The Indian start-up Ola Electric, once celebrated as a trailblazer in the nation’s electric vehicle landscape, is currently facing tumultuous challenges that threaten its dominance. Established in 2010, Ola expanded from ride-hailing services to electric scooters and battery manufacturing, earning recognition as a competitor to global giants like Uber. In 2023, Ola ventured into AI, establishing Krutrim, the country's first AI firm valued at over $1 billion, thanks to major investments from global players such as SoftBank and Tiger Global.
Ola Electric raised about $734 million in an initial public offering (IPO) in 2024, marking it as a significant achievement in India's stock market history. Yet, within a mere seven months post-IPO, the company has lost around 70% of its value due to intense competition from established two-wheeler manufacturers and increasing regulatory scrutiny. Reports indicate that scooter sales have dwindled to less than half compared to the previous year, amid mounting complaints about safety issues including scooter fires and malfunctioning components.
The firm is facing an ongoing government inquiry into licensing irregularities at its new showrooms, while one of its suppliers has initiated insolvency proceedings. Former employees cited widespread issues with delayed payments, resulting in severed partnerships with key suppliers and logistics firms. In response to financial strains, Ola has undertaken major cost-cutting measures, including layoff rounds that have seen over 1,000 jobs eliminated since November.
Ola CEO Bhavish Aggarwal initially compared the company to Tesla, underscoring its mission to tackle environmental concerns for the economically sensitive Indian market. Despite heavy marketing investments and a network of showrooms, industry analysts express concerns that Ola has failed to accurately gauge market dynamics. A former compliance employee mentioned rushed approvals for vehicle launches, leading to safety incidents and necessitating recalls of over 1,400 scooters to investigate fire hazards.
As rival companies introduce electric scooters with strong brand reputations, Ola’s market share has nosedived from 52% to 19%. Although the company announced a recovery to 25%, selling 50,000 scooters monthly to achieve profitability seems increasingly uncertain. Recent reports from the federal transportation ministry have raised alarms over discrepancies in sales numbers reported by the company.
Ola's aggressive marketing strategies, such as steep discounts on newer models, have yet to reverse its losses, which increased to $65 million in late 2022. Additionally, inadequate customer service responses to safety complaints have further escalated dissatisfaction among consumers. Despite Ola's attempts to remedy customer relations by proposing the establishment of nearly 4,000 service centres, questions loom about their regulatory compliance.
Investor sentiment is declining due to the company's struggle to balance growth with operational efficiency. Despite receiving state subsidies aimed at expanding manufacturing capabilities, Ola's planned gigafactory for EV battery production has encountered delays that threaten financial penalties. Analysts argue that common startup pitfalls, emphasizing rapid, CEO-driven pivots, have hindered Ola's ability to stabilize its offerings.
Crucially, leadership turnover within the company has aggravated its challenges, with significant departures in tech, marketing, and sales roles over the last year impacting its recovery efforts. As competition intensifies, Ola’s capacity to regain users’ trust and financial viability remains uncertain, leaving investors wary about the firm's trajectory in the ever-evolving EV market.
