OLA Electric IPO: Can the Electric Dream Become Affordable Reality?

OLA Electric Introduction

Ola Electric Mobility Limited, stylized as OLΛ ELECTRIC, is an Indian electric two-wheeler manufacturer based in Bangalore.

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Brief about 

Summary of the business

OLA Electric is a pure EV player in India building vertically integrated technology and manufacturing capabilities for EVs and EV components. OLA Electric manufacture EVs and certain core EV components at the Ola Futurefactory. OLA Electric have delivered four products and additionally announced six new products. We are building our EV hub in Tamil Nadu, India, comprising Ola Futurefactory for EV manufacturing, upcoming Ola Gigafactory for cell manufacturing, and co-located suppliers.

History

OLA Electric Company was incorporated as ‘Ola Electric Mobility Private Limited’ at Bengaluru, Karnataka as a private limited company under the Companies Act, 2013, pursuant to a certificate of incorporation dated February 3, 2017, issued by the Registrar of Companies, Central Registration Centre. Subsequently, our Company was converted to a public limited company and the name of our Company changed to ‘Ola Electric Mobility Limited’ pursuant to a Shareholders’ resolution dated October 5, 2023 and a fresh certificate of incorporation dated November 17, 2023 was issued by the RoC.

Promoters & Board of Directors

• OLA Electric Promoter is Bhavish Aggarwal.

Board of directors

Share Holding pattern

Qualitative Factors

• Pure EV player with a leadership position in the fast-growing Indian E2W market
• Founder led company supported by a highly experienced and professional leadership team
• In-house R&D and technology capabilities
• Manufacturing at scale and supply chain resilience
• Scalable platform-based design and development approach
• Direct to customer omnichannel distribution model
• Eligibility for EV-related government incentives leading to cost advantages
• Execution excellence

Strategy

• Build “India” centric EV products with an “India first” strategy
• Continue to invest in R&D to advance our technological capabilities and optimize costs
• Building an EV hub with vertically integrated manufacturing and supply chain to improve cost efficiency
• Develop our cell technology and strengthen our in-house manufacturing capabilities
• Strengthen our D2C omnichannel network across sales, service and charging
• Expand the product portfolio to drive market penetration
• Allocate capital efficiently and focus on growth
• Leverage the global EV opportunity

Industry Outlook

India automotive market consists of ~26Mn vehicles and is central to the economy.
India has a large automotive market, comprising annual production of ~26Mn vehicles as of FY 2023 (excluding electric rickshaws – Source: Society of Indian Automobile Manufacturers (SIAM)). It is central to India’s manufacturing sector and the overall economy, contributing ~35% to the manufacturing GDP and 5-6% to the overall GDP in FY 2023. Further, the Indian government envisions improving contribution of the automotive industry to reach ~40% of the manufacturing GDP by FY 2026 (Source: Automotive Mission Plan 2016-26).
While India’s (and global) vehicle production experienced a short-term decline in the FY 2020 – FY 2022 period, (due to the global shortage of semiconductors, pandemic-induced lockdowns, increase in fuel prices and volatile geo-politics driven by the Russia-Ukraine conflict), it has recovered well to ~83% of FY 2019 levels (as of FY 2023). Despite having large two-wheeler (2W) and four-wheeler passenger-vehicles (4W-Passenger Vehicle) markets, India sees limited penetration, indicating a solid backdrop for medium to long-term volume growth.

2W, 3W, 4W-Passenger Vehicle and Commercial Vehicles are the key segments in India’s automotive market.

