Ola Electric has emerged as the leader in India's electric two-wheeler market, with impressive profit margins, according to a new report by Bernstein. The company is on track to achieve profitability, outpacing competitors like TVS and Bajaj
Ola Electric has emerged as the top player in India's electric two-wheeler market, achieving the highest margins among competitors and moving closer to profitability. Its strategy of localisation, vertical integration, and direct sales to consumers has given it a competitive edge.
Ola Electric's leadership in the EV two-wheeler market stems from a combination of cost-effective localisation, in-house manufacturing, and a direct-to-consumer approach, all while benefiting from government subsidies. This strategy has driven the company to outperform rivals like TVS, Bajaj, and Ather in terms of profitability margins.
Ola Electric's Financial Edge
A report by global brokerage firm Bernstein reveals that Ola Electric posted a gross margin of 18.4 percent for Q1 FY2025, well ahead of competitors like TVS (14 percent), Bajaj (12.3 percent), and Ather (7 percent). The analysis credits Ola’s aggressive localisation and vertical integration strategies for cutting down production costs. By sourcing materials locally and handling much of the manufacturing in-house, the company has been able to reduce expenses, further bolstering its margins.
The direct-to-consumer (D2C) business model also played a crucial role in Ola Electric’s success. By bypassing intermediaries, the company has gained greater control over pricing and improved profitability. Additionally, access to government subsidies such as the Production Linked Incentive (PLI) and Faster Adoption and Manufacturing of Electric Vehicles (FAME) schemes has further boosted its financial position.
Profitability on the Horizon
Ola Electric is on the verge of reaching EBITDA-level profitability, with an EBITDA margin of -2 percent in the reported quarter. This positions them significantly ahead of competitors, with TVS reporting -7.9 percent, Bajaj at -10.4 percent, and Ather at -37 percent. The Bernstein report underscores that the differences in manufacturing approaches between EVs and traditional automobiles play to Ola’s strengths, particularly in technology and vertical integration, both of which are key factors in its path towards profitability.
Positive Outlook from Investment Banks
Investment banks are optimistic about Ola Electric’s future. Goldman Sachs and Bank of America have both initiated coverage of Ola Electric with a 'buy' rating. Goldman Sachs set a target price of Rs. 160 per share, while Bank of America followed with a target of Rs. 145 per share. Both firms have pointed to Ola’s technological advancements, cost leadership, and the growing potential of the Indian EV market as strong indicators of long-term success.
As the demand for electric vehicles in India rises, Ola Electric’s strategic positioning and innovative approach are expected to continue driving the company forward, making it a dominant player in the sector.