A month after Ola Electric listed on the public markets, its older but smaller rival Ather Energies also filed its draft red herring prospectus (DRHP) for an initial public offering (IPO). Founded in 2013, Ather Energies has seen sales overtake Ola Electric, which is four years younger, in the last few years. According to Tracxn, before its IPO, Ola Electric had raised $1 billion in 14 rounds, while Ather had raised $502 million from 19 rounds. This reflects their contrasting paths. But Ather’s decision to go for an IPO and its acceleration are strong signs that it is shifting gears.
Ola Electric's attempt to expand aggressively is reflected in the earnings of both companies. According to DRHP data, Ather remained ahead in terms of operating income in 2021-22, while Ola's revenue grew three times that of Ather in 2023-24. Ather's revenue declined, while Ola Electric's revenue grew by more than 90%.
The latest vehicle registration data from the Centre's Vahan database also shows this gap. From April to August, Ola sold 297,789 vehicles, while Ather sold 73,497 vehicles. Between Ola and Ather, there are TVS Motor and Bajaj, two traditional companies betting on electric vehicles in an increasingly competitive market.
Ather's relationship with traditional players is more complex, thanks to an investment by two-wheeler major Hero MotoCorp. Hero MotoCorp is the company's largest shareholder with a 30% stake. Operationally too, the two companies partnered last year to share an interoperable fast-charging network across the country.
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Scale vs. Engineering
The difference between Ola Electric and Ather Energies is partly due to the strategic direction adopted by the two rivals. Ola established itself as a large-scale player, using its acquisition of Amsterdam-based Athergo BV as a springboard to launch its first product. Scale and speed had negative consequences, as customers complained about faulty products and inadequate service. Just last week, there was an incident in Karnataka where a disgruntled customer set fire to an Ola showroom (he was arrested).
Ather's slower growth rate helped it establish a better reputation for quality. Its products were made in-house. It has been steadily increasing its research and development expenditure, while Ola's fell by 24% in 2023-24 compared to a year earlier. Still, Ola has a large research and development (R&D) budget and is not averse to paying top dollar to attract talent. Ather plans to spend part of the IPO funds on R&D.
Delivery Model
The general perception is that Ola Electric is stronger in marketing, which is further strengthened by its dominant position in the market. However, in each of the last three financial years, Ather has been spending significantly more than Ola Electric on this front as it has tried to gain market share. Ola's greater market share comes primarily from its manufacturing capacity and distribution model. It launched its products across the country through an online-only, direct-to-home delivery model.
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Ather adopted a traditional showroom-based model, resulting in a relatively slow pace of growth and concentration in South India. In 2023-24, the South accounted for 68% of its total sales, followed by the West at 16%. North, East and Central India accounted for 9%, 5% and 2%, respectively. State-level regulation could impact the business either way. Karnataka has its own electric bike taxi policy. Delhi has vowed to move ride-hailing and delivery firms to electric bikes by 2030.
Inevitable growth
Regulations will continue to play a key role in electric vehicle (EV) adoption. When the government withdrew the FAME-II subsidy, it impacted sales of all companies. In China, EV adoption grew even after the government withdrew the subsidy, due to other factors such as lower total cost of ownership of EVs compared to vehicles running on conventional fuels, better performance, and easy access to battery-charging points.
These factors are also expected to boost EV penetration in India, rising from 1.8% of new two-wheelers sold in 2021-22 to 5.1% in 2023-24. McKinsey expects it to reach 60-70% by 2030. Companies that invest in capacity now have a better chance of capturing that market. That has been Ola’s bet. Ather’s current facility in Hosur is operating at only 30%. Still, it plans to build another one in Maharashtra with the IPO funds. It’s a sign that Ather is also betting on scale.
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