Ola Electric’s Stock Plunges 60%: What Went Wrong?

Ola Electric, India’s prominent electric vehicle (EV) company, has faced a significant setback with its stock price plummeting by 60%. This decline, marked by a sharp drop from its peak in August 2024, reflects a combination of diminished investor enthusiasm and internal challenges stemming from unsustainable growth.

Initially, Ola Electric garnered substantial attention and investments, overshadowing traditional mobility firms within its first five years of operation. However, the company’s recent struggles can be attributed to intensified competition from established players like Bajaj Auto, TVS Motor, and emerging startups like Ather. Customer dissatisfaction with Ola’s electric scooters has further exacerbated its woes, resulting in a notable decline in sales.

The company’s valuation soared to $3 billion early on, backed by prominent investors such as Tiger Global and SoftBank, with ambitious plans to lead India’s EV market, poised to become a global leader by 2030. Ola Electric’s manufacturing hub, the Ola Future Factory in Tamil Nadu, boasted an annual production capacity of 1 million units as of March 2024. Despite capturing a 35% market share of electric two-wheelers sold in India in 2024, recent figures indicate a stark sales slump, with a significant drop in scooter registrations compared to the previous year.

Financially, Ola Electric has faced mounting losses, with shrinking margins evident in its financial reports. The company’s operational challenges have been exacerbated by quality concerns surrounding its scooters, prompting regulatory scrutiny and a probe into consumer complaints related to delivery delays, subpar service, deceptive advertising, and manufacturing defects.

To mitigate its losses, Ola Electric has initiated workforce reductions, cutting 1,000 jobs across various departments. While some of this downsizing aligns with manufacturing automation trends, it also reflects the company’s distress and restructuring efforts. The departure of key executives, including the CEO and CFO, has further disrupted strategic planning and hindered organizational development.

In a bid to alleviate financial strains, Ola Electric disclosed receiving a government subsidy under the Production Linked Incentive Scheme, aimed at bolstering the country’s EV production. Despite this support, the company’s ability to invest in new technologies and research and development remains challenged by its meager profit margins. Continuous financial losses could erode investor confidence, potentially leading to further operational hurdles for Ola Electric in the foreseeable future.