• Two-wheelers (2W)
  • India is a global production hub for two-wheelers – a total of ~19.5 Mn 2W were produced in India in FY 2023 contributing 15-20% of the world’s total 2W production, making it the second largest 2W producer in the world after China. Of the total production, ~4 Mn units were exported. 16-17 Mn units were sold domestically. Globally, India is the second largest 2W market in terms of domestic sales volumes. Value of 2W domestic market size in India was ₹1.4-1.6 Tn (US$17-20 Bn) in FY 2023.
  • Multiple factors are pushing the personal mobility demand towards 2Ws:
    • Need for affordable personal mobility – 2Ws offer greater reach and convenience than public transport facilities and modes of shared mobility, while also being more affordable than other personal mobility options (like 4W-Passenger Vehicles).
    • Current state of road transport infrastructure – 2Ws are suitable to travel across unpaved (especially in smaller towns & rural areas) and traffic congested roads that require ease of maneuvering and, narrow lanes which do not allow bigger & bulkier 4Ws.
    • Strong supply – Availability of wide 2W option range across price-points, fuel types and with multiple features etc., marketed specifically towards targeted age-groups, gender and income levels.
    • Last-mile mobility – Travel requirements to reach public transport stations and increasing demand for last-mile deliveries (for industries such as food, ecommerce etc.). The latter will also fuel greater demand for electric 2Ws as players in these markets move towards meeting their sustainability commitments.
  • Scooter sub-segment has grown quickly in past few years owing to:
    • Ease of learning & riding – smaller structure, gearless, light-weight framework (which makes it the preferred choice for most women, old and inexperienced riders). This also pushes the demand in domestic and international tourism markets where people need rentals for temporary use.
    • Utility and features – Storage space, safer (low top speed), ease of maneuvering through congested roads.
• Four-Wheeler Passenger vehicles (4W-Passenger Vehicle)
  • This segment comprises cars of various sub-segments such as hatchbacks, sedans and utility vehicles.
  • As per SIAM, India produced ~4.6 Mn 4W-Passenger Vehicles in FY 2023, of which ~0.7 Mn were exported and 3.9 Mn were sold domestically (domestic opportunity size of ₹3.2-3.5 Tn (US$ 40-45 Bn) at consumer prices). In terms of domestic sales, India became the world’s third largest 4W-Passenger Vehicle market (source: Economic Survey) in December 2022.
  • Cars are being adopted by a higher number of Indian households due to increased affordability led by growing income levels. Furthermore, premiumization trends can be seen with segments like compact SUVs growing faster than the other segments as consumers lean towards better drivability (across different road conditions), greater comfort and improved digital connectivity. Thus, entry-level hatchbacks will relent some market share to more premium segments, however affordability will continue to drive the overall demand. This along with other underlying drivers of automotive growth (e.g., reliance on localized components & fuel, development in road infrastructure and improving credit penetration) will fuel the growth for 4W-Passenger Vehicle ahead.
• Commercial vehicles
  • In FY 2023, 1 Mn commercial vehicles were produced in India, of which ~0.08 Mn were exported, and 0.96 Mn were sold domestically. Growth in the segment is driven by increasing govt. capex logistics, last mile mobility demand and development of national highways.
• Three-wheelers (3W)
  • India is the largest producer of 3W in the world. The three-wheeler market segment includes vehicles used to transfer both passengers (e.g., auto rickshaws) and cargo (e.g., loading autos). 0.85 Mn 3Ws were produced in India, of which 0.36 Mn were exported and 0.48 Mn were sold domestically, as of FY 2023.

Electrification of India’s Automotive Market

2Ws are at the forefront of automotive electrification in India as Indian consumer is sensitive to initial vehicle price. E2W adoption has grown rapidly to form ~5.1% of 2W registrations in H1 FY 2024, primarily led by scooters. Moreover, EVs are likely to account for almost half of the domestic 2W sales volumes by FY 2028. E2W OEMs are also well placed to serve the exports opportunity of 100-110 Mn 2W units. Select E2W OEMs with greater control over manufacturing technology can also leverage the EV know-how to capture domestic E4W opportunity, taking their overall TAM to ₹ 8.0-9.1 Tn (US$100 to 115 Bn) in FY 2028.

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Automotive Electrification in India is being led by 2Ws.

