Ola Electric vs Ather Energy: Who wins the EV race?

Just a couple of weeks after Ola Electric's IPO delivered bonanza returns on its listing day, its direct rival Ather Energy filed its IPO papers on September 9, 2024. The Bengaluru-based electric two-wheeler manufacturer aims to raise Rs 3,100 crore through a fresh issue.

While there is hype around Ather, a closer look reveals financial woes. So, let's look at what's ailing the e-scooter maker:

1. Expensive EV scooters
Ather's entry-level scooter starts at Rs 1.12 lakh as of FY24, due to a few hi-tech features like smart helmet integration and inter-city trip planners.

Ola Electric's lowest-priced model comes in at Rs 80,000, hitting the sweet spot for regular buyers.

Given this context, Ola Electric reported sales of 3.29 lakh units, while Ather reported just over 1.09 lakh units.

2. Branding yet to hit the mark
Ola Electric also benefits from its established brand presence, thanks to its ride services business through the Ola mobile app.

Even Ather's founder, Tarun Mehta, admits, "Their marketing is damn good!" Despite superior products, Ather Energy struggles to sell them as effectively as Ola.

Interestingly, even though Ather has outspent Ola on marketing over the past three years (Rs 340 crore vs Ola's Rs 190 crore), Ola is still outpacing Ather in sales. In fact, Ola has more than doubled its sales, against Ather's modest 19 per cent rise.

3. Underutilised capacity
Ather's current capacity utilisation is at a laughably low 29 per cent of its existing 4.2 lakh-unit capacity. That said, it is gearing up to expand its production capacity to 1.42 million units.

Ola, meanwhile, is making better use of its resources. With a nearly 6.8 lakh-unit capacity, its current capacity utilisation is at 49 per cent. The company is also rapidly expanding its product portfolio, recently announcing the launch of e-bikes, which should help boost volumes.

4. Squeezed margins
Both companies are operating at a loss, but Ola's financials paint a slightly less grim picture.

Ola Electric achieved gross margins of 16 per cent in FY24, higher than Ather Energy's 9 per cent since Ather's tech-heavy approach leads to higher R&D expenditure and employee expenses.

Investors' corner
Ather's ambitious expansion plans haven't yet hit the mark. Its high production costs, underutilised capacity and significant cash burn make for a concerning reading.

It's not all doom and gloom, though. Ather does have high operating leverage. In other words, if the Bengaluru-based startup can ramp up capacity utilisation, its margins could improve dramatically.

In contrast, Ola Electric's success, at least so far, stems from sensible pricing, effective resource utilisation, and strong brand recognition. It has also started producing its own lithium-ion cells, which are expected to be used in their EVs starting Q1 FY26. This could further improve margins and provide a competitive advantage.

That said, investors should remember that, at the end of the day, both companies are still operating at a loss in a highly cyclical industry.

Also watch: Can electric vehicles drive your investment success?