India’s Zoomcar raises $40M led by automotive giant Mahindra & Mahindra

India’s Zoomcar — which operates an on-demand car rental service — has raised a $40 million Series C round led by Mahindra & Mahindra, the 70-year-old Indian corporation that specializes in automotive.

Ford and other existing investors also took part in the round, Zoomcar confirmed. CEO and co-founder Greg Moran added that the round is still open and may be extended with other investors coming in.

As it stands, the new capital takes Zoomcar to around $100 million from investors to date, according to Crunchbase. Previous to today, its last round was its $24 million Series C led by Ford in 2016 with an undisclosed investment from China’s Cyber Carrier added later that year.

Other backers include Sequoia Capital, Nokia Growth Partners, FundersClub and a number of angels including former U.S. treasury secretary Larry Summers and ex-Infosys CFO T.V. Mohandas Pai.

Mahindra & Mahindra, for those who are not aware of it, is a $14 billion-valued company that operates a series of businesses focused on automotive, motorcycles, agricultural machines and more. The firm started out as a manufacturer for Jeep, but it has expanded its business considerably. The firm has worked with Zoomcar to distribute its electric vehicles.

Rumors of a potential investment in Zoomcar were first reported by Indian news site Mint in November.

Growing the fleet

Zoomcar was founded in 2013 by Americans Moran and David Back. Back is not directly involved in the business today, having returned to the U.S. for personal reasons in 2015, and Moran serves as CEO.

Plenty has happened in the past 18 months since we last wrote about Zoomcar. The service is currently present in 29 cities while it claims 2.7 million registered users and 3,500 cars. Its customers have completed over 1.1 million trips to date.

Its core business remains Zipcar-style rentals, allowing registered users to find and use cars in a city, but the company shifted its focus with ZAP (Zoomcar Associate Program) which allows new car buyers to lease their vehicles out when they aren’t being used. (India law prevents existing vehicles being used for commercial purposes.) That helps buyers recoup the cost, and it allows Zoomcar to grow its inventory without the high cost of purchase.

That approach helped grow Zoomcar’s fleet but not to the 25,000-car target Moran spoke of last year. Moran told TechCrunch while demand for ZAP purchases reached 25,000-30,000 people, a combination of India’s “byzantine” car financing landscape and state-level red tape, meant interested customers were forced to wait months for their car which most weren’t prepared to do.

In response, Zoomcar modified its package somewhat with a subscription service that effectively allows users to pay up in advance for access to a personal car for a 6-24-month period.

In other words, the process of buying the car is massively simplified with Zoomcar doing most of the work. It simply turns up at your house, in similar to fashion to how Silvercar delivers Audis in the U.S..

Their costs are lowered if car owner leaser, agrees to allow the vehicle to be pooled as part of ZAP. The deal is sweetened by free insurance, maintenance and other perks which Zoomcar hopes make it more attractive than buying.

Only a few months old, Moran said the move has strengthened ZAP which is close to representing one-third of its fleet. The Zoomcar CEO is optimistic that it can reach 15,000 cars by the end of the year and go from there.

“We exceeded [the 25,000 car target] number in terms of demand for ZAP, the challenge was the last mile and that’s where this program can transform it,” Moran said.

Moran said electric vehicles are another key driver, which is where Mahendra & Mahendra comes into the strategic picture. The companies are working together on selected pilots. Right now, just 50 of Zoomcar’s fleet are EVs, but Moran sees that figure growing to 500 in the coming few months ahead of a further push.

“We’re thinking that by 2020, EVs will be over 50 percent of the fleet,” he added.

Pedal power

Beyond electric — which also includes electric scooters — Zoomcar has gone further still.

Last year, the startup expanded into bike-sharing services with its Pedl offering which is rivaled by a new launch from taxi-hailing firm Ola and China’s Ofo, which recently moved into India. Pedl is available in half a dozen cities in India, including Chennai where it partnered with Mahindra World City.

The core service is 29 cities in India, with perhaps the potential to reach 35 in total, but the scope for Pedl is far more ambitious with the company aiming for 100-plus locations that would include tier-three cities (and beyond) where the car rental business is unlikely to enter.

“Pedl gives us a virtuous flywheel effect,” Moran explained. “It’s a way to give us a massive funnel for Zoomcar.”

That applies to the 30-35 cities where its rental cars as positioned, but in Pedl-only cities, Moran sees the potential to move into complementary services in the future.

Currently in ten cities since its launch three months ago, Pedl is clocking around 500,000 transactions per month, according to the company. Moran thinks that over one million transactions per month can happen before the end of the year if Pedl expands to 75 cities and 200,000-250,000 bikes as is planned.

As for global expansion, Moran said in 2016 than 2018 would be the year for moving overseas but challenging conditions in India and expansion into new verticals have pushed that timeframe back to “two to three years.” The target remains the same, and that is to explore neighboring markets in South Asia and Southeast Asia. Africa, where Moran sees similarities with India, is another region that Moran said Zoomcar is “continuously evaluating.”

At the end of 2017, Zoomcar announced it had turned EBITDA positive but it remains unprofitable overall. According to Mint, which accessed filings, the company lost 100.4 crore ($15.6 million) for the financial year ending March 2017, versus 101.4 crore ($15.8 million) in the previous year. Revenue for the period grew by 35 percent to reach 121.2 crore, or approximately $19 million.

The company’s newest financial results come after March — even private companies file financial returns annually in India. Moran didn’t comment on them, but he did say that if the company can hit its goal of 15,000 cars on the road it is looking at “north of $100 million in annualized revenue.”

“We’re not burning cash for operations,” said Moran. “We want to be the definitive leader within self-drive mobility in India.”