Ola Electric Mobility Limited — Q1 FY25 earnings call

Call held 14 Aug 2024

Management summary

Ola Electric delivered a strong first quarter as a public company, characterized by record revenue and significant volume growth. The company is successfully transitioning to its Gen 2 platform, which is driving margin expansion despite tapering government subsidies. Management's focus is now shifting toward vertical integration through in-house cell manufacturing and expanding into the massive motorcycle segment.

Highlights

  • Total income reached ₹1,718 crores, the highest ever, representing 34% YoY growth

  • Vehicle deliveries grew 77% YoY to 1.25 lakh units in the quarter

  • Adjusted gross margins improved significantly to 21.94%, up 873 bps YoY

  • Consolidated EBITDA margin improved by 660 bps YoY to negative 7.6%

  • Automotive segment EBITDA margin reached negative 2%, nearing break-even

  • Maintained a dominant market share of 48.6% in the Indian electric two-wheeler market

  • Phase 1A of the Gigafactory (1.4 GWh) completed; over 30,000 cells produced to date

  • Announced the launch of a motorcycle portfolio across premium and mass categories

Concerns

  • Execution Risk in Cell Integration

Key financials

  1. Total Income ₹1,718 Cr +34%YoY
  2. Deliveries 1,25,000 units +77%YoY
  3. Adjusted Gross Margin 21.9%
  4. Consolidated EBITDA Margin -7.6%
  5. Gross Debt ₹3,750 Cr

What they filed

Q1 FY27: revenue down 45.0%, net profit up 21.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,214 1,045 611 828 690 −43%470 −55%265 −57%455 −45%
EBITDA-379 -460 -695 -237 -203 +46%-271 +41%-281 +60%-165 +30%
Net profit-495 -564 -870 -428 -418 +16%-487 +14%-500 +43%-336 +21%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Automotive
    -2% EBITDA Margin75,000 units Premium Deliveries50,000 units Mass Deliveries
  • Cell
    1.4 GWh Installed Capacity30,000 units Cells Produced

Guidance & targets

Capacity

  • Gigafactory Phase 1B Capacity Capacity · Phase 1B completion · High confidence 5 GWh

    From 1.4 GWh today

    Now going ahead which is a Phase 1B is another implementation which will take us from 1.4 to 5 gigawatts of cumulative capacity.

    — Harish Abichandani, CFO

Other

  • Cell Integration into Products Other · Q1 FY26 · High confidence Q1 FY26
    These cells will get into our, will get integrated into our products by Q1 of FY26.

    — Bhavish Aggarwal, Founder, Chairman and MD

Volume

  • Motorcycle Deliveries Volume · FY25 · Medium confidence FY25
    And these will be available for delivery soon enough within this financial year.

    — Bhavish Aggarwal, Founder, Chairman and MD

Capex

  • Phase 1B Investment Capex · Phase 1B · High confidence ₹400-500 crores
    That phase will get completed, around 400 to 500 crores in that phase.

    — Harish Abichandani, CFO

Risks & concerns

  • Execution Risk in Cell Integration

    high

    Integrating in-house 4680 cells by Q1 FY26 is a complex technological shift; management expresses high confidence based on current production of 30,000+ cells.

    Analyst downplayed

  • Subsidy Tapering

    medium

    Government is tapering FAME subsidies (from ₹60k to ₹10k per vehicle); management argues the industry is now resilient enough to grow despite this.

    Both acknowledged

  • Cannibalization of Premium Products

    low

    Risk that mass-market S1X products might eat into premium S1 Pro/Air sales; management claims mass products are expanding the market to upcountry/Tier 3-4 areas instead.

    Analyst downplayed

Areas of evasion (1)

  • Specific consolidated EBITDA breakeven date

Q&A highlights

2 direct
Subsidy Impact on Margins Direct
The FAME subsidy is about INR10,000 a vehicle... So that would be about 8-10 points of margin there. And then PLI we are recognizing right now for S1 Pro and S1 Air... you assume maybe on 50%-55% of revenue you will get 30%.

Clarifies the exact contribution of government incentives to the current margin profile.

Asked by Gunjan, Bank of America

Unallocated EBITDA Loss Direct
If you look at the unallocated I think for Q1 it is 70 or so 75... these are for INR25 crores a month. These are largely corporate costs corporate teams, finance team etc.

Explains the gap between segment-level profitability and consolidated losses.

Asked by Amyn Pirani, JP Morgan

Cell Manufacturing Economics Partial
The cell is let's say 30%-35% of the overall vehicle cost... globally companies make about let's say companies like LG etc... between 15%, 25% margins on the cell business... we will actually be able to save that at a gross margin level.

Provides a framework for understanding the potential margin upside from vertical integration of cell production.

Asked by Amit Hiranandani, SMIFS Limited

2 min read 5 chapters

Detailed narrative

Automotive Segment Nears EBITDA Breakeven

The automotive segment showed significant operational improvement, with EBITDA margins reaching negative 2% in Q1 FY25, a 7 percentage point improvement quarter-on-quarter. This progress was driven by the successful ramp-up of the Gen 2 platform and the introduction of the S1X mass-market portfolio. Management noted that premium products like the S1 Pro and S1 Air are already 'fairly profitable' on a standalone basis, helping offset the initial costs of mass-market expansion.

Vertical Integration via Gigafactory Progress

Ola Electric has completed Phase 1A of its Gigafactory with 1.4 GWh of installed capacity and has already produced over 30,000 cells. These in-house 4680 format cells are expected to be integrated into vehicles by Q1 FY26, which management believes will unlock significant margin potential. Since cells represent 30-35% of total vehicle cost, capturing the 15-25% margin typically earned by global suppliers like LG is a core part of the company's long-term profitability strategy.

Expansion into the Motorcycle Frontier

Recognizing that motorcycles account for two-thirds of the Indian two-wheeler market, Ola is launching a comprehensive motorcycle portfolio. These bikes are built on the same Gen 2 platform as the scooters, allowing for shared supply chains and manufacturing processes without significant incremental capex. Deliveries are slated to begin within the current financial year (FY25), targeting both mass and premium segments to accelerate overall EV penetration.

Resilience Against Subsidy Tapering

Despite the reduction in government subsidies (FAME/EMPS) from ₹60,000 to ₹10,000 per vehicle over the last 18 months, Ola has managed to improve its gross margins. Management highlighted that the cost reductions achieved through the Gen 2 platform and supply chain negotiations have more than offset the loss of incentives. They view the remaining ₹10,000 subsidy as 'not material' in the long-term scheme of the industry's growth.

Financial Position and Capex Outlook

As of June 30, 2024, the company reported gross debt of approximately ₹3,700-3,800 crores and cash in hand of ₹1,300 crores. Post-IPO proceeds will be utilized to fund Phase 2A of the Gigafactory, expanding capacity from 5 GWh to 6.4 GWh. The company expects to invest ₹400-500 crores in the immediate Phase 1B implementation to reach the 5 GWh milestone.

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