The increase in using alternative energy compared to fossil fuels is ever-growing. The shift is ongoing due to the climate change issues. Many governments across the world are trying to replicate the energy source of fossil to renewable energy. Major Cities in India fight air pollution and revolutionizing Electric Vehicles was a way forward to curb the pollution effect.
The reduction of fossil fuels can even help India’s importing bill on crude oil which can improve the trade deficit. On this opportunity, an IITian started an Electric Vehicle in the 2-wheeler segment in India which holds a high market share. In this article, we will look at Ola Electric, its business, financials, and plans to determine the company’s stock growth.
Company Overview
Ola Electric was incorporated in 2017. The company manufactures and builds integrated technology and components for Electric Vehicles (EVs) at Ola Futurefactory. Their product line includes Ola S1 Pro, S1 Air, S1 X, S1 X+, and others. Ola has announced four new motorcycles: Adventure, Diamondhead, Cruiser, and Roadster. They recently launched Roadster e-bikes in different price segments, with the top model costing around Rs. 2L and the lower model Rs. 75,000. Ola plans to start motorcycle deliveries in the first half of 2026.
The company’s business model involves manufacturing at Ola Futurefactory and the upcoming Ola Gigafactory. Their R&D covers motor, electronics, software, and other areas. Ola operates its charging network, sales and service network, and online retail platform within the D2C platform.
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Ola’s market share in the E2W segment reached 34.80% in FY24, with the company reporting a current share of 49% in Q1FY25. This marks a significant increase from 21% in FY23 and 5.70% in FY22. As of March 31, 2024, Ola operates 870 experience centers and 431 service centers for D2C distribution.
About the Founder
Bhavish Aggarwal studied in B.Tech at IIT Bombay and began his career in Microsoft. In 2010, he Co-founded Ola Cabs and has been CEO ever since. Now, after a near duopoly in the Indian ride-hailing market with Uber as a competitor, he has ventured into electric two-wheeler manufacturing. With Investors like SoftBank Group and Tiger Global Management, he started Ola Electric and now it is the market leader among its peers.
Industry Overview
India produces about 28 million vehicles annually in its huge automotive market. This sector contributes 35% to manufacturing GDP and 7% to overall GDP. The Indian government plans to boost its contribution to 40% of manufacturing GDP by 2026. Advancements in cell technology are making EVs comparable to ICE vehicles in performance.
EVs have lower total ownership costs than ICE vehicles due to reduced or no road taxes in many Indian states. They support India’s goal to reach net-zero emissions by 2070. EVs produce zero tailpipe emissions and have a smaller carbon footprint than ICE vehicles, even considering manufacturing and charging.
The PLI scheme launched by the Indian government in 2020 is to boost domestic manufacturing. These schemes cover 14 sectors and aim to generate additional production of ₹30 trillion over five years. They invite foreign and local investors to set up new capacities.
India serves as a global hub for two-wheeler production. In FY23, it produced about 19.5 million two-wheelers, holding a 15-20% share of world production. India exported 4 million units and sold 16-17 million units domestically.
As a manufacturing powerhouse, India has one of the largest two-wheeler markets globally. The domestic market value reached ₹1.4-1.6 trillion in FY23. Motorcycles make up around two-thirds of the Indian two-wheeler industry.
Financial Overview & Its Segments
Ola Electric increased its revenue from operations by 90.42% to Rs. 5,009.83 crores in FY24 from Rs. 2,630.92 crores in FY23. The company reduced its losses by 7.63% to Rs. 1,584.40 crore in FY24 from Rs. 1,472.07 crore in FY23. Ola Electric improved its material costs, employee benefits expenses, stock purchases, and other expenses, limiting its losses.
The company’s earnings per share decreased by 11.25% to Rs. -4.35 in FY24 from Rs. -3.91 in FY23. Despite the concerning reduction in EPS and losses, Ola Electric managed to reduce costs.
