Ola Electric, a major player in India’s burgeoning electric scooter market, has made significant adjustments to its sales targets for the years 2023-2025, cutting them by more than half and postponing its profitability goal by a year. This move comes in response to a reduction in government incentives, leading to an increase in the prices of e-scooters. The modified targets align with Ola Electric’s planned $700 million IPO.
The Indian government’s unexpected decision to slash cash incentives for e-scooter buyers in May created a ripple effect in the market. Ola Electric, often compared to Tesla in the West, now faces challenges as it readjusts its projections. The government’s reduction in subsidies was not accompanied by a detailed explanation. Ola Electric’s CEO, Bhavish Aggarwal, initially downplayed the impact, describing it as a “short-term blip” for sales. The company asserted that the move would not affect sales volumes.
However, a document revealing Ola’s revised financial projections indicates a substantial decrease in its sales expectations. The company now anticipates selling 300,000 e-scooters in the ongoing fiscal year until March 2024, a significant drop from the earlier goal of 882,000 reported in July. Correspondingly, the revenue target for the same period has been revised to $591 million, down by approximately 60%.
The internal document, which Ola Electric did not explicitly acknowledge, cites the reduction in government subsidies as the primary reason for revising targets. Two anonymous sources familiar with the company’s finances attributed the adjustments to ensure that Ola meets or surpasses the revised numbers, aligning with investor expectations.
Ola Electric’s revised targets also impact its operating profit projections. Previously, the company anticipated its first operating profit of $220 million in the ongoing fiscal year, but the revised figures suggest an operating loss of $92 million this year and a profit of $111 million in the next fiscal year.
The electric scooter market in India, led by Ola, witnessed substantial growth in sales, nearly tripling to over 700,000 during 2022-23 compared to the previous year. However, this still represents a fraction of the 15 million-plus two-wheelers sold in the country. The Indian government’s ambition, led by Prime Minister Narendra Modi, is to have 70% of all new two-wheeler sales be electric by 2030.
The reduction in government incentives, now at 15% of the price before tax compared to the earlier 40%, has led to increased e-scooter prices. Ola Electric responded by lowering the prices of its entry-level e-scooter by around 20%, aiming to enhance appeal and encourage more consumers to adopt electric vehicles. Bhavish Aggarwal expressed confidence in the industry’s resilience despite the government’s incentive cuts, emphasizing the significant recovery it has experienced.