Ola Electric Mobility Limited, specializes in electric vehicles (EVs) and EV components, operating within the rapidly growing Indian EV market. It distinguishes itself as a “pure EV player” meaning it focuses solely on EVs and does not allocate resources to traditional internal combustion engine (ICE) technologies.
The company has primary manufacturing facilities, Ola Futurefactory and Ola Gigafactory in the Krishnagiri district of Tamil Nadu. Ola Futurefactory, spanning 134.95 acres, focuses on the production of electric two-wheelers (E2Ws). Adjacent to Ola Futurefactory, Ola Gigafactory focuses on the development and manufacturing of EV batteries, a critical component in the EV value chain.
The company’s primary revenue streams stem from the sale of electric scooters, vehicle accessories (including spare parts for repairs), and services such as performance upgrades for their products
Ola Electric Mobility Limited has implemented a vertically integrated business model, encompassing in-house research and development, manufacturing, and a robust go-to-market strategy.
The company currently manufactures seven electric scooter products and plans to release four more in the future. It is also in the process of developing electric motorcycles but has not begun to deliver them to customers. It also has a battery innovation centre in Bengaluru, dedicated to advancing battery technologies for its EVs.
The Ola S1 Pro (both Gen 1 and Gen 2) has been the highest-selling model overall. However, the Ola S1 Air and Ola S1 X+ demonstrate a strong sales trajectory in their first year, suggesting they may soon rival the S1 Pro in popularity.
In Fiscals 2024, 2023 and 2022, imported supplies comprised 37.03%, 31.11% and 29.76% of the cost of materials consumed for those respective periods. Ola Electric largely imported supplies such as lithium-ion cells, magnets, amplifiers, and electronic integrated circuits mostly from China.
Sale and Distribution Network
Ola Electric utilizes a direct-to-customer (D2C) omnichannel distribution model for its products, encompassing both online and offline channels. A key element of this model is the company’s own network of experience centres.
870 experience centres across India providing customers with a tangible “touch and feel” experience
The Ola Electric website serves as the central hub for its online sales. Customers can explore the different scooter models, reserve test drives at their nearest experience centre, and proceed with their purchase.
The company had established a network of 250 hypercharger guns and 764 standard charger guns across various states in India. Ola Electric offers free charging to its customers at both its standard and hypercharger guns until August 31, 2024.
Ola Electric has 431 service centres across India most of which are located within the experience centres.
Work Flow Chart
Revenue – Category
Experience Center – Location
Audit and Legal
The auditors noted that Ola Electric Mobility Limited and some of its subsidiaries in India did not have the audit trail (edit log) facility enabled at the database level to log direct data changes for specific accounting software used for certain periods. However, the auditors did not find any instances where the audit trail feature was tampered with during the periods it was enabled.
The auditors have relied on audit reports from other auditors for certain subsidiaries located outside India. The auditors did not audit the financial statements of Ola Electric Mobility Inc. (USA), Ola Electric UK Private Limited (United Kingdom), Ola Electric Mobility B.V. (Netherlands), and Etergo B.V. (Netherlands).
The Reserve Bank of India (RBI) has fined Ola Financial Services Private Limited (OFSPL) as following
(a) a penalty of ₹1.13 million was imposed in FY 2020, for providing a cash-out option for a semi-closed prepaid payment instrument which was in violation of Master Direction
(b) a penalty of ₹16.78 million was imposed in FY 2023, for violation of Master Direction – Know Your Customer Direction
(c) a letter of displeasure was issued in FY 2023 for violation of certain requirements under Master Direction.
Consumer Complaints: Ola Electric Mobility Limited and its subsidiary, Ola Electric Technologies Private Limited (OET), are involved in 455 consumer complaints related to EVs sold.
