Ola Electric Dominates Indian EV Two-Wheeler Market with Record Margins and Approaches Profitability
A new report from global brokerage Bernstein highlighted Ola Electric’s leading position in the Indian electric two-wheeler (EV 2W) market. The company has achieved the highest gross margins in the industry and is on a promising path toward profitability. This analysis comes at a time when the EV sector is experiencing significant growth and competition.
Main Points
Ola Electric’s Impressive Margin Performance
According to Bernstein’s findings, Ola Electric recorded a gross margin of 18.4% in the first quarter of FY2025. This figure significantly surpasses its main competitors, including TVS at 14%, Bajaj at 12.3%, and Ather at just 7%. The report attributes Ola’s strong margin performance to several key strategies:
- Aggressive Localization: By sourcing materials locally and manufacturing in-house, Ola Electric has effectively reduced costs.
- Vertical Integration: This approach allows for better control over production processes and quality.
- Direct-to-Consumer Model: Selling directly to customers eliminates intermediary costs, enabling more competitive pricing.
- Government Subsidies: Access to programs like the Production Linked Incentive (PLI) and Faster Adoption and Manufacturing of Electric Vehicles (FAME) has bolstered financial performance.
Path to Profitability
The report also indicates that Ola Electric is nearing EBITDA-level profitability, with an EBITDA margin of -2% for the quarter. This is a notable improvement compared to competitors like TVS (-7.9%), Bajaj (-10.4%), and Ather (-37%). Bernstein emphasized that the unique nature of EV manufacturing, which differs from traditional automobile production, plays a crucial role in achieving profitability.
Investment banks are optimistic about Ola Electric’s future. Recently, both Goldman Sachs and Bank of America initiated coverage on the company’s shares, giving them a ‘buy’ rating. Goldman Sachs set a price target of Rs. 160 per share, while Bank of America has a target of Rs. 145 per share. Analysts believe that Ola Electric is well-positioned for substantial growth due to favorable long-term trends in the Indian EV market.
Competitive Landscape
Ola Electric’s success comes amid growing competition in the Indian EV market. The company has invested around $1 billion into building its EV ecosystem, giving it a significant advantage over competitors who struggle to match its scale. The introduction of its Gen 3 platform is expected to enhance its gross margin profile further.
Despite facing skepticism regarding its profitability and potential slowdowns in the EV market, Bernstein’s report paints a positive picture for Ola Electric. The company’s focus on urban commuters and tech-savvy consumers has driven its leading industry volumes.
Future Outlook
Ola Electric plans to continue expanding its product lineup beyond scooters to include electric motorcycles by the end of next year. The company aims to capture diverse consumer preferences with models like Diamondhead, Adventure, Roadster, and Cruiser.
Ola Electric’s founder, Bhavish Aggarwal, has laid out a roadmap for profitability that includes increasing production volumes and further vertical integration of its supply chain. This strategy aims to reduce reliance on external suppliers and improve margins as production scales up.
The company has also announced plans to integrate its proprietary ‘Bharat 4680’ lithium-ion cells into its vehicles starting in Q1 FY26. This move is expected to significantly impact cost structures and enhance profitability.
Market Dynamics
The Indian electric two-wheeler market is currently valued at approximately $1.3 billion, with revenues projected to grow as consumer interest in electric vehicles increases. However, challenges remain as companies navigate profitability hurdles amidst rising competition and fluctuating government incentives.
Despite these challenges, Ola Electric’s strategic moves position it as a frontrunner in the transition towards sustainable mobility in India. As it continues to innovate and expand its offerings, Ola Electric is set to play a pivotal role in shaping the future of electric transportation.
