Car rental startup Zoomcar is set to raise $50 million (Rs 318 crore) from automobile and farm equipment manufacturer Mahindra & Mahindra and existing investor Ford Smart Mobility, the startup investment arm of global automaker Ford Motor Company. The term sheet has been signed and a deal, which would value the Bangalore-based startup at around $200 million, will be closed within weeks, two persons familiar with the development told VCCircle.
The development comes a few months after Mahindra & Mahindra and Ford announced a strategic alliance to work together in areas such as shared mobility and connected cars, besides helping each other expand their presence in the Indian and overseas markets.
In November 2017, business newspaper Mint had reported that Zoomcar was in talks with new and existing investors, including Mahindra & Mahindra to raise $50 million. According to one of the persons cited above, Mahindra & Mahindra will put in around $30 million and Ford will invest the remaining $20 million. Ford will continue to be the largest external shareholder after the latest fundraise, while Mahindra & Mahindra and Sequoia Capital will be among the top three investors in Zoomcar.
Ford, Mahindra & Mahindra, and Zoomcar did not immediately respond to email queries from VCCircle on the fundraise at the time of publishing this report.
Zoomcar has so far raised around $60 million. Co-founded by Greg Moran and David Back in 2012, the car rental firm, which is a new generation of transportation services promoting shared mobility, attracted investment from Ford, Sequoia Capital, and angel investors such as former CFO and HR head of Infosys TV Mohandas Pai and former US treasury secretary Lawrence Summers. VCCircle was the first to report Ford’s plans to invest in Zoomcar in mid-2016.
In March 2017, VCCircle, citing three people in the know, had reported that Ford, as the lead investor, had shown interest to acquire Zoomcar. It is not immediately clear how this would play out as Mahindra & Mahindra is joining as a significant minority shareholder of the company. According to one of the persons mentioned above, Ford is actively involved in bringing in Mahindra & Mahindra as an investor in the self-drive car rental startup.
Incidentally, Mahindra & Mahindra’s investment in Zoomcar follows a strategic alliance that the Mumbai-based homegrown auto major and Ford jointly announced in September 2017. The partnership would address areas such as mobility programmes and connected vehicle projects, the two firms had said in a joint statement at that time. Also, Zoomcar and Mahindra & Mahindra recently entered into a partnership under which the former would promote the latter’s electric vehicle offering e2o on its platform.
With Mahindra & Mahindra becoming an investor, Zoomcar will be backed by two formidable automobile manufacturers. Ford had already spelt out its long-term interest in Zoomcar, which it thinks would be an important part of its business strategy in India. “Our new mobility business could be a factor that plays in there,” Mark Fields, Ford’s former chief executive, had said a year ago.
Fields’ successor, the current CEO Jim Hacket, was directly involved in the decision to invest in Zoomcar as he was previously chairman of Ford Smart Mobility LLC. The Indian self-drive car rental startup was one of the early bets of Ford Smart Mobility, which was formed in early 2016 to build, design and invest in new age mobility solutions.
As for Zoomcar, the fresh funding of $50 million comes at a time of overseas expansion and business diversification. The company launched bicycle sharing service, PEDL, in October 2017 even as the five-year-old company aims to expand to several countries in Asia and Africa.