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Ola Electric launches its much awaited e-scooter

Disruptive product at a disruptive pricing sets a high benchmark

* Ola Electric launched its much anticipated electric Scooter on 15th Aug’21. Though loaded with technology (with several class-leading features), it is still being offered at an attractive price. The company launched two models – S1/S1 Pro – at INR99.9k/INR129.9k (post FAME-2 subsidy) and offers a class-leading range of 121km/181km and a top speed of 90kmph/115kmph.

* Ola’s guiding principle in developing its e-Scooter was to offer the best design, technology, and performance. Despite offering top-notch performance and range, it is priced cheaper than its performance-oriented peers (like Ather, BJAUT, and TVSL).

* The management claims 90% localization (except battery cells), while almost all other materials, software, etc. have been sourced locally.

* Ola has been accepting bookings from across India and intends to make the Scooters available in 1,000 cities simultaneously from Day 1. This is in quite a contrast to other OEMs who are expanding their reach in a phased manner (Ather/TVS iQube/Bajaj Chetak available in 20/six/six cities).

* This aggressive ramp-up is enabled by: a) faster and higher localization, and b) direct to consumer model (D2C, with no physical retail model). Ola said it would be providing doorstop service. This D2C model is untested in the Indian market and it would be interesting to see whether customers accept this model, as it has the potential to disrupt the distribution/service network moat of incumbent OEMs.

* Ola initially plans to set-up a charging network in over 100 cities, and eventually plans to cover over 400 cities.

* It has received over 100k bookings in the first 24 hours of opening bookings. It intends to start delivery from Oct’21. It has recently started manufacturing operations, with initial capacities of 1m units p.a., and plans to ramp-up it to 10m units eventually.

Our view: Disruptive product and pricing, sustenance of subsidies key

* Ola’s S1/S1 Pro is a truly disruptive product, with an attractive pricing. It sets a very high benchmark in the nascent e-2W industry.

* While initial bookings are encouraging, its direct to customer distribution and service model are yet to be proven in the Indian market at high volumes.

* Ola has put all building blocks in place in the form of: a) a disruptive product at a very attractive price, b) high localization, and c) large capacity to derive scale advantage.

* Without subsidies, the ex-showroom price of S1/S1 Pro is estimated at INR143.5k/INR158.8k. This needs to be seen in light of FAME-2 subsidies that are in place till Mar’22. The subsidies offered by both FAME-2 and state governments are in limited quantities (FAME-2 offers subsidy for 1m 2Ws over a three-year period). The economics of e-2Ws, without subsidies, are not favorable yet to drive mass adoption.

* 2Ws will be among the first to be electrified, particularly the Scooter segment. The Scooter segment offers a large potential, with an EBITDA pool of ~INR40b. While Ola has got the key ingredients in place, it would be too early to write-off other OEMs.

* In 2Ws, Scooters are vulnerable to EVs. TVSL is the most vulnerable player in the listed space, with over 30% of total volumes accruing coming from domestic Scooters. Other 2W listed players are BJAUT/HMCL, with nil/~8% volumes from Scooters.

* In the near term, we expect mainstream 2W players to continue to underperform as we continue to wait for the demand recovery to play out. The risk of an electric disruption will continue to be overhang, particularly for players with a higher exposure to Scooters.

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