In a witty exchange between Bhavish Agarwal of Ola Electric and Rajeev Bajaj of Bajaj Auto, Agarwal playfully remarked, “I put ICE cubes in my drink and enjoy sipping it,” subtly jabbing at competitors still manufacturing vehicles with traditional internal combustion engines. Ola Electric, a frontrunner in India’s electric two-wheeler market, is gearing up for an IPO, aiming to raise ₹5,500 crore and targeting a valuation of $7-8 billion in early 2024.
Market Dominance and Financial Performance
Recent data from Vahan highlights Ola Electric’s dominance, with a 32.6% share of the electric two-wheeler market. Fiscal year 2022-23 saw a seven-fold volume surge, with more than 156,000 scooters sold. The company reported a sevenfold increase in revenue to ₹2,630.93 crore, with an operating loss of ₹1,100 crore.
Valuation Challenges
Ola Electric’s ambitious valuation of ₹60,000 crore for its IPO, implying a price-to-sales ratio of 15 times, raises eyebrows, especially when compared to more conservative valuations of established internal combustion engine (ICE) giants. Hero MotoCorp and TVS are valued at 2-2.5x, while Bajaj Auto sits at 4.5x.
Challenges in the Electric Vehicle (EV) Segment
Despite rapid growth, Ola Electric faces challenges. The high employee attrition rate, reduced government subsidies, and inadequate charging infrastructure outside significant cities pose hurdles to sustained sales growth. The government’s decision to cap incentives for electric two-wheelers at 15% has impacted Ola Electric’s sales, with a significant drop reported in June.
Intense Competition and Strategic Moves
Competition in the e-scooter market is intensifying, with significant players like Bajaj Auto and Hero MotoCorp launching new electric two-wheelers. Ola Electric is implementing price cuts to maintain its lead, offering substantial discounts on its products.
Founder’s Involvement and Revised Targets
Bhavish Agarwal’s involvement in multiple ventures, including Tork Motors, raises concerns about potential conflicts of interest. Reports suggest that Ola Electric has slashed its sales goals for FY2023-2025 by more than half and delayed its profitability target by a year, raising questions about its valuations.
Industry Uncertainties
The government’s neutrality toward green technologies, including incentives for hydrogen and compressed natural gas alongside electricity, adds uncertainty to Ola Electric’s path. Ather Energy, Ola Electric’s peer, needs help securing external funding, raising questions about potential issues in the broader EV market.
Summary
As Ola Electric navigates these challenges, its IPO ambitions and expansion plans will be closely monitored in India’s evolving electric mobility sector. While the company aims to revolutionize the two-wheeler market, concerns about valuations, competition, and industry uncertainties highlight the complex journey ahead. Perhaps, as Bajaj suggests, caution is warranted in embracing too much “ICE” (Internal Combustion Engine) in the pursuit of electric dreams.
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