Smart Transport
An outlook of smart transport in India in 2019
India shares several structural causes of carsharing with these markets: mega cities, traffic congestion and parking shortages. Mobilisation is being seen as a segment that can be an effective and sustainable solution to address the structural challenges in the transportation sector largely emanating from lack of infrastructure (roads, parking etc.) and first/last mile connectivity. Structural changes such as urban congestion combined with technology enablers are leading to the emergence of new types of mobility solutions and shifts in the mobility mindset of customers. There has been a rapid growth not only in cab aggregators but also in other aspects of the mobility landscape such as route optimisation
and public transport. While demand for automobile ownership in India is likely to remain high as there is an aspirational value attached to it. There has been a proliferation of alternative mobility models especially on the app-based cab aggregators that have become an integral part of the ecosystem and have a large customer base and multi-billion-dollar valuations in relatively short spans of time.
While cab aggregators have been around for a while, micro-mobility is the key solution that is trying to address the first/last mile connectivity problem that is being faced – while cab aggregators including ride sharing and pooling have helped create an effective system, the infrastructure still is not able to keep
pace with demand and hence micro mobility is helping bridge the gap. Multiple players have emerged to meet specific needs in the increasingly multimode mobility ecosystem. Bike apps such as Rapido, ONN Bikes, Wickedride, Vogo and Yulu offer first/last-mile transportation services.
Other offerings help commuters choose the most efficient route across different modes of transportation and enable making easy reservations from a unified platform. Zophop is one such start-up that provides route optimisation across buses, passenger trains, metro rail, auto rickshaws and taxis with live ETA updates and smart ticketing. Abhibus, Travelyaari and RedBus tap into the demand for convenience within the public transportation system by offering apps that enable bus booking and seat reservation.
Investment Rationale
Smart transport being bedrock of future cities along with cost, convenience, carbon footprint and health benefits across all modes of transport will help boost investor sentiment. With US$300m invested by PE/VCs in the space in 2018, there is confidence in the need and demand in the sector. While cab aggregators will continue to see more investments as they scale, the self-ride segment has the ability to scale rapidly given the supply side constraints are easy to manage. And the growing popularity of first/last mile companies and adoption is clearly making them an interesting investment proposition. With IoT technology in play, scale is getting easier to understand, though the parking infrastructure is still a challenge despite appropriate government and corporate
tie-ups are in place. The capital needed to scale will continue to be high, some of the key impactful players may see mega raises as they scale. Use of EV infrastructure may also provide opportunities to deploy capital even as the EV infrastructure being built gets scaled to meet mobility demands.
Deal Activity PE/VC activity
The Mobility sector recorded 22 M&A deals in the period 2013-2018 aggregating US$402 million. The largest M&A deal in the sector saw Ola acquiring Serendipity Infolabs Private Limited, a Bangalore based taxi booking service, for US$ 200 million.
M&A Activity
The Mobility sector recorded 22 M&A deals in the period 2013-2018 aggregating US$402 million. The largest M&A deal in the sector saw Ola acquiring Serendipity Infolabs Private Limited, a Bangalore based taxi booking service, for US$ 200 million.
Future Outlook
New technologies and modes of transport are already disrupting the status quo and changing the way people move. The pace of innovation is rapid and filled with opportunity, as well as risk, because decisions made today will lock in infrastructure for decades to come. Two important future trends; greater adoption of electric vehicles both two and four wheelers to curtail pollution levels and bringing down associated fuel costs and the second is to associate with an offline model for can aggregators to cater to tier II cities.
We are also slowly witnessing a shift where owning a car is no longer a necessity. Alternative modes of travel have filled the gap left by traditional public transportation systems. As companies achieve scale, unit economics should continue to get better giving the high recall value that these companies are likely to see especially in first/last mile micro mobility side as the rides are more predictable which make supply planning easier and hence result in a better customer experience.
While bike taxis have been around, the regulation side of things have been uncertain; but once established, these bike taxis will also significantly improve on- demand mobility. Gojek is an example of high growth opportunities globally. Players will also have the opportunity to move into adjacent areas of services once a certain scale is achieved and that will also make for a more engaging ecosystem. As technology in the space picks up, the future trend seems to be better travel time prediction, increase in eco-friendly transport options, pick-and- go bicycle sharing platforms and easier adoption of public transportation.