All automotive vehicle segments are witnessing the electrification wave. Shared mobility segments (3Ws, commercial vehicles and taxis) are undergoing electrification to achieve better operating economics (than ICE). eCommerce and logistics players have adopted EV fleets as part of their decarbonization commitments. Central and state governments are boosting the electrification of public buses. 3Ws are getting electrified on the back of exemptions from registration and road taxes.
Within personal mobility segments (2Ws and private 4W-Passenger Vehicles), 2Ws are well positioned to lead the electrification wave in India, unlike many developed markets. This is because of high sensitivity of Indian consumers to the initial vehicle prices of EVs versus ICE vehicles (given the lower GNI per capita vs the developed markets).
-Adjusting for purchasing power parity, the average ₹200-500 thousand (i.e. US$ 2500-6250) difference between the price of an E4W – Passenger Vehicles and ICE 4W -Passenger Vehicles in India, is quite high for an Indian consumer, unlike the consumers in the developed markets. On the contrary, the difference in prices of E2W over ICE 2Ws in India ( ₹20-70 thousand i.e. USD 250-875) is more palatable for Indian consumers, resulting in E2Ws leading the electrification in personal mobility automotives.
-Reduced registration costs for EVs across states make the on-road price differential between E2Ws and ICE 2Ws smaller.
Furthermore, the TCO of an E2W breaks even with a comparable ICE vehicle in ~2 years while that for an E4W breaks even with that of a comparable ICE 4W in 6-7 years (assuming total lifetime of 2Ws and 4Ws to be 10 years and 15 years respectively).

E2Ws have seen an accelerated adoption journey in India, with the penetration increasing over 6x between FY 2021 and FY 2022 and over 2x between FY 2022 and FY 2023, to reach penetration levels of ~4.5% of the 2W registrations reported on the Vahan Dashboard (MoRTH) in FY 2023. It has increased further to ~5.1% in H1 FY 2024. E2W registrations (and subsequently penetration as % of overall 2W registrations) were marginally lower in Q2 FY2024 than the previous quarter due to reduction in FAME subsidy, effective from June 2023.

The journey started In 2007, when India saw the introduction of its first E2W. Since 2010, the government focused on EV adoption and initiated regulatory discussions and planning (including setting up the National Council for E-Mobility) to encourage reliable, affordable, and efficient EVs that meet consumer performance and price expectations.

Key enablers of E2W adoption in India:
National Electric Mobility Mission Plan 2020 was launched in 2013, covering multiple initiatives:

• FAME (Phase I & II) – 86% of the FAME II policy’s budget outlay has been allocated for the creation of demand. The new rules provide a demand incentive of ₹ 10,000 per KWh. The cap on incentives for E2Ws has been reduced to 15 per cent of the ex-factory price of vehicles from 40 per cent previously (effective from 1st June 2023).
  • The rate of Goods and Services Tax on electric vehicles has been kept in the lower bracket of 5% (with no cess) as against the 28% GST rate with cess up to 22% for ICE vehicles.
  • MoRTH also issued a notification in October 2018 which exempted electric vehicles from the requirement of obtaining permit for their usage as goods or passenger transport vehicles.
• Production-linked Incentive Scheme (PLI) for Automotive Sector (2021) (detailed in section A): The Scheme was open to existing automotive companies as well as new investors (who are currently not in automobile or auto component manufacturing business). Under the Champion OEM 2W & 3W scheme, 4 incumbent Automotive Investor OEMs (i.e. OEMs already present in the automotive space with ICE 2Ws or 3Ws) and 6 New Non-Automotive Investor OEMs have been approved.
• Production-linked Incentive Scheme (PLI) for Advanced Cell Chemistry (2021): The Program will boost domestic manufacturing and facilitate demand creation for both EVs and stationary battery storage. Three selected bidders (out of 10 received bids) signed the Program Agreement. Under this PLI, the manufacturing facility would have to be set up within a period of two years. The incentive will be disbursed thereafter over a period of five years on sale of batteries manufactured in India. In addition to the capacities allocated by the Ministry of Heavy Industries under the PLI Program, private players are expected to create battery manufacturing capacity to the tune of ~95 GWh.
• State based subsidies on EV are offered by several states in the range of ₹ 2,500-10,000 (US$ 31–- 125) per KWh on EV purchase. The tax benefits, registration, and road tax waivers (different policies in different states) etc. further increased penetration in these markets.
• Charging Infra co-development by the government, automotive OEMs and focused startups, has also fueled E2W adoption. As of March 2023, there were 6,586 public EV charging stations in India.

Scooters are leading the E2W penetration.

