Daybreak - What has two wheels, runs on electricity, and is Ola Electric's next big bet?

Episode Date: September 10, 2024

On Independence Day this year, just six days after it went public, Ola Electric launched three new electric motorbikes. This was a bold move, especially considering that  electric vehicles haven’t really clicked with the Indian audience yet. The exception to that rule has been electric two and three wheelers, which had some unexpected success in tier-2 India. But motorcycles are not scooters. People still prefer their 125cc ICE bikes. So, it’s a difficult space to break into. But if there is one thing we know about Ola Electric, it’s that the company does not shy away from making bold business decisions. It has its sights set on becoming the next Hero Splendor. Has Ola Electric bitten off more than it can chew? Tune in.If you've been wondering what The Ken is all about and why our subscribers love us, here is your chance to find out. Check out our special 30-day trial curated just for you.To apply for the latest job openings in The Ken's podcast team, click here.

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.

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Now, this was a bold move for multiple reasons. The first of which is that electric vehicles haven't fully clicked with the Indian audience just yet. The exception to that rule, of course, has been electric two-wheelers, which have had some unexpected success in here to India. But here, when I say electric two-wheelers, I am referring to scooters. While electric motorbikes are also technically two-wheeler's, they are still a whole other ballgame. The thing is, people still prefer their traditional 125-cc ice bikes. It's a difficult space to break into.

But if there's one thing we know about Ola Electric is that the company does not shy away from making big, bold business decisions. So now it has its sights set on becoming the next splendor. To convince consumers to take a chance and believe in its electric, electric motorbikes. They've promised low prices and high performance. So you can book one of the new models for just $999. OLA Electric's Roadster X model, which is seeing the most traction at the moment, is priced at just under $75,000. It sounds like a great deal because it is. But it doesn't make a lot of sense for OLA Electric from a revenue perspective. Sure, it's a great tool to gauge consumer interest in their electric motorbikes,

but industry insiders say that the conversion rate to real sales always tends to be in single digits. Ola Electric CEO, Bhavi Shaharwar, doesn't seem to care about that so much. You see, his goal is not just getting more of his bikes into garages, he has way bigger plans. He wants

every new bike and scooter sold in India to be electric by 2025. Now, that's an even more ambitious goal than the government has set for the country. India's target is 70% electric by 2030. So there's ambition and then there is blind ambition. Ola Electric really doesn't shy away from making bold claims, even if they are completely implausible.

I'm sure you remember how ruthlessly Agarwal was trolled for claiming OLA Electric is the world's fourth largest EV company, excluding China. And there's also the cautionary tale of the OLA's S-1 Air and S-1 Pro. The S-1 Air was initially priced at 79,999. just shy of rupees 80,000. But once OLA finished upselling all the software features,

buyers were looking at a final price closer to 1.1 lakh rupees. People in the space say it's likely that the same thing will end up happening with the bikes as well. Now, when it comes to actually meeting demand, OLA is convinced it can speed things up on the manufacturing side of things.

But that raises a whole other set of safety concerns. I mean, we all remember the infamous incident in Punei where an Ola S1 Pro caught fire. right? So, has Ola Electric bitten off more than it can chew? Welcome to Daybreak, a business podcast from the Ken. I'm your host, Rahal Philippos,

and I'll be joining my colleagues Nikita Sharma every day of the week to bring you one business story that is worth understanding and worth your time. Today is Tuesday, 10th of September. When you imagine what an EV user looks like, your mind automatically conjures up a very specific picture. You're probably imagining some climate, conscious, elite, highly educated person living in a tier one city. But funnily enough, this stereotype couldn't be further away from reality.

Firstly, electric two-wheeler's have had far more success than four-wheelers. I mentioned that a little while earlier as well. And secondly, their sales in tier two cities are significantly higher than in India's wealthier metropolises. A senior employee at Ather told the Ken reporter Nathan Narday that there is a relationship between rising literacy rates and higher e-scooter sales. Higher literacy rates also open up the market to a new category of consumers. Women in Tier 2 cities are increasingly purchasing scooters.

