BluSmart to Exit Ride-Hailing Business, Transition to Uber Fleet Partnership

BluSmart, an electric vehicle (EV) ride-hailing startup, is preparing to exit its core ride-hailing business. The company is set to transition into a fleet operator for Uber, marking a significant shift in its business strategy after nearly six years of offering ride-hailing services. Sources familiar with the matter revealed that shareholders of BluSmart have approved a phased plan to transition its fleet of vehicles to the Uber platform, starting with 700 to 800 cars.

Challenges Behind the Pivot

The decision to pivot comes amidst severe financial pressures on BluSmart, including a monthly cash burn of over ₹20 crore. Despite significant investments from the company's founders, Anmol Singh Jaggi and Puneet Singh Jaggi, BluSmart has struggled to maintain financial stability.

The two founders, holding over 25% equity, have been supporting the company financially, alongside external investments. BluSmart's move aligns with Uber's “Green” service initiative, which aims to incorporate 25,000 electric cars through fleet partnerships with companies like Everest Fleet and Lithium Urban Technologies.

Financial Struggles and Funding Roadblocks

The Strain of Financial Stress

BluSmart’s ongoing financial troubles have worsened due to challenges at Gensol Engineering, a solar engineering firm co-promoted by the Jaggi brothers. Gensol owns a significant portion of BluSmart’s fleet, which now totals around 8,000 electric vehicles. The struggles at Gensol have made it difficult for BluSmart to secure additional funding.

Failed Fundraising Efforts

Earlier this year, BluSmart attempted to raise $50 million from existing investors but failed to secure new capital. This fundraising failure, coupled with cash flow issues, led to the delay of salary payments for March. In an internal email, Anmol Jaggi reassured employees that salaries would be paid by the end of April, prioritizing those in the lower pay brackets.

BluSmart's Negotiations with Uber

Securing Investment from Uber

BluSmart is now looking to secure a $15–$20 million investment from Uber, but this will depend on how smoothly the fleet transition process goes. Under the proposed agreement, BluSmart’s vehicles will begin operating on Uber’s platform, with the startup receiving a share of the fare revenues after Uber deducts its commission.

Vehicle Sale Deal Collapses

The Gensol-Refex Deal Fails

BluSmart's financial troubles also extend to a failed deal with Refex Industries to sell 2,997 electric vehicles. Gensol Engineering, which owns most of BluSmart’s fleet, had arranged the sale, but Refex Industries, a fleet operator for Uber, walked away from the deal due to concerns over the condition of the vehicles. This deal's collapse has added pressure to BluSmart’s already strained cost structure.

Ongoing Vehicle Lease Issues

BluSmart has been heavily reliant on Gensol for leasing vehicles. However, Gensol has stopped issuing new leases since early last year, forcing BluSmart to operate with fewer vehicles. In light of Gensol's current financial instability, BluSmart faces renewed stress on its cost model.

Competition and Shrinking Ride Volumes

Declining Ride Volumes and Competitive Pressure

BluSmart’s operational difficulties have resulted in a sharp decline in ride volumes. The company, which once handled 25,000–30,000 rides per day, now reports fewer than 12,000 rides daily. Additionally, BluSmart has scaled back its international ambitions, halting operations in Dubai and suspending expansion plans for Saudi Arabia.

Aggressive Competition from Rapido

Rapido, a rival ride-hailing platform, has stepped up its efforts to recruit BluSmart’s driver-partners by offering higher incentives. BluSmart’s loss of loyalty among drivers is evident, with users in Bengaluru reportedly receiving BluSmart vehicles while booking through the Rapido app.

Internal Leadership Changes

Leadership Exodus Amidst Challenges

BluSmart’s internal troubles have been compounded by several key leadership departures. Anirudh Arun, CEO of BluSmart Fleet, Rishabh Sood, CTO, and Tushar Garg, CBO, have all left the company. Vice President Priya Chakravarthy has also departed. Nandan Sharma, another senior executive, is expected to take over as CEO to guide the company through this transition.

Financial Performance and BluSmart’s Future Outlook

Past Investments and Financial Performance

Since its inception in 2019, BluSmart has raised over $180 million from investors including BP Ventures and Green Frontier Capital. For the financial year ending March 2023, BluSmart reported a sharp increase in revenue, which rose to ₹71 crore from ₹13.84 crore the previous year. The company also managed to reduce its losses, bringing them down to ₹14.89 crore from ₹35.37 crore in FY22.

Investor Skepticism and Uber's Interest

Despite these financial gains, investor confidence has been shaken due to BluSmart’s operational and financial struggles. While BluSmart previously denied acquisition talks with Uber, industry insiders suggest that Uber remains interested in acquiring BluSmart’s assets or deepening the partnership once BluSmart stabilizes its operations.

A Critical Turning Point for BluSmart

BluSmart’s Future Uncertainty

Once a promising competitor to ride-hailing giants like Uber and Ola, BluSmart is now facing significant challenges. Its future depends on a successful transition to become a fleet partner for Uber—a move that could provide a lifeline for the company but also carries inherent risks. The success of this strategy will determine whether BluSmart can recover from its current financial and operational turmoil.