OLAELEC

Faces Margin Pressure and Volume Decline Amid Policy Shifts

’s auto business is under pressure as retail volumes decline and policy changes erode its pricing advantage. The GST rate cut on ICE two-wheelers and expiry of EV subsidies threaten margins, while its new battery energy storage system (BESS) venture faces intense competition. The stock has halved in 2025 and trades well below its IPO price. - GST Cut and EV Subsidy Expiry Erode Price Advantage The GST rate on ICE two-wheelers was cut from 28% to 18% in September, prompting rivals like Hero, Bajaj, and TVS to slash prices by ₹5,000. Combined with the pending expiry of the ₹5,000 PM E-Drive EV subsidy in March, Ola’s price gap vs ICE rivals could widen to ₹10,000—25% of its gross margin per vehicle. November retail sales fell to 8,350 units, the lowest since February. October sales were 16,048 units, suggesting Q3FY26 volumes may fall below the breakeven level of 20,000 units/month. Q2FY26 delivery volumes dropped to 52,666 units from 68,192 in Q1, reversing earlier momentum. Despite a high-profile launch, motorcycles contributed only 12–15% of Q2 volumes (~6,000 units). Adjusted for this, scooter volumes fell by nearly one-third QoQ, highlighting deeper weakness in Ola’s core product line. Ola Shakti, its lithium-ion battery energy storage system for residential and commercial use, is expected to generate ₹1,000 crore in FY27. However, competition from Exide and Amara Raja—who are also commissioning lithium-ion plants—could limit market share. With FY27 revenue estimated at ₹4,700 crore, Ola trades at 3.8x sales—considered expensive given execution risks. The stock, currently at ₹41, is far below its ₹76 IPO price, reflecting investor skepticism about growth and profitability.