Daybreak - Ola chose selling over servicing EVs. Bajaj disagrees

Episode Date: August 10, 2023

After a delay of almost a year Ola Electric finally released its financials this week. The company was valued at $5 billion last year and so far it has raised nearly $800 million from investors, including Softbank. With a 40% market share, it is the leader of the two-wheeler EV market in India. It has already sold over 250,000 vehicles.Ola Electric has set up 600 experience centres around the country where people can go take test rides. But the company only has 200 service centres. Its lack of focus towards after-sales servicing is upsetting customers. Plus, the financials point towards a 4X loss in FY 2022.Meanwhile, its competitors like Ather and Bajaj are strategically going for a service-first policy.Tune in.RecommendationWhy $3 billion set aside for India’s EV makers is sitting idleDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me. My interruptions, my analogies and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. After a delay of almost an entire year, the country's leader of two-wheeler EVs or electric vehicles finally released its financials this week. The company was valued at $5 billion.

last year, and so far it has raised nearly $800 million from investors, including SoftBank. I'm talking about OLA Electric, which currently holds a giant share of the pipe. It controls a 40% share of the electric two-wheeler market in the country. The EV Maker, which launched its first scooter two years ago, has already sold over 250,000 vehicles. In fact, bookings crossed the 100,000 sales mark on the first day of the first day of sales itself. And less than a week ago, it even launched its most affordable vehicle, the OLA S-1 Air, for less than 1 lakh rupees. Potential buyers can go and take rides in any of OLA's 600 experience centers that the company has set up around the country. Now, all of this

sounds pretty great, right? But there is a little problem. Actually, maybe it's not that little. It may have 600 experience centres around the country, but Ola Electric only has 200 service centres in India. Think of the number of vehicles that it sold, 250,000. And while it has a huge fan club without doubt, more and more people are pointing towards the not-so-great after-sales services. Now, in a budding market, that is not a very good look. And also about the companies delayed financials for the year 2022 that I referenced, to earlier, they point to a four times increase in losses. Meanwhile, Ola Electric's competitors like Ather and Bajajar are going for a service-first approach.

Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickda Sharma, and I Don't Chase the News Cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Friday, the 11th of August. Celebratory atmosphere surrounded Ola Electric stores earlier this month. Employees could be seen bustling around in their bright neon t-shirts. It was the day that Ola Electric launched its cheapest two-wheeler so far.

Standing in this crowd was a 27-year-old man named Madhu who raised his hand. People thought that he was going to lord the company for this new achievement. Instead, Madhu began asking questions about Ola Electrics after sales services. The store manager very quickly ushered him to the side of the room for a chat. But that did not help. Soon enough, the crowd at the Ola store got unruly. So what was Madhu's problem? Madhu bought the Ola S1 Pro online in November last year for 1.6 lakh rupees.

He began by telling the Ken reporter, Sashito and Anushka that it had been eight months since he had bought the scooter, but the registration was incomplete still. Madhu claimed that the scooter malfunctioned barely a day after he got it. Right in the middle of the right, the vehicle just stopped working. What followed were three long months of frustration. Despite Madhu's repeated calls to Ola Electric's customer care and his rounds to their service stations and experience centres all around Bangalore, the scooter remained unusable. Eventually though, his scooter was fixed. But he went through a lot of unnecessary anxiety, right?

There are other similar stories like Madhuz. While the company's sales are soaring right now, the discontent regarding its after-sales services is also growing louder. And the number of stores does kind of give it away to an extent. 600 experience centres for test rights, but only 200 service centers. In fact, it wasn't until the start of this year that Ola Electric started linking service stations to its physical stores. This was meant to streamline servicing and repairs for buyers.

A former employee told us that OLA cabs even turned its empty workshops into service centers after it sold off its taxi fleets during the pandemic. Still, this was not enough. A former OLA electric employee told again that the company started off servicing operations with 750 technicians. But the number began to fall after people started leaving. The employee estimated that the company actually. needs at least 1,500 technicians around the country. My colleagues, Anushka and Shashuotow went to an Ula Electric Service station in Bangalore's

Indira Nagar to see what was going on. This particular station has a three-person team that tends to 100 to 120 scooters every month. On average, each scooter requires roughly two hours of work. Plus, another issue is finding skilled people who can work on EVs. Especially in small towns, it's quite tough. to find them. So what is Ola Electric doing about all of this? It is outsourcing its servicing problems hoping that it will help its staff shortage problem. It has turned to Ready Assist, a company that offers bike and car repair services. Its executives have been training third-party technicians

to visit homes and handle minor issues while major problems such as faulty batteries, wiring and motors are worked on at service centres. Meanwhile, OLA's rivals are taking a more hands-on approach. Stay tuned. Ather and Bajaj have set up a network of over 100 showrooms already. They are leveraging partnerships with multiple dealers to operate these outlets. Also, Bajajar has a policy to sell its e-scooters in cities where it has service centres. An ex-employee told us this and said that Ather on the other hand has a captive operation in Bangalore for three years. It let its product mature, identified initial defects and took countermeasures. Only then it went about scaling up its operations. Now this is exactly the opposite of expanding operations across India

all at once, which is basically what Ola has been doing. Bajajato has also staunchly pursued a separate service centre approach for its electric two-wheeler Cheetahq since its debut in January 2020. A manager at a Cheetahe dealership told again that until December last year, Cheetah repairs were being done at the service centres of KTM, which is Bajajaj's motorcycle brand. Then Bajaj started pressuring dealers to expand into exclusive Cheetahs service centers. But this has not been going down too well with its dealers due to a number of reasons. The first one, of course, is that the EV game is not as stable for auto dealers just yet. They are used to generating reliable, recurring income and substantial profits from services.

But with EVs, that is no longer the case. Dealerships also need a lot of capital for real estate ownership or for rent. They have to pay salaries and operational costs such as electricity supply. The money that they spent could potentially run into $4 to $5 lakh per service centre. It is quite expensive and quite risky. But Bejajarj has been trying to sweeten the deal for them. It has started moderating its expectations from these dealers as they can earn up to 40% less than what they did servicing normal non-electric vehicles.

See, irrespective of how keen automakers are on selling their EVs as low maintenance options, dependable after-sales services are extremely important. It is a matter of human safety. Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business news news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website.

I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.