Stronger supply availability, compact and suitable designs, limited range anxiety, smaller (and lighter) batteries, lower initial price difference and growing popularity in the Indian market, have resulted in scooters leading India’s E2W market. Within the scooter segment, premium scooters subsegment (priced (ex-showroom) >₹100 thousand i.e. US$ 1250) have high electric penetration of ~75% (in H1 FY 2024). With the projected decline in electric scooter prices, consumers are likely to see a higher number of options across price ranges, driving greater adoption in the lower price bracket as well. Limited options have restricted EV penetration in the motorcycle segment to <1%, with major EV play in the > ₹100 thousand price segment. With the strengthening of supply in popular price segments through R&D & technological advancements, penetration in the electric motorcycle segment is also expected to see an uptick.

E2Ws have also reached the smaller cities in India.

E2Ws are not only limited to the top cities but have also reached non-metro cities such as Kolhapur and Surat (with ~23% and
~15% E2W penetration respectively). Short & localized personal mobility needs in the smaller markets, wider distribution networks by E2W OEMs, government initiatives to promote universal household electrification & power infrastructure improvement, and focused financing support for low-mid income consumers, have driven universal adoption of E2Ws in the country.

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India’s E2W penetration is potentially at an inflection point for explosive growth ahead.
Mature EV markets denote that EV penetration levels of 3-5% in the leading vehicle segment, (E4Ws in these markets) have been followed by tremendous growth in EV adoption, driven by increased product awareness, greater user comfort and strong market supply. India is projected to follow suit to see rapid increase in E2W adoption in the next ~5 years.

Market Opportunity

Unless otherwise indicated, industry and market data appearing in this section have been derived from the Redseer Report.
India is emerging as a manufacturing powerhouse of EVs. India is the second largest 2W market globally and third largest in the 4W market in terms of domestic sales. The total addressable market for 2W exports from India is between ₹ 7.20 trillion to ₹ 8.00 trillion. The trend towards electrification of mobility is driven by increasing affordability of EVs attributable to lower battery prices, improved EV driving ranges and regulatory support amongst other factors, in addition to advanced software enabled features, favourable policy environment and a lower carbon footprint as compared to internal combustion engine vehicles (“ICE”). E2Ws are at the forefront of the electrification of mobility in India due to their favourable total cost of ownership (“TCO”). E2W adoption has grown rapidly to reach approximately 5.1% of total 2W registrations in India the first half of Fiscal 2024. E2Ws are projected to account for 41-56% of the domestic 2W sales volume by Fiscal 2028. Additionally, markets like Africa, LATAM and SE Asia provide an export opportunity for Indian E2W OEMs further increasing their TAM. E2W OEMs are well placed to leverage an export opportunity of 100-110 million units globally.

India is the 2nd largest 2W market globally (by domestic sales volume), with the Indian 2W market constituting 15-20% of the global 2W production in Fiscal 2023. Despite having the second largest domestic 2W sales volume, E2W penetration in India is lower than Germany, China, France, Spain and Italy but is expected to expand from approximately 4.5% of domestic 2W registrations reported on the VAHAN portal in Fiscal 2023 to 41-56% of domestic 2W sales volume by Fiscal 2028.

Approximately 18% of vehicles manufactured in India in Fiscal 2023 were exported. In Fiscal 2023, approximately 75% of 2W exports from India were to Africa, LATAM and Southeast Asia geographies that are categorized by limited domestic E2W supply. Further mature markets such as Europe contribute a major share to China’s E2W exports and represent an additional export opportunity for Indian E2W OEMs. Overall, 2W exports provide a global market opportunity of 100-110 million units per annum.

India’s favourable policy environment is also accelerating electrification of mobility led by improved EV penetration across vehicle segments. The National Electric Mobility Mission Plan (“NEMMP”) 2020 of the Government of India covers multiple incentives including demand incentives for various EV categories. In 2015, the FAME scheme was launched pursuant to the NEMMP. In 2020, the Government of India launched the production-linked incentive (“PLI”) schemes across various sectors to boost domestic manufacturing, reduce import dependence, encourage exports and generate employment, of which India’s automobile industry is a key beneficiary. In addition, certain states in India provide EV purchase related subsidies, tax benefits, vehicle registration and road tax waivers to enhance EV penetration in such local markets.