Directorate of Enforcement Investigation: India’s Directorate of Enforcement is investigating Ola Electric’s Promoter, Bhavish Aggarwal, regarding copyright licenses, property holdings, and a settlement with Lahari Recording Company. This investigation stems from a summons issued under the Prevention of Money Laundering Act, 2002
Complaints Against Krishnamurthy Venugopala Tenneti: Five complaints have been filed against Ola Electric Director Krishnamurthy Venugopala Tenneti for his role as a non-executive director of Indiana Dairy Specialities Limited. These complaints allege violations of the Negotiable Instruments Act, 1881, and the Code of Criminal Procedure, 1973, due to unpaid checks totalling ₹1.05 Cr
Litigation from Etergo B.V. Depository Receipt Holders: A group of former depository receipt holders of Ola Electric’s subsidiary, Etergo B.V., filed a legal action in the Netherlands. They allege that Ola Electric provided misleading information in the context of the acquisition, particularly with the valuation of Etergo B.V. on and before the acquisition of Etergo B.V. by Ola Electric Mobility.
MapMyIndia has issued a legal notice to Ola Electric, alleging that the company copied its data after Ola Electric introduced its own mapping service in India, violating their licensing agreement.
SWOT Analysis
Strengths
Leading Market Position: Ola Electric was the largest E2W seller in India by units sold in Fiscal Year 2024, achieving a market share of about 35%.
Vertically Integrated Business Model: The company emphasizes its vertically integrated approach, encompassing in-house design, R&D, manufacturing (including battery cells), and sales
Strong Leadership and Experienced Team: The company benefits from its founder’s experience in building successful businesses and a senior management team with diverse industry expertise.
Brand Recognition and Customer Base: Ola Electric leverages the existing brand recognition of its parent company, ANI Technologies (Ola Cabs), potentially providing a marketing and customer acquisition advantage.
Focus on Technology and Innovation: Ola Electric highlights its commitment to technology, software development, and incorporating innovative features into its vehicles, aiming to differentiate its products in the market
Weaknesses
Reliance on Related Parties: Ola Electric depends on companies within its Promoter Group for services and resources, potentially creating conflicts of interest and impacting pricing fairness.
Limited Operating History: As a relatively new entrant in the automotive sector, Ola Electric has a limited operational track record, making it harder to assess long-term performance and stability.
Dilution of Shareholding: The company suggests that they may have to finance growth through future equity offerings resulting in further dilution of shareholding.
Dependence on External Funding: Ola Electric has relied heavily on external financing to support its growth and capital-intensive operations, potentially impacting its financial leverage and flexibility.
Dilution of Shareholding: Company suggests that they may have to finance growth through future equity offerings resulting in further dilution of shareholding.
Opportunities
Growth of the Indian E2W Market: The Indian electric two-wheeler market is predicted to expand considerably, presenting substantial sales and expansion prospects.
Government Incentives: Favorable policies and incentives from the Indian government aimed at boosting EV adoption create a supportive environment for Ola Electric’s growth.
Expansion of Product Portfolio: Opportunities exist for Ola Electric to broaden its product offerings to include different vehicle segments and price points, catering to a wider customer base.
International Expansion: As Ola Electric establishes itself in the Indian market, opportunities may arise to export vehicles or expand operations internationally, tapping into new customer segments.
Strategic Partnerships: Collaborations with other players in the automotive, technology, or energy sectors could enhance Ola Electric’s capabilities, resources, and market reach.
Threats
Competition: Ola Electric encounters competition from established automotive firms and new EV startups, potentially impacting market share and profitability.
Technological Advancements: Rapid advancements in battery technology, charging infrastructure, and EV features could necessitate continuous innovation and investment to remain competitive.
Economic Downturn: A potential economic slowdown or recession could negatively affect consumer spending on discretionary items like vehicles, potentially impacting demand for Ola Electric’s products.
Regulatory and Policy Changes: Changes in government policies, regulations, or incentives related to the EV industry could significantly impact Ola Electric’s business and profitability.
Supply Chain Disruptions: Ola Electric, like other automotive manufacturers, faces potential risks related to supply chain disruptions, including raw material shortages or logistics challenges, which could affect production.
