Ola Electric's maiden quarterly results paint a mixed picture

Ola Electric Mobility posted a mixed set of numbers for the June quarter, the first time it is reporting results after listing on the public markets in India last week. For the first quarter of fiscal year 2025, Ola Electric reported revenue of Rs 1,644 crores, marking a 32.3% increase from Rs 1,243 crores in the same quarter of the previous year.

This suggests an expanding market for electric vehicles in India, though it's important to note that the EV market is still in its early stages and subject to fluctuations.

Despite the revenue increase, profitability remains elusive for the electric vehicle manufacturer.

Ola Electric posted a loss before tax of Rs 347 crores for Q1 FY2025. While this represents an improvement from the Rs 416 crores loss in the previous quarter and Rs 267 crores in Q1 FY2024, it underscores the ongoing financial challenges facing the company.

The company's automotive segment generated the majority of revenue at Rs 1,644 crores, while the cell segment contributed a modest Rs 4 crores. This disparity highlights Ola's heavy reliance on its core electric two-wheeler business, with its diversification efforts still in nascent stages.

Ola Electric's balance sheet shows total assets of Rs 7,568 crores against liabilities of Rs 5,850 crores. While this indicates a reasonably stable financial position, the company's ability to manage its resources efficiently will be crucial as it seeks to achieve profitability.

Expenses remain a significant factor in Ola's financial performance. The company reported Rs 1,311 crores in material costs and Rs 123 crores in employee benefits expenses. These substantial outlays reflect the capital-intensive nature of the EV industry and the competitive talent market, both of which could continue to pressure the company's margins.

Company’s Automotive segment (E2W) posted a strong improvement in operating loss margin. Automotive segment operating loss margin for the quarter was 1.97%, an improvement overthe 8.29% operating loss margin for the quarter ended 30th June 2023.

The company said it had an "adjusted gross margin" of Rs 377 Cr for the quarter ended 30th June 2024, implying a margin of 21.94%, up from 13.21% for the same quarter last year.

"The increasing scale of operations has benefited the company in the form of lower manufacturing costs and supply chain optimizations. These benefits of scale are further amplified by the company’s scalable platform-based product development and manufacturing technology that results in high degrees of commonality across its products," it said.

A closer look at Ola Electric's financial statements reveals that the company's major expenses have grown at a faster rate than its revenue, potentially putting pressure on profitability. The cost of materials consumed increased from Rs 1,114 crores in Q1 FY2024 to Rs 1,311 crores in Q1 FY2025, representing a 17.7% year-over-year growth. This is significant, but still lower than the 32.3% revenue growth rate.

However, other expense categories show a more concerning trend. Employee benefits expense rose from Rs 94 crores to Rs 123 crores, a 30.9% increase, nearly matching the revenue growth rate. Most notably, other expenses surged from Rs 257 crores to Rs 385 crores, a substantial 49.8% increase, far outpacing the revenue growth.

This disproportionate growth in expenses, particularly in the 'other expenses' category, suggests that Ola Electric's operational costs are escalating rapidly as it expands.

On the operational front, the quarter witnessed the highest ever deliveries of vehicles by the Company at 1,25,198 units as against 70,575 units delivered in the same period last year. The company ramped up deliveries of its mass market scooter portfolio (S1 X portfolio) during the quarter which helped accelerate growth.  

As Ola Electric moves forward, it faces several key challenges. Maintaining revenue growth while reducing losses will be paramount.