They find them way more comfortable than bikes. Some industry insiders say this is because of how scooters are built. So the gap between the seat and the handle has made it a lot more accessible for women riders. Now compare that to motorcycles, which have traditionally shut up. doors for female riders. Of course there are women riders, but these numbers are few and far between. So this is a market that Ola Electric doesn't seem to be tapping into with its latest offering. It also doesn't help that the Ola Electric Roadster, currently the most popular motorbike among its newer offerings, isn't the most comfortable for a commuter. Let's compare it to other commuter

motorcycles, popular ones, like the Bajajar Motor C.J or Hero Motor Corps Splendor. These generally have flatter seats. So they allow you to sit upright while riding your bike, which makes the whole experience far more comfortable, especially while navigating India's difficult roads. Meanwhile, the roadster is more sporty looking. So its riding position is a lot more

aggressive than with a conventional commuter motorbike. And that's on me talking. That's what a senior employee at TVS Motor Company had to say. They said that this could be a big pain point for future customers. The thing is now more than ever, this sort of thing should matter to OLA Electric, how its design compares to its

competitors. Because while it once ruled the electric scooter market, it has steadily been losing its market share to legacy players like TVS and Bajaj. The competition is only intensifying, especially when these legacy brands start launching CNG bikes. Because with that, Ola Electric could face the same threat EV manufacturers faced from hybrid vehicles. We've spoken about this in previous episodes of daybreak, hybrid cars have been denting EV sales in India. Industry experts say it won't be far-fetched to see alternative fuels like CNG slowing down EV penetration in the two-wheeler space too. But that's only the tip of the iceberg. Ola Electric has much bigger challenges ahead. More on that in the next segment.

Hello, this is Praveen. I'm the co-host of the Ken's weekly business podcast 2x2, where Rohin, my co-host and I, bring a bunch of interesting guests and have discussions on pressing topics like, will FlipCard become phone pay before phone pay becomes FlipCart? Or is the golden era of the software engineer over? 2x2 episodes are behind a paywall for our subscribers, but occasionally we sneak some of these out into the open world so you can listen to them and find out what they sound like. This week, the episode we have unlocked is also one of my favorite. favorite ones. It's called Delhi Pricked the Bangalobble. And for the final time, we have the definitive discussion about what is really better. Delhi startups or Bangal ones. This episode is

available for a limited time. So to listen to it, just subscribe for 2x2 by 2 by the Ken wherever you get your podcast and you'll find the full republish episode on your feed. When you really think about it, Ola Electric's decision to venture into the e-motor bike space makes sense. They were already making scooters, so they had all that infrastructure in place. So a complete overhaul wasn't necessary. But it still came with its own set of complications. You see, scooters are easier to electrify. They're a natural fit for electric power. They have this large enclosed rear and floorboard, which makes it easier to place a battery. Meanwhile, motorbikes are designed for enhanced performance and greater load capacity. So placing swore,

charging a battery becomes far more difficult. But apart from these practical concerns, there are also some broader challenges, like the fact that the electric motorbike market is really struggling at the moment. Take the RV 400 from Revolt Motors, for instance. Back in 2019, it was the first electric bike on Indian roads. It was initially operated by Rahul Sharma,

the co-founder of smartphone maker Micromax. And soon after, Revolt Motors faced a setback after being found guilty of violating EV subsidy localisation norms. The company is now operated by private power generation company Rattan India, but its sales have been struggling. It's fallen from around 12,000 units in FY23 to nearly half that number in the following financial year. You can also take the case of Pune-based torque motors, which incidentally is backed by Bhawe-Shagarwal. The company is operationally closed primarily because of a capital.

crunch. It's currently looking at a stake sale to revive operations. Now, to combat all of these possible challenges, OLA Electric seems to be hyper-focused on growth. Its aggressive launch strategy has also faced criticism for leading to quality and service issues. But reducing the time taken to be road-ready doesn't necessarily amount to being reckless. Experts say that it all boils down to the automaker at hand. But going by OLA Electric's track record, things could go downhill. For instance, an employee said that it caused the company close to cover up the PR crisis that took place after the OLA S-1 Pro Fire incident. The company dealt with it by conducting a dialogue with the OLA Electric Community and Media

across Mumbai, Gurgao and Tamil Nadu. The director of an equity research firm told the Ken that Ola's mantra seems to be launching vehicles before they're ready and then letting customers continue the testing. That sounds pretty decent. And this is a sentiment that is echoed across the board. Here at the ken, we've previously reported on how OLA tends to be sales-heavy, but missing in action when it comes to servicing customer complaints. One look at Agarwal's social media handles, and you will know that this is still the case.

The comment section on his posts are full of complaints about quality and service. But despite all of this, OLA Electric seems to be battling ahead with the roadster regardless. Could this be another costly drama? Well, only time will tell. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business 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 and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted by Rahil Filippo's, produced by me, Snigda Sharma, and edited by Rajiv Sien.