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The Indian electric two-wheeler market is experiencing a period of turbulence, as evidenced by the recent performance of Ola Electric and its competitors. Ola Electric Technologies Ltd., once a dominant force in the sector, saw its monthly registrations plummet in February, reaching a near three-year low. This decline occurred against the backdrop of an overall contraction in the electric two-wheeler market in India, raising concerns about the sustainability of growth in this segment. While Ola Electric insists that it remains the market leader, data from the Union road transport and highways ministry’s centralised vehicle registry database, Vahan, paints a different picture. The Vahan database reveals that electric two-wheeler sales in India fell by approximately 27% from January to February, amounting to 71,847 units. This represents the lowest registration figure since April 2024, when 65,554 registrations were recorded. The significant drop in sales raises questions about the factors contributing to this downturn and the potential impact on the electric vehicle (EV) industry as a whole. Several factors could be at play, including fluctuating consumer demand, supply chain disruptions, and the availability of government incentives. The market is particularly sensitive to changes in government policies, as incentives play a crucial role in driving adoption. Furthermore, macroeconomic conditions and overall consumer sentiment can influence purchasing decisions, especially for big-ticket items such as electric two-wheelers. It's also important to consider the seasonal trends that might impact sales. For example, the period after Diwali may see a decrease in demand, as many consumers make major purchases during the festive season. The drop in registrations is particularly concerning for Ola Electric, which has positioned itself as a leader in the Indian electric two-wheeler market. However, the company's statement claiming higher sales numbers than reflected in the Vahan data adds complexity to the situation. The discrepancy between Ola Electric’s internal data and the official government registry raises questions about data collection methods, reporting accuracy, and the potential for discrepancies in market share calculations. This discrepancy also highlights the challenges of accurately tracking sales and market share in a rapidly evolving industry. The lack of a standardized reporting system across the industry contributes to confusion and makes it difficult to assess the true state of the market. For stakeholders, including investors and policymakers, reliable and consistent data is crucial for making informed decisions. In the face of Ola Electric’s struggles, legacy rivals such as Bajaj Auto and TVS Motor Co. have been quick to capitalize on the opportunity to gain a larger share of the market. Bajaj Auto sold a little over 20,000 electric two-wheelers in February, accounting for 27.8% of India’s electric two-wheeler market. TVS Motor followed closely with 17,605 electric bikes and scooters, claiming a 24.5% market share. Ather Energy, another new-age rival, registered 11,130 vehicles, capturing a 15.5% market share. These figures highlight the increasing competition in the electric two-wheeler market, with established players leveraging their brand recognition, distribution networks, and technological expertise to challenge Ola Electric’s dominance. The competition is further intensified by the entry of new players and the expansion of existing companies' product portfolios. As the market matures, consumers are becoming more discerning and demanding, seeking a wider range of options and prioritizing factors such as performance, reliability, and after-sales service. The ability of companies to meet these evolving customer needs will be crucial for success in the long run. The market share gains by Bajaj Auto and TVS Motor are significant because these companies have a long history in the Indian automotive industry. They have established brands, extensive distribution networks, and strong relationships with customers. This gives them a significant advantage over newer entrants in the market. Bajaj Auto, in particular, has been successful in leveraging its iconic Chetak brand to gain traction in the electric scooter segment. The Chetak electric scooter has been well-received by consumers, and Bajaj Auto has been expanding its production capacity to meet the growing demand. TVS Motor has also been investing heavily in electric vehicle technology and has launched several new electric scooter models. The company has been focusing on providing a range of electric scooters to cater to different customer segments. Ather Energy, while a relatively new player in the market, has also been making significant strides. The company has focused on developing high-performance electric scooters and has built a strong brand reputation. Ather Energy has also been investing in charging infrastructure and has established a network of charging stations across major cities in India. Ola Electric’s 8,390 registrations in February, down from 24,376 units in January, represented its lowest monthly count since August 2022. This decline is a stark reminder of the challenges facing the company. While Bajaj Auto, TVS Motor, and Ather also experienced lower registrations in February compared to the previous month, Ola Electric’s decline was particularly pronounced. This raises concerns about the company’s ability to maintain its market share and compete effectively against its rivals. Ola Electric attributed the lower registration numbers to renegotiations of contracts with its agencies responsible for vehicle registration. The company stated that it was renegotiating terms with Rosmerta Digital Services Private Limited and Shimnit India Private Limited to reduce costs and enhance registration process efficiencies. Ola Electric had forewarned about the impact of these negotiations in a stock exchange filing on February 19, stating that its registration numbers for February would be temporarily impacted. However, this explanation has not fully alleviated concerns about the company’s performance. The explanation appears insufficient to account for the substantial drop in sales, prompting skepticism among industry analysts and market observers. Some analysts suggest that the contract renegotiations may be a smokescreen, masking deeper issues with the company's products, customer service, or supply chain. Moreover, the timing of the renegotiations, coinciding with a broader market downturn, raises questions about the company’s strategic decision-making. Whether the lower registration numbers were due to these renegotiations or other underlying issues, the company must address the situation quickly to avoid further loss of market share. Ola Electric’s statement claiming higher sales numbers than reflected in the Vahan data further complicates the picture. The company claimed to have sold more than 25,000 electric two-wheelers in February, which would give it a 28% market share. This discrepancy between Ola Electric’s internal data and the official government registry adds to the confusion and raises questions about the reliability of market share figures. The discrepancy could be due to several factors, including differences in data collection methods, timing of reporting, and variations in the definition of a “sale”. It is important to note that the Vahan database only captures vehicle registrations, which may not always correspond directly to actual sales. For example, there may be a time lag between the sale of a vehicle and its registration. Additionally, Ola Electric may be including pre-orders or other types of transactions that are not captured in the Vahan database. Regardless of the reason for the discrepancy, it is important for Ola Electric to provide more transparency about its data collection methods and market share calculations. This would help to alleviate concerns about the reliability of its claims and provide a clearer picture of the company’s performance. Despite the challenges, Ola Electric remains optimistic about the future. Bhavish Aggarwal, the company’s founder and CEO, has stated that the company expects to achieve auto segment EBITDA breakeven at about 50,000 monthly sales. This target is contingent on continued gross margin expansion and operational cost control. However, given the recent performance of the company, achieving this target may prove to be a significant challenge. The company's loss widened to ₹564 crore in the December quarter from a loss of ₹376 crore in the year-ago third quarter. This indicates that the company is still struggling to achieve profitability. Ola Electric has faced blowback over the quality of its electric scooters and its customer service, which has affected its reputation. These issues have led to customer complaints and negative publicity. As the electric two-wheeler market becomes more competitive, Ola Electric will need to address these issues to retain its existing customers and attract new ones. The overall electric two-wheeler registrations drop was viewed as a one-off event. With incentives and tax relief for consumers the EV numbers are predicted to rise. Preetesh Singh at Nomura Research Institute stated that sentiment for the EV ecosystem is positive. The future of Ola Electric and the Indian electric two-wheeler market remains uncertain. The market is facing several challenges, including fluctuating consumer demand, supply chain disruptions, and increasing competition. In order to succeed, Ola Electric needs to address its operational challenges, improve its product quality, and enhance its customer service. The company also needs to be more transparent about its data collection methods and market share calculations. The broader EV market needs consistent data reporting and sales tracking systems to properly reflect the health of the industry.
Source: Ola Electric’s share plunges in a shrunk market. But its data says otherwise.