India’s competition watchdog puts a brake on Hyundai-Kia USD 300 million investment in Ola

Korean automakers agreed to invest USD 300 million in Ola in March.

Photo by Vruyr Martirosyan on Unsplash

Indian anti-trust watchdog, Competition Commission of India (CCI) has put a spanner in the works of South Korean automobile maker Hyundai and its affiliate Kia Motor’s plans to invest USD 300 million in ride-hailing unicorn Ola.

In response to the application sent by the trio to CCI seeking investment approval, the regulator asked Ola’s parent company ANI Technologies to define the competitive impact of car companies investing in ride-hailing apps.

As Ola dragged its feet on CCI ‘s directive and did not submit the report on time CCI termed the proposal as invalid. Bengaluru-based Ola refiled its application early in September, stating the investment deal of USD 300 million that was solely to go in ANI Technologies, would now be split into two: USD 250 million for Ola and the remaining USD 50 million to go towards Ola Electric–a company forked out of its parent company to focus on electric vehicles.

“CCI thought that the deal might create a monopolistic situation for one car maker in the cab-hailing market,” a source told Moneycontrol.

In its second application for approval, Ola has dwelled on the competitive landscape in India, touching on points like the market size for production and sale of passenger cars in India, operational leasing services, radio taxi services, and charging infrastructure services for electric vehicles. According to the source quoted above Ola’s second attempt at getting CCI’s approval might not bring any different result.

In March 2019, Ola partnered with Hyundai and Kia Motors for strategic investment wherein the Korean automakers would build India-specific electric vehicles (EVs) and infrastructure around it.

Ola’s co-founder Bhavish Aggarwal personally owns about 40% stake in Ola Electric, making him the biggest shareholder, and the remaining 60% is divided between investors like Softbank, Tiger Global, and Matrix Partners, amongst others.

Nine-year-old Ola, valued at over USD 6 billion has raised a total of USD 3.3 billion to date from Softbank, Tiger Global, Tencent, Matrix Partners and DST Global among others.

Meanwhile, Hyundai had launched its Kona electric SUV car in July 2019 in India and is now working on the prototype of a smaller electric car. Whereas, Kia Motors Corporation and its parent Hyundai are planning a slew of EVs tailored to the Indian market.  At the 2018 Auto Expo, Kia had sounded out about the possibility of an India exclusive compact electric vehicle between 2019 and 2021.

“We are ready to introduce EVs in India but it depends on infrastructure and government support policy. When the market is opportune, we will introduce EVs anytime to India,” Kia Motors Corporation President and CEO Han-Woo Park told local media Business Standard in June this year.