Ola Electric Shares Drop 5.5% Following 33% Sales Decline: What’s Behind It?

November jitters left this EV stock grappling to hold its market share. Ola Electric Mobility Limited shares opened the week with a 5.5% dip in early trading. The stock has been on a downward trajectory for three months, but November brought a mix of highs and lows, eventually closing at Rs.87.41 on the last trading day. Despite this, the sharp plunge on Monday morning has raised the big question: What went wrong? Let’s dive in to uncover the reasons.

Ola Electric Mobility Share Price Trend

Since its inception in August 2024, the company’s share price has seen a series of highs and lows, but the overall trend is downward. Ola Electric was listed at a 66% increase from the issue price of Rs.76. However, the following months saw a drop in the share price to levels below the issue price.

The market competition from peers like Bajaj Auto and TVS Motors fueled the struggle to stay on top, especially before the festive rush. 

Four reasons attributable to this fall can be

Lower Quarterly Revenue

The company delivered 98,619 units during the quarter, marking a 73.6% YoY growth. It also recorded quarterly revenue of Rs.1,240 crore in the second quarter of FY25, up 38.5% from Rs.896 crore in the quarter ending September 2023. However, a decline in sales and revenue becomes apparent compared to the June 2024 quarter. 

Fading Festive Peak in Sales:

The company’s sales sharply declined in November, dropping by 33% to 27,746 units. Registrations fell by 18% in November, which is higher than the rate of decrease of its competitors TVS Motors (13.4%) and Bajaj (12%). The reasons for this decline are attributed to the fading festive demand. 

The company’s deliveries peaked in the first quarter of FY2025 (at 1,25,198) due to Ola Electric’s price cuts and the resulting increase in demand for its mass-market scooter. The numbers declined in the second quarter to reach 98,619 deliveries. 

String Of Losses:

Ola Electric has long experienced a series of losses in its profit margin. The chain of net losses remained unchanged for the FY2024 quarters as well. In the second quarter of FY2025, the company reported a negative PAT of Rs.495 crore, more than the loss of Rs.347 crore in the first quarter (June 2024).

Strong Competition

Ola’s market share in CY2024 has seen significant fluctuations, reaching a high of 49.8% in May, dropping to 28.6% in September, and recovering to 31% in October, driven by festive discounts.

Though the sales have fallen, the company remains the segment leader with a market share of 25.09%, higher by a narrow margin from its peers. However, November’s sharp decline underscores intensifying competition from TVS and Bajaj, hinting at a tighter battle for market dominance in 2025.

Road Ahead For Ola Electric:

After a sharp 5.5% dip in early trading on Monday morning, the stock rebounded strongly, climbing nearly 6% by the end of the first half of the trading session. This happened after the company CEO, Bhavish Aggarwal, announced the company’s retail expansion plan on various platforms. The company also plans to increase its store count to 4000 by the end of December 2024. 

The company also plans to broaden its product portfolio by adding 20 new products in the next two years, keeping a frequency of one launch per quarter. Under its Network Partner Program, it plans to expand its network of partners to 10,000+ to amplify its D2C network. Additionally, the company is also ready to enter cell production by FY2026. 

Source: Company Report and ET

What’s in it for Investors?

Ola Electric’s recent stock performance reflects positive and negative factors. While the company has shown growth, recent challenges such as declining sales, increasing competition, and ongoing losses have raised investor concerns.

Key takeaways for the company include-

• Strong Growth Potential: Ola Electric’s focus on electric mobility and its strong brand presence offer growth potential.
• Intensifying Competition: The increasing competition from established players like Bajaj Auto and TVS Motors could impact market share and profitability.
• Financial Performance: The company’s consistent losses and declining sales are major investor concerns.
• Future Plans: The company’s expansion plans, including product launches, retail expansion, and cell production, could drive future growth.

So, if you plan on investing in Ola Electric Mobility Limited, carefully evaluate Ola Electric’s ability to execute its growth plans amidst intense competition, improve profitability, and adapt to evolving market dynamics and regulatory changes. The company’s success hinges on its ability to maintain market leadership, address financial challenges, and capitalize on emerging trends in the EV industry.

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