Government incentives accounted for 1.94% of operating revenues at Rs. 97.23 crore in FY24, applying to Ola S1 Pro and Ola S1 Air products. The company includes part of this incentive under other income based on government criteria fulfillment.
Ola Electric reported negative RoE in FY23 and FY24 due to losses. However, the company improved its gross margins (excluding employee expenses) to 12.58% in FY24 from 2.30% in FY23. Deliveries increased by 111% year-over-year, reaching 3.3L units in FY24 compared to 1.56L in FY23. In recent
The company generates revenue from manufacturing and supplying electric vehicles, providing EV value chain services, and trading related accessories. Ola Electric focuses its sales primarily in India.
Ola Electric increased its installed capacity from 1,87,500 units in FY22 to 6,79,000 units in FY24. The company achieved 49% capacity utilization in FY24. Over the years, the company has to increase its production to achieve optimum utilization or else the costs would be high.
Future Plans Of Ola Electric
- The delivery of the recently announced Motorcycle segments is to be started by the end of this financial year.
- Ola Electric will start integrating its own manufactured 4680 cells into its vehicles from Q1 FY26.
- The company will ramp up cell production from the current 1.4 GWh capacity to 5 GWh, then to 6.4 GWh, and eventually to 10 GWh and beyond.
- Ola Electric plans to develop LFP and LMFP chemistries for its cells in the next couple of years, in addition to the current NMC chemistry.
- The company will continue to focus on profitable growth while tactically using pricing levers.
- Ola Electric aims to expand into export markets in the medium to long term, focusing on ASEAN, Africa, Latin America, and parts of Europe.
- The company will consider capacity expansion and augmentation for its automotive segment when it approaches current capacity limits.
- Ola Electric plans to improve its gross margins through vertical integration and in-house technology development.
- The company will keep innovating on cell technology to improve metrics like range, weight, charging time, and cost in subsequent generations of cells.
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Peer Comparison
Eicher Motors, TVS Motors, Hero Motocorp, and Bajaj Auto directly compete with Ola Electric. Unlike its profitable peers, Ola has not yet achieved profitability. Bajaj Auto boasts the highest EPS among the group.
Given Ola’s capital-intensive nature, the gross margin ratio indicates operational efficiency. Ola’s margin stands at 12.58%, while its peers range from 28% to 46%.
In FY24, Ola Electric’s EBITDA margin sits at -19.84%, contrasting sharply with its peers’ range of 14% to 33%. Despite negative margins compared to competitors, Ola has improved its margins year-over-year. Ola’s debt-to-equity ratio exceeds 1, placing it at the higher end among peers. Only TVS Motors carries more debt than its competitors.
Ola Electric dominates the E2W segment with a 34.80% market share, significantly outpacing its rivals. Ola has exponentially increased its market share year-over-year, far surpassing its competitors. TVS Motors follows with 19.30%, Bajaj holds 11.30%, and Hero claims around 1.90%. Eicher has no presence in this segment.
OLA Electric’s recent listing on Bourses
The company listed a flat price on the bourses with Rs. 76 which was the higher band of the IPO Price. However, it surged 20% during the day closing at Rs. 91.20. Over the next 6 days, the stock doubled to make a 52W high of Rs. 157.40. The surge was due to an announcement of Ola group to introduce the motorcycle segment into the portfolio and the release of Q1FY25 results.
Conclusion
As we look into Ola Electric’s business, financials, and some plans, we will look into the company in brief. The company has projected its revenue growth in recent years after its product launch. Ola’s product is price-sensitive and competitive compared to its competitors. They command a high market share which provides an edge but sustaining with new product launches and upgrading the existing products lies a challenge for every company.
However, Ola is making losses and needs to improve their sales further to work at the optimal efficiency to bring down the costs. The competitors as well are catching up with the race and competing against existing players for a long time depending on various factors. Most of the players already have experience and have been working in the automobile industry for decades and they can bring down the costs.
What do you think about Ola’s products? Will Ola defend their market share? What do you think about its prospects? Let us know in the comments section below.
Written by Santhosh
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