Porter’s Five Forces
Threat of New Entrants
LOW
The company utilizes a direct-to-customer (D2C) business model through online platforms, which could reduce the bargaining power of individual buyers, giving the company greater control over pricing and promotions.
Bargaining Power of Suppliers
MODERATE – HIGH
Despite efforts to diversify, Ola Electric at present relies heavily on its top 10 suppliers, accounting for a significant portion of its Costs. This concentration could give those suppliers more bargaining power. Ola Electric does not have long-term contracts (over one year) with its cell suppliers, this could give cell suppliers more bargaining power in negotiations.
Bargaining Power of Buyers
LOW – MODERATE
Company utilizes a direct-to-customer (D2C) business model through online platforms, which could reduce the bargaining power of individual buyers, giving the company greater control over pricing and promotions.
Threat of Substitute Products or Services
MODERATE
EVs are still in the evolving stage and the components like batteries, softwares etc face the threat of substitution due to technological advances.
Rivalry Among Existing Competitors
HIGH
Ola Electric operates in a competitive market, against industry peers like TVS Motors, Eicher Motors, Bajaj Auto, and Hero MotoCorp who have the advantage of stronger cashflows from other segments to cushion their EV departments.
Peer Comparison
While the company aims to be a pure EV player, its listed peers TVS Motors, Bajaj Auto and Hero MotoCorp primarily generate revenue from traditional internal combustion engine (ICE) based two-wheelers, making direct comparisons challenging.
Profitability: Ola Electric is not yet profitable. The company’s Return on Net Worth (RoNW) in Fiscal 2024 was -78.46%, indicating a significant loss compared to the positive RoNW figures of its listed peers.
Rapid Market Share Gain: Despite being a relatively new entrant, Ola Electric has rapidly captured a significant share of the Indian E2W market, compared to peers
Green Box
E2W penetration in India is expected to expand from approximately 5.40% of domestic 2W registration sales reported on the VAHAN portal in Fiscal 2024 to 41-56% of the domestic 2W sales volume by Fiscal 2028, according to the Redseer Report.
Favourable Government Policies: Ola Electric takes benefit of various incentive programs implemented by Govt of India to encourage the adoption and manufacturing of EVs
Production-Linked Incentive (PLI) Schemes: These schemes incentivize domestic and foreign companies to establish large-scale manufacturing facilities for advanced EV components, including batteries.
Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME): Launched in 2015, this scheme aims to promote the adoption of cleaner and more efficient electric vehicles.
Focus on Vertical Integration: allows for greater control over the supply chain, potentially leading to cost optimization and quality control.
Ola Electric’s R&D spend in Fiscal 2024 was 7.69% of its revenue from operations.
Amber Box
Capacity utilization at Ola Futurefactory, the company’s electric scooter manufacturing plant increased from 36% in 2023 to 49% in 2024.
Under the Cell PLI Scheme from the government, the company is required to manufacture cells as per the committed capacity of 1 GwH capacity FY 2024, 5 GwH in the second year, 10 GwH in the third year and 20 GwH capacity by the fourth year. If they fail to achieve the agreed-upon capacity, the Government of India has the right to deduct twice the shortfall in the committed capacity from the total subsidy payable.
There is no guarantee that Ola Electric will realize returns on its R&D investments. The EV industry is still in its early stages of development, and there is a lot of uncertainty about the future direction of the market.
Red Box
Battery Disposal and Recycling: The Battery Waste Management Rules 2022, place an extended producer responsibility on the company to ensure proper battery recycling or refurbishment. Failure to comply with these regulations could lead to financial and reputational consequences.
The company had very high negative operating cash flows and losses for the last few years, with a Return on Net Worth (RoNW) of -(78.46)% for 2024 and -(62.47)% for 2023, suggesting potentially unsustainable cash burn.
Debt to Equity Ratio: The D/E of the company as of 2024 was at 1.18, suggesting difficulties the company would face in raising further debt for its operations or growth.
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