Believe that we are well-positioned to address this large market opportunity in EV led by our vertical integrated approach, focus on technology, R&D, execution ability and eligibility to avail certain government incentives. Globally disruptor OEMs (versus incumbent OEMs) have emerged as winners in EVs driven by a focus on innovation. Similarly, in India, disruptor OEMs have scaled well to cover more than 70% of the E2W domestic sales by volume in the first half of Fiscal 2024.

Conclusion

India accounts for 15-20% of global production for 2W and is the 3rd largest 4W-Passenger Vehicle market in the world (in terms of sales volumes), with strong growth headroom in both segments. India’s automotive market is undergoing EV-led transformation with EVs emerging as the next-gen smart products. Indian government has also provided impetus to promote domestic manufacturing and adoption of Electric vehicles through production-linked incentives for manufacturers and subsidies.
2Ws have been at the forefront of automotive electrification in India, emerging as the more appealing alternative (as compared to 4W) to the price sensitive Indian consumer, with a lower initial price differential vis-à-vis their ICE counterparts. Technologically advanced electric vehicles are expected to disrupt the India market with greater affordability, advanced software enabled features, better consumer experience and decarbonization capabilities. E2W adoption has grown rapidly to reach ~5.1% of total 2W registrations in India in H1 FY 2024. E2W are projected to account for 41-56% of the domestic 2W sales volumes by FY2028. E2W OEMs are also well placed to serve the exports opportunity of 100-110 Mn units globally.
Globally, disruptor OEMs (when compared to the incumbents) have emerged as the winners in the EV industry driven by their ability to innovate. Even in India, disruptor OEMs have scaled well to cover more than 70% of the E2W domestic sales by volume in H1 FY 2024. Disruptor OEMs have taken multiple approaches in the Indian E2W market, including the Vertically Integrated approach which enables the OEMs to have a stronger control over the vehicle performance and costs. Hence, successful E2W OEM in India will need to have greater control over manufacturing technology- it will be critical to own key EV technology elements such as the cell and battery pack, software, motor & drive train and electricals & electronics, along with their interplay with each other and rest of the EV components. It will also be crucial for OEMs to rely on domestic sourcing as it will enable them to improve product quality and compliance with regulations while saving costs & import duties.

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Business Data

Three key pillars of our business model

Verticals

• Ola S1 Pro:
  • Our flagship premium EV scooter offering, featuring an extended driving range of up to 195 km, a top speed of 120 km per hour and a range of smart technologies on a 7-inch touchscreen.
• Ola S1 Air:
  • Our second premium EV scooter offering, featuring a driving range of 151 km with a 6 kW peak motor power and a range of smart technologies on a 7-inch touchscreen.
• Ola S1 X+:
  • Retailing at a lower price than the Ola S1 Air, the Ola S1 X+ features a driving range of 151 km and comes in seven different colours. This model also includes smart connectivity features such as keyless unlock and a 5-inch segmented display.
• Ola S1 X (2 kWh) and Ola S1 X (3 kWh) :
  • Our mass-market EV scooters that feature a driving range of up to 151 km and a 3.5- inch segmented display available in two battery capacity configurations: 2 kWh and 3 kWh.

Machinery/Plants/Factory

OLA Electric have designed and are building our Ola Gigafactory for cell manufacturing. We plan to manufacture the 4680 cell at scale at the Ola Gigafactory, which is currently under construction. We commenced construction of our Ola Gigafactory in June 2023. It will be located within close proximity to our Ola Futurefactory, within the EV hub. Phase 1(a) of the Ola Gigafactory is expected to be completed and the Ola Gigafactory is expected to be operational by March 31, 2024. It will have a production capacity of 1.5 GWh upon the completion of such phase. We plan to use the net proceeds to expand our capacity to 6.4 GWh by April 2025.

Phase 1 of construction covers electrode production, cell assembly, cell formation, incoming and outgoing material process flow at the warehouse, utilities and others. The factory will be automated and integrated with vision and metrology equipment to ensure quality at each process step.
We have also signed an MOU with the State Government of Tamil Nadu that offers various incentives for EV and cell manufacturing. We believe that in developing our in-house cell manufacturing capabilities, we will be able to unlock greater control over the quality, supply and cost of our batteries and EVs.

