Inside Ola Electric's Policy And Service Nightmare

The largest motorbike exhibition in Milan, EICMA, scheduled to be held in November this year, will likely feature only two Indian vehicle manufacturers — Royal Enfield (Eicher Motors Ltd) and Ultraviolette Automotive Pvt Ltd, an electric superbike manufacturer. But why are we bringing up a motorbike show in Milan? It serves as a stark reminder of the gap between global ambitions and local realities for Indian electric vehicle (EV) manufacturers. While several players are vying for a slice of the Indian EV pie — Hero, Bounce, Ather Energy, Simple Energy, and of course, Ola Electric — it's Ola that has been the most vocal about its global aspirations.

In 2022, Ola Electric founder Bhavish Aggarwal boldly declared that the company would soon conquer international markets, with plans to enter Latin America, ASEAN, and the European Union. Two years later, there’s no international presence to speak of and no clear timeline in sight.

That hasn’t stopped Aggarwal from claiming that Ola Electric was the world's fourth-largest EV company (excluding China, of course). He made this statement during Ola's event on August 15, where he unveiled a new generation of EV vehicles. The reality remains that China dominates the global EV two-wheeler market and the top five manufacturers are all Chinese. The internet was quick to react, putting the company's CEO Aggarwal to shame. Ola Electric's market cap stood at Rs 36,270 crore at the time of writing, reflecting a 34% decrease from Rs 55,669 crore at listing.

Not only does Ola Electric not have the global presence it claims, but back home it is in the eye of a storm. There is outrage over service quality, mounting concerns over potential subsidy violations, and regulatory scrutiny. The outcome of the ongoing investigations, particularly by the Central Consumer Protection Authority (CCPA), could have significant legal and financial consequences for Ola Electric, impacting its market share, future growth prospects, and global ambitions.

A venture capital (VC) partner at an Amsterdam-based VC fund told The Core on the condition of anonymity that Ola Electric was just a symptom of a much larger issue in the Indian electric two- and three-wheeler industry. “None of the products, and I'm including Ather, Ampere, and even Bounce, meet global standards. The proof is in the pudding. At EICMA, the Milan motorbike show, one the largest in the world, you'll find Royal Enfield and Ultraviolette (from India), but that's about it. Then look at the names from China – they make up 95% of the attendees in a show that happens in Italy.”

The problems with Ola Electric aren’t because of the company policies alone. Loopholes in government policies could have aided companies like Ola Electric to expand rapidly without after-sales accountability.

Also Read: The Fork On The Road For Ola

Ola’s Mounting Troubles

Currently, three different government bodies — the Ministry of Road Transport and Highways (MoRTH), the Ministry of Heavy Industries (MHI), and the CCPA — are looking into alleged irregularities in Ola Electric.

It seems that as Ola Electric scaled up its operations, the complaints piled up faster than their scooters. A September report by Mint said that Ola Electric received a whopping 80,000 complaints in a single month — that's more than double their average monthly sales of 35,000 two-wheelers. However, On October 22, Ola Electric claimed that it had resolved 99.1% of the 10,644 complaints forwarded to it by the CCPA

Of all the ongoing investigations, action being taken by CCPA could result in the most drastic outcomes for Ola, said at least two legal and policy analysts to The Core. Established in 2020 under the Consumer Protection Act, 2019, the CCPA can proactively initiate investigations into unfair trade practices. This allows the CCPA to take action against companies even before consumers lodge formal complaints. Penalties imposed by the CCPA can range from substantial fines to product recalls and bans on misleading advertisements.

"The CCPA was born only in 2020 and since there's been a significant shift in how consumer complaints are handled. The Supreme Court had earlier clarified that the CCPA can file representative actions, meaning they can act on behalf of a large group of consumers against a company engaging in malpractice," said a partner at a law firm advising EV firms asking to remain anonymous since he didn’t want to publicly criticise Ola.

