain Nature of Quick Commerce
As we all know all the companies which are in the quick commerce segment are facing heavy losses. Be it Dunzo, Zomato or Swiggy Instamart.
Ola was also one of those companies which were incurring heavy losses in the quick commerce segment. But, why are these companies incurring losses?
There are two reasons for this: No customer loyalty and heavy discounts. Let's understand both of these aspects in great detail.
To acquire customers in the quick commerce segment, you need to give heavy discounts to customers on groceries and other items in order to encourage them to try the app. When companies are giving discounts they are not making any profits. But, still, the companies are giving heavy discounts because this is the only way to make customers habituated to your app.
But, here the question arises: How long can you give customers discounts? At a certain point in time, any company like Zomato or Ola Dash have to stop giving discounts.
As customers are using their service just for discounts, there is no customer loyalty. Due to this Ola was not able to make a loyal customer base.
Apart from this, the increased competition in the market from newly launched startups like Zepto and Dunzo made things worse for Ola and the company decided to shut down Ola Dash.
Future Plans of Ola
The quick commerce segment is booming in India. There is a tough fight going on with so many startups like Zepto, Dunzo and Swiggy Instamart in order to capture the quick commerce market in India.
In December 2021, Swiggy invested $700 million into Instamart.
On the other hand, Zomato recently acquired Blinkit, a quick-commerce grocery delivery platform for Rs 4,447.
Zepto, a very popular 10-minute delivery platform, raised $200 million, taking the total valuation of the company to $900 million.
If so many companies are draining millions of money in this sector why did Ola decide to shut down Ola Dash?
Ola said that the company wants to focus more on Ola Electric. Instead of dabbling between multiple businesses Ola has reassessed its priorities and decided to use all of its resources in strengthening its electric sector.
Ola Car's infra, technology and capabilities will be repurposed towards growing Ola Electric's sales and service network, the company said in a statement.
Ola's decision to shift its complete focus on the electric business makes sense because, within months of its launch, Ola Electric has already become India’s largest EV company.
Ola Electric is delivering huge profits for the company, Rs 500 crore revenue in its first two months of FY 22-23. The company is on its way to surpassing a $1 billion run rate by the end of this year.
Due to all of these positive correlations the company has understood that if they want to stay in the race for a long time it must focus on its electric scooters. Ola has also planned to launch its second electric scooter before the end of this year.
Apart from focusing on its electric sector the company also wants to invest in new areas like cell manufacturing and financial services. To enter the world of fintech Ola has acquired Avail Finance, India’s first neobank that aims to provide financial services to the blue-collared workforce.
As Ola is now allocating all their resources towards Ola Electric it would be interesting to see the future of this company. Even though Ola Electric is India’s largest EV company, it did face a lot of problems in the past for its faulty batteries.
The competition in the electric sector has increased tremendously with players like TATA Motors, Mahindra, Okinawa, Tunwal and Kia Motors. Ola needs to continuously innovate and understand the market conditions if they want to be successful in the EV sector.
Why did Ola shut down Ola Cars and Ola Dash?
Ola decided to shut down its used car division, Ola Cars and its quick commerce business, Ola Dash because the company wants to use all of its resources in strengthening Ola Electric. Ola Car's infra, technology and capabilities will be repurposed towards growing Ola Electric's sales and service network.
What is Ola Cars?
Using Ola Cars customers could buy and sell their used cars. Under this business, the company would purchase used cars from people and from the company’s driver-partners and would sell them to interested buyers.
Must have tools for startups - Recommended by StartupTalky
Subscribe to StartupTalky
Get the latest insights delivered to you right in your inbox