Ola Electric Mobility, a prominent player in India’s electric two-wheeler market, experienced a significant recovery in its stock price on Tuesday, March 18. Shares surged by 15%, reaching ₹53.80 each, helping the company regain a market capitalization exceeding ₹20,000 crore. This rebound comes after a challenging trading day where the stock plummeted by 7%, triggered by a court petition from one of its creditors alleging payment defaults by its subsidiary.
Legal Challenges and Market Reactions
The petition, filed by Rosmerta Digital Services, a vehicle registration service provider, accuses Ola Electric Technologies—a wholly-owned subsidiary—of failing to pay for services. As a response, Ola Electric has firmly denied the allegations and is seeking legal counsel. This legal setback contributed to the stock’s previous decline, but investors appeared optimistic about the company’s future, driving the recovery.
Trends in the EV Market
However, it’s important to note that Ola’s stock had been on a downward trajectory for the past three months, losing a staggering 40% of its value. Analysts attribute this decline to a mix of factors affecting the electric two-wheeler (e-2W) sector, including:
- Slower growth in the e-2W industry.
- Loss of market share within this segment.
- Delays in launching new motorcycle models due to homologation issues.
- Increased costs related to warranty claims.
Despite these challenges, industry experts anticipate an uptick in profitability in the upcoming quarters, primarily due to cost-cutting measures. However, they caution that the anticipated growth in sales volumes may fall short of market expectations.
E-2W Industry Outlook
According to a report by Kotak Institutional Equities, the electric two-wheeler market has seen a notable decline in demand following the festive season. Contributing factors include:
- Weakened consumer sentiment.
- Lackluster new product launches from major manufacturers.
- Rising financing costs.
- Saturated demand among early adopters.
Additionally, the reduction in government subsidies for e-2Ws—from ₹10,000 to a maximum of ₹5,000—will likely increase initial purchase costs unless manufacturers can absorb these changes.
Future Projections and Stock Rating
Given these market dynamics, Kotak has revised its growth forecasts for the e-2W industry, projecting a 31% CAGR from FY2024 to FY2027, down from an earlier estimate of 40%. For Ola Electric, the brokerage has adjusted its revenue predictions for FY2025-27 downward by 2-15% due to these challenges and delays in product launches.
Despite anticipating improvements in profitability starting FY2026, concerns about ongoing sales volume persist. Consequently, Kotak has maintained a ‘Reduce’ rating on Ola’s stock, lowering its price target from ₹65 to ₹50 per share.
Key Opportunities Ahead
The brokerage noted that a strong performance from Ola’s motorcycle segment and a successful expansion of its Gigafactory could present significant upside risks to its current outlook. As the electric vehicle landscape continues to evolve, Ola Electric’s ability to navigate these challenges will be crucial for its future growth.
