Ola Electric Mobility Limited — Q3 FY25 earnings call

Call held 7 Feb 2025

Management summary

Ola Electric is undergoing a structural transformation focused on margin expansion and vertical integration. Despite a dip in Q3 volumes due to intense competition and service challenges, the company reclaimed the #1 market position in January with a 25-26% share. Management is pivoting toward the Gen 3 platform and in-house cell production to drive long-term profitability and achieve EBITDA breakeven.

Highlights

  • Targeting auto segment EBITDA breakeven at 50,000 monthly sales units

  • January 2025 gross margins expanded significantly to approximately 25%

  • Accrued ₹120 crores in PLI benefits during Q3 FY25 across all product lineups

  • Network expanded to 4,000 total touchpoints, including 3,000 company-owned stores

  • Headcount optimized by 15-17% to reduce operational costs while maintaining R&D

  • In-house cell commercialization remains on track for Q1 FY26 (April-June 2025)

  • Gen 3 platform expected to deliver an 11% reduction in BOM costs over the year

  • Q3 FY25 Capex stood at approximately ₹300 crores across cell and auto segments

Concerns

  • Service Backlog and Goodwill Costs

  • Competitive Intensity

Key financials

2 periods

Headline

  • Gross Margin (January)
    25%
  • PLI Accrual
    ₹120 Cr
  • Warranty Provision (per unit)
    ₹3,250
  • Market Share (January)
    25.5%

Q3

  • Capex
    ₹300 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

  • Auto Segment
    50,000 units/month EBITDA Breakeven Target
  • Cell Segment
    70% Current Yield90% Target Yield

Guidance & targets

Volume

  • Monthly Sales for EBITDA Breakeven Volume · next few quarters · Medium confidence 50,000
    we can expect auto segment EBITDA breakeven at about 50,000 monthly sales. Now when we get there, it depends on market conditions as well as EV penetration. But we do feel in the next few quarters, we can get to about 50,000 monthly sales.

    — Bhavish Aggarwal, MD

Capacity

  • Cell Commercialization Timeline Capacity · April-June 2025 · High confidence Q1 FY26
    Our cell, we've guided before is on track for commercialization into our products by Q1 of next year, which is about the April to June timeline, and we are on track for that.

    — Bhavish Aggarwal, MD

Margin

  • BOM Cost Reduction (Gen 3) Margin · FY26 · Medium confidence 11%
    on Gen 3, the press release, the 11% is a BOM cost reduction. That will happen over the course of this year.

    — Bhavish Aggarwal, MD

Market Share

  • Scooter EV Market Share Market Share · FY25-FY26 · Medium confidence 30-35%
    we will aim to have a scooter EV market share of about 30% 35%. And we believe we can get there with our Gen 3 product as well as Gen 2 coexisting.

    — Bhavish Aggarwal, MD

Capex

  • Cell Expansion Capex (5GWh) Capex · FY26 · Medium confidence ₹500-1,000 crores
    We will expand to five gigawatt hour, and that capex investment will come in into FY26. Now, that would mean about, let's say, maybe INR500 crores to INR1,000 crores, thereabouts.

    — Bhavish Aggarwal, MD

Risks & concerns

  • Service Backlog and Goodwill Costs

    high

    Exceptional costs related to clearing service backlogs and providing 'goodwill' repairs will impact Q3 and Q4 FY25.

    Management acknowledged

  • Competitive Intensity

    high

    Top three players are 'fighting aggressively' for market share, with some competitors reportedly losing money to maintain volumes.

    Management acknowledged

  • FAME Subsidy Reduction

    medium

    Management expects a potential 2-3 month volume 'blip' starting April 2025 as subsidies reduce from ₹10,000 to ₹5,000.

    Management acknowledged

Areas of evasion (2)

  • Specific reservation numbers for motorcycles (refused to share today)
  • Absolute revenue and PAT figures for the quarter were not explicitly discussed in the call text.

Q&A highlights

3 direct
Sustainability of 25% Gross Margins Direct
Firstly, our BOM cost has been reducing continuously... Then on top of that, there was about a 3.5%-odd point improvement from no discounting because last quarter was the festive quarter so January was less intense in terms of discounting.

Explains that the margin jump was driven by both structural cost reductions and a tactical reduction in discounts.

Asked by Ajox Frederick

Path to EBITDA Breakeven vs Current Losses Direct
So when we get to 50,000, at a gross margin level at where we are today, about 25-odd percent that you saw in January, we will be auto segment EBITDA positive.

Clarifies the specific unit economics required for the company to stop burning cash in its core auto business.

Asked by Gunjan Prithyani

Warranty and Service Backlog Costs Direct
you see a onetime exceptional cost in this Q3. There will also be another one in Q4. This is largely linked to the service backlog we had. It is not all warranty. Part of it is also no questions asked goodwill that we did.

Reveals that recent service issues have resulted in significant one-time 'goodwill' expenses that are depressing current earnings.

Asked by Gunjan Prithyani

2 min read 5 chapters

Detailed narrative

Path to Auto Segment EBITDA Breakeven

Management has identified 50,000 monthly sales units as the critical threshold for auto segment EBITDA breakeven. This target is predicated on maintaining the 25% gross margin level achieved in January 2025. While current volumes are around 25,000 units, the company expects the expansion of its touchpoints to 4,000 and the launch of the Gen 3 platform to drive the necessary volume growth over the coming quarters.

Vertical Integration and Cell Strategy

The commercialization of in-house 4680 cells is slated for Q1 FY26 (April-June 2025). Current production yields at the Giga factory are approximately 70%, with a target to reach 90% by the end of the year. Management expects the cell business to be EBITDA positive at a 5GWh scale, which would further expand consolidated margins by reducing dependency on imported cells.

Gen 3 Platform and Cost Optimization

The newly launched Gen 3 platform is a central pillar for future profitability, designed to reduce Bill of Materials (BOM) costs by 11% through engineering efficiencies like mid-mount motors and reduced ECU counts. This platform will coexist with Gen 2, allowing Ola to target both premium and entry-level segments. Management also optimized the workforce by 15-17%, focusing on removing redundancies in corporate and field roles while protecting R&D capabilities.

Service Transformation and Warranty Costs

Ola has aggressively addressed service issues, reducing the average turnaround time (TAT) from 3 days in October to 1.1 days currently. However, this transformation came at a cost, with one-time exceptional 'goodwill' expenses booked in Q3 and expected in Q4 to clear the service backlog. Steady-state warranty costs are currently provisioned at ₹3,250 per unit, but management expects Gen 3 products to have a lower warranty incidence of under 2% of revenue.

Market Share Recovery and Distribution Expansion

After ceding market share in late 2024, Ola reclaimed the #1 spot in January 2025 with a 25-26% share. The company has expanded its distribution network to 4,000 touchpoints, including 3,000 company-owned stores and 1,000 partner outlets. Management believes this expanded reach, particularly in Tier 2 and Tier 3 cities, will support a long-term market share target of 30-35% as the new stores mature over the next 4-6 months.

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