Software subscription model to give Ola competitive edge in the electric scooter market

Software subscription model to give Ola competitive edge in the electric scooter market

What sets Ola Electric apart is not just the superior product but also a strategic business model that allows them to offer their scooters at a more affordable price point. Instead of relying solely on the initial sale of the scooter, Ola plans to generate continuous revenue through subscriptions for its software. This software, boasting features such as hyper mode, proximity unlock, key sharing, and cruise control, will be a key driver of profits. 

Users may also be required to pay for software updates or annual maintenance charges, contributing to the company’s sustained profitability. This approach contrasts sharply with competitors who primarily focus on scooter sales, hoping for subsequent scooter or battery purchases after a few years.

For electric vehicle (EV) customers, the battery cost often comprises a substantial portion of the vehicle’s value, prompting them to consider buying a new scooter when the battery depletes. Ola aims to extend the battery lifespan, utilising LG Chem battery cells. However, users may still need to pay for performance enhancements, given Ola’s development of smart locks, smart batteries, and power trains.

Notably, traditional motorcycle manufacturers struggle to ensure after-sales service and generate spare revenue. Ola, on the other hand, has established a network of solely operated service centres for their smart scooters, ensuring all service and spare revenue remain within their ecosystem.

Ola’s revenue model draws parallels with Tesla’s successful approach, where 72 per cent of profits come from software subscriptions. Tesla, renowned for its autopilot features, offers advanced driver assistance through a monthly subscription, while hardware for advanced features is sold with the vehicle or available as a separate purchase.

Tesla’s autopilot is already available on a subscription basis, providing features such as steering, accelerating, and braking assistance within the vehicle’s lane. Similarly, Ola’s smart batteries and power train enhancements suggest a comparable strategy.

Drawing inspiration from Tesla’s success, Ola could potentially generate more revenue from software and subscriptions than hardware. Tesla’s model indicates that autopilot and full self-driving (FSD) features could contribute to 25 per cent of gross profit by 2025, emphasizing the significant potential of software-related revenue.

In conclusion, Ola Electric’s strategic business model, akin to industry leaders like Tesla, positions them for success in the evolving electric scooter market.

(The Writer, Vishnuraj Moolassery, is an automotive, entrepreneurship and innovation consultant)

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