Ola Futurefactory

OLA Electric manufacture our E2Ws and certain E2W components at the Ola Futurefactory. We built the Ola Futurefactory in eight months, reaching an installed capacity of one million units per year as of October 31, 2023. The Ola Futurefactory spans 134.95 acres of land in Krishnagiri, Tamil Nadu. The Ola Futurefactory is the largest integrated and automated E2W manufacturing plant in India (in terms of production capacity) by an E2W-only OEM, as of September 30, 2023, according to the Redseer Report.
Our Ola Futurefactory is an automated manufacturing facility equipped with modular assembly lines across motor, battery and welding and has an in-house paint shop. The factory’s flexible manufacturing lines facilitate the manufacture of new EVs. This integrated ecosystem enables fast and low-cost component development and maximizes cross-utilization of equipment, thereby reducing costs across the value chain. It employs modern technologies and automated manufacturing, which includes autonomous mobile robot-driven material movements, autonomous robotic welding lines and battery lines. As of October 31, 2023, we utilized over 148 automated robots for functions such as welding, battery, motor and general assembly lines and paint shops.

Capacity Utilisation

Peer companies comparison

(in ₹ million)

Subsidiary companies

Group companies

• Indian Group Companies
  • ANI Technologies Private Limited;
  • Ola Financial Services Private Limited;
  • Ola Fleet Technologies Private Limited;
  • Ola Stores Technologies Private Limited; and
  • Pisces eServices Private Limited.
• Foreign Group Companies
  • Ola USA Inc.

Business risk factors

• OLA Electric electric vehicles make use of lithium-ion cells, and if such cells catch fire or vent smoke and flames, we could be subject to adverse publicity and our brand, business, financial condition, results of operations and prospects could be harmed.
• OLA Electric have a limited operating history and have incurred losses and negative cash flows from operations.

Amount in ₹ million

• OLA Electric could experience defects, quality issues or disruptions in the supply or increase in prices of components used in our electric vehicles thus increasing material costs and the price of our electric vehicles and impacting our projected manufacturing and delivery timelines.

Amount in ₹ million except percentage values

• If OLA Electric is not able to attract and retain customers, OLA Electric business, prospects, financial condition, results of operations, and cash flows would be materially harmed.

Financials

Key Performance Indicators

(₹ in million, unless otherwise stated)

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Balance Sheet

(Amount in ₹ million)

Profit & Loss

Cash Flow

(in ₹ million)

Capital structure

(₹ in million, except ratios)

SWOT ANALYSIS

• Strengths:
  • Market Leadership: Ola Electric is a prominent player in the Indian electric two-wheeler market.
  • Ecosystem Integration: Their ecosystem approach (vehicles, charging infrastructure, battery tech) sets them apart.
  • Futurefactory: India’s largest E2W manufacturing plant, enabling scale.
  • Battery Innovation Center: Focused on cutting-edge battery tech.
  • Brand Recognition: Leveraging the Ola brand’s existing goodwill.
• Weaknesses:
  • Competition: Intense competition from other electric vehicle manufacturers.
  • Supply Chain Challenges: Dependence on global supply chains for components.
  • Regulatory Uncertainty: Evolving regulations impact business decisions.
  • Limited Product Portfolio: Currently focused on two-wheelers.
• Opportunities:
  • Government Incentives: Favorable policies for electric mobility.
  • Urbanization: Growing urban population drives demand for eco-friendly transport.
  • Global Expansion: Potential to expand beyond India.
  • Battery Tech Advancements: Innovations can enhance performance and range.
• Threats:
  • Battery Supply Constraints: Global shortage affects production.
  • Technological Disruption: Rapid advancements may render existing tech obsolete.
  • Economic Downturns: Impact on consumer spending.
  • Competitor Moves: Rival companies’ strategies and market share.

IPO Details

OLA Electric Mobility Limited IPO Details

Object of the issue

(in ₹ million)

Litigation involved

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