A month after Ola Electric was listed in the public market, its older but smaller rival Ather Energies also filed its draft red herring prospectus (DRHP) for an initial public offering (IPO). Founded in 2013, Ather Energies has seen Ola Electric, four years its junior, overtake it in sales in the past few years. Before its IPO, Ola Electric had raised $1 billion in 14 rounds, whereas Ather raised $502 million from 19 rounds, according to Tracxn. This reflects their contrasting paths. But Ather's decision to go for an IPO and its run-up are strong indicators that it's shifting gears.
Ola Electric's aggressive pursuit of scale is reflected in the two companies’ incomes. While Ather was ahead in income from operations in 2021-22, Ola’s revenue swelled to three times Ather’s in 2023-24, according to numbers in the DRHP. While Ather's revenue shrank, Ola Electric's jumped by over 90%.
The latest vehicle registrations data from the Centre’s Vahan database also reflects this gap. While Ola sold 297,789 vehicles from April to August, Ather sold 73,497. Between Ola and Ather, there are TVS Motor and Bajaj, two traditional players betting on electric vehicles, in an increasingly competitive market.
Ather's relationship with traditional players is more complicated, thanks to investments by two-wheeler major Hero MotoCorp. With 30%, Hero MotoCorp is the largest shareholder in the company. Even operationally, the two companies entered into a partnership last year to share an inter-operable fast-charging network across the country.
The gap between Ola Electric and Ather Energies is in part due to the strategic direction the two rivals took. Ola positioned itself as a scale player, using its acquisition of Amsterdam-based Etergo BV as a springboard to launch its first product. The scale and speed had negative consequences, as customers complained about faulty products and inadequate service. An incident just last week in Karnataka involved a disgruntled customer setting fire to an Ola showroom (he was arrested).
Ather's slower pace of growth helped it establish a better reputation for quality. Its products were built in-house. It has been consistently increasing its research and development expenditure, while Ola's dropped by 24% in 2023-24 compared to a year earlier. Even so, Ola has a bigger research and development (R&D) budget and has not shied away from paying top dollar to attract talent. Ather plans to use part of the IPO funds on R&D.
The common perception is that Ola Electric is stronger in marketing, reinforced by its dominant position in the market. However, in each of the past three fiscal years, Ather has been outspending Ola Electric on this front by a large margin as it tried to win market share. Ola's higher market share comes predominantly from its manufacturing capacity and distribution model. It launched its products across the country through an online-only, direct-to-home delivery model.
Ather adopted a traditional showroom-based model, resulting in a relatively slower pace of growth and a concentration in South India. In 2023-24, the south accounted for 68% of all its sales, followed by the west with 16%. North, east and central India accounted for 9%, 5% and 2%, respectively. State-level regulations could impact the business either way. Karnataka has its own electric bike taxi policy. Delhi has vowed to move ride-hailing and delivery firms to electric bikes by 2030.
Regulations will continue to play an important role in electric vehicle (EV) adoption. When the government withdrew FAME-II subsidies, it impacted sales of all players. In China, EV adoption expanded even after the government withdrew subsidies, thanks to other factors like total cost of ownership of EVs compared to vehicles running on traditional fuels, better performance, and easier access to battery-charging points.
These factors are also expected to drive EV penetration in India, which has increased from 1.8% of new two-wheelers sold in 2021-22 to 5.1% in 2023-24. McKinsey expects this to reach 60-70% by 2030. Companies investing in capacities now have a better chance of capturing that market. That has been Ola's bet. Ather's existing facility at Hosur is running at only 30%. Yet, it plans to build another one in Maharashtra with IPO funds. It's a signal that Ather, too, is betting on scale.
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