Finshots Daily
Can Ola Electric regain consumer confidence?
In today’s episode for 10th October 2024, we talk about Ola Electric’s challenges and see if it has what it takes to rise from the ashes.
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- Broadcast on:
- 10 Oct 2024
- Audio Format:
- other
Hello and welcome to Finshots Daily. In today's episode, we talk about Ola Electric's challenges and see if it has what it takes to rise from the ashes. Before we start today's episode, here's a quick message from one of our co-founders. Hey there, my name is Straits, one of the co-founders of Finshots and Ditto. And I've been entrusted with an important mission, that is finding talented marketers to join our growing team. If you're someone that has a knack for simplifying the complex and making it fun, we'd love to hear from you. Head over to Tito's career page to apply or share this with someone who would be a great fit. Bonus tip, grab a referral from someone on our team to give your application an extra edge. Good luck, we can't wait to hear from you. Now on to today's episode. Stock markets are known for reacting to the news. Sometimes in dramatic ways, an Ola Electric just got a taste of it. A few days ago, a public spat on X, formerly Twitter, between Ola Electric CEO Pavesh Agarwal and comedian Kunal Kamra grabbed a lot of eyeballs. The comedian was voicing frustrations on behalf of unhappy customers. And just a day later, Ola Electric shares tanked nearly by 9%. So what caused this steep drop? Well, it seems the comedian struck a nerve with many Ola Electric scooter owners, who have been waiting endlessly to get their vehicles back from repairs. Apparently, the turnaround time was painfully long. For some context, Ola Electric has been battling multiple issues, such as battery failures, handlebars locking up, software issues. As in the Ola Electric app, refusing to connect with the vehicle and repair delays, there have left many scooters sitting idle for weeks if not months. Even customers with premium service plans are facing the same fate. Why? Because Ola's service centers are overwhelmed. Reports suggest they could be handling as many as 80,000 complaints a month, with some days seeing up to 7,000. With numbers like that, it's no wonder they're struggling to keep up. And this isn't the first time Ola's found itself in hot water. Remember those viral videos of scooters catching fire? Are the front four calm of the S1 Electric scooter collapsing under heavy braking? Well, Ola tried to control the damage by offering voluntary replacements of faulty parts, but the issues keep piling up. Some customers completely fed up, also resorted to extreme measures like setting showrooms on fire in Karnataka or strapping placards on their scooters, warning others not to buy Ola. And as if that wasn't bad enough, there's more. Last week, after a flood of customer complaints, the central consumer protection authority of the CCPA issued a show-cause notice to Ola Electric. The charges, misleading advertisements and unfair trade practices. In fact, over the past year, the CCPA logged over 9,000 complaints against Ola Electric. And the company's market share tells the story. It plunged from almost 50% in April to just 27% now. Sure, there's no official audit or report to confirm every complaint, but the consumer frustration is loud and clear. So what's driving this downfall for Ola Electric? It seems, Ola's aggressive expansion strategy could be partly to blame. They might have stretched themselves too thin in their rush to dominate the market. Add in global supply chain disruptions causing production delays and confidence shortages and the problem just snowballed. As a result, Ola lost its lead in five of the top 10 states for electric vehicles, which make up nearly 80% of the total market. Their sales are driven down by over 50% compared to the start of FY 25, suggesting that these service troubles are hitting monthly sales too. And here's the irony. Despite its current struggles, Ola Electric's story started off on an inspiring note. Even with competition from established players like Bajaj and TBS as well as a flood of Chinese EVs, Ola managed to carve out a massive share of the market. To put things into perspective, in less than five years, they sold nearly seven lakh electric scooters commanding a third of India's electric two-wheeler market. With an average of 35,000 units sold monthly, they outpaced both legacy companies and new entrants alike. Yet, while Ola captured the market, they couldn't keep up with customer support or maintain efficient supply chains. And as these cracks began to show up, legacy players like Bajaj Auto seized the opportunity. Bajaj, which initially struggled, has nearly doubled its market share, climbing to upwards of 20% today. Bajaj and TBS now have a combined 38% of the E-2-wheeler market. With lower price scooters like the Bajaj Chetak and TBS's IQ variants starting at around 95,000 rupees, they are undercutting Ola's S1 Pro, which sits at 1 lakh 30,000 rupees. But Bajaj's strategy offers Ola a lesson. Both Bajaj and TBS launched their electric two-wheeler vehicles back in 2020 before Ola came along in 2021. Yet, they chose to watch and wait, letting startups like Ola build the market. And now they're swooping in with a better cost structure. Bajaj's playbook? Timing, affordable pricing and sustainable growth. They're also looking long-term, focusing on releasing models only when they're truly road-ready. Ola, on the other hand, has been often called out for launching vehicles despite performance issues. And even when complaints pile up, it doesn't recall its models. Unlike Bajaj and TBS, which have a solid service network, Ola struggles to service its faulty vehicles with its existing centers being understaffed as well. So if Ola wants to stage a comeback, they might need to take a leap out of Bajaj's playbook in order to scale production wisely, focus on affordability and to keep customers in the loop. But before we go gaga over legacy players, here's a twist. Are they really doing that much better? A recent Bernstein report suggests that the electric two-wheeler industry is grappling with losses. The report claims only a handful of EV players will survive in the long run. Ola currently enjoys the highest margins among electric scooter makers, but legacy players like TBS, Bajaj and Hiro are bleeding money. While Ola profits on its premium models like the S1 Pro, it's losing on its mass market offerings like the S1X. TBS is the reportedly losing 11,000 rupees per scooter, and Bajaj's losses are steeper, nearing 15,000 rupees per vehicle. Everyone in the EV space will need to ramp up operations and drive down costs to compete with traditional internal combustion engine scooters truly. Bernstein's report suggests that the dominant startups like Ola could eventually become mainstream players, while traditional manufacturers like Bajaj, TBS, Hiro and the like may struggle to keep pace. So yes, Bernstein's report favors startups like Ola dominating the EV space. But to get there, Ola has a lot of ground to cover to win back the hearts of Indian EV buyers. After all, who wouldn't want to see a homegrown startup rise to the top and become a legacy player one day? But until then, the road ahead looks pretty bumpy. Thank you for listening to today's episode, and if you want to share your feedback or suggestions, do drop us an email to high@theratefinshots.in. Until next time.