This is a game-changer for consumer protection. In the past, each consumer had to fight their own battles in court. Now, the CCPA can swoop in and fight on behalf of everyone who has been wronged. "So, if there's a monetary compensation of, say, Rs 10,000 per defective electric vehicle, and there are 10,000 customers, everybody is entitled to that benefit, even if they weren't personally involved in the litigation," a lawyer speaking anonymously told The Core.

The CCPA can represent all affected Ola Electric customers in legal proceedings, demanding compensation on their behalf. It can escalate the case to district, state, or national consumer commissions for further action. It can also impose fines on Ola Electric.

If evidence of defective service or other violations emerges, the CCPA may order Ola Electric to pay mandated refunds to customers. This could be a costly affair, potentially derailing Bhavish Aggarwal's ambitious expansion plans and putting a damper on Ola Electric's dreams of dominating the EV market.

Also Read:Will Ola Lead The EV Revolution In India?

FAME Subsidy Abuse?

While Ola Electric's problems have existed for months, experts suggest that its public listing certainly played a role in the action being taken. Aggarwal’s feud on X with comedian Kunal Kamra probably also contributed to the scrutiny it now faces.

MHI which regulates the Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India (FAME) subsidies given to EV manufacturers has called on its standardisation agency Automotive Research Association of India (ARAI) to dig into consumer complaints against Ola Electric. ARAI has already fired off a notice to Ola on October 8, questioning a sneaky price change that Ola "forgot" to tell them about. This little oversight could jeopardise Ola's eligibility for a sweet subsidy under the PM E-DRIVE scheme.

Ola’s vehicles were certified under this scheme, making them eligible for government subsidies. However, a condition of the scheme is the vehicle's specifications or price after certification cannot be changed.

“Ola offered massive discounts for upcoming festive season sales, violating these conditions. The MHI, which implements the scheme, asked ARAI to issue a notice to Ola, questioning the basis for the price reduction. Ola should have either rolled back the discount or declared that the discounted vehicles would not be eligible for the subsidy," said a policy analyst specialising in finance and public policy, who advises EV companies. He also asked to remain anonymous since he didn’t want to be seen publicly criticising Ola Electric.

Ola, in its defence, is sticking to the "limited-time festival campaign" story. They provided ARAI with an invoice showing a Rs 5,000 discount and a screenshot of their app stating that the price of the Ola S1 X 2KWh hasn't been revised and that the Rs 25,000 discount is only applied to limited inventory. Whether ARAI will buy this explanation remains to be seen.

The FAME-2 subsidy wasn't just a generous handout; it was a strategic move by the Indian government to nurture a domestic EV industry and counter the influx of cheap imports, particularly from China.

Ola Electric itself initially relied on acquiring technology from abroad. Their acquisition of Amsterdam-based EV startup Etergo BV, which was facing bankruptcy, gave them access to Etergo’s design and engineering capabilities. These Etergo scooters are now rebranded and sold in India as the Ola scooter. This approach isn't uncommon — even giants like Mercedes, BMW, and Toyota bring international models to India through the domestic homologation route.

"For an independent OEM like myself, with limited funds unlike Ola Electric, which is backed by big VCs and PEs, the cost of homologation and R&D is immense," an OEM manufacturer based in north India told The Core. "Certification alone costs Rs 40-42 lakh, but other R&D costs related to the body, bolts, and everything else push the total to around Rs 3.5-4 crore, plus the time involved (up to 2 years for getting tests certified). Many OEMs believed in the government's Make in India push and the FAME policies, but they've burned their fingers. The reality is that imports are flourishing, while those who were serious about Make in India scooters are struggling. Not a single one is truly flourishing right now."

This stark comparison raises questions about the effectiveness of government policies in supporting smaller players in the EV industry. While intended to promote local manufacturing, the high costs and complex regulations may be inadvertently favouring larger companies with deeper pockets, like Ola Electric.

Furthermore, repairing these scooters, which rely on sophisticated technology, requires specialised knowledge and skills that may not be readily available in the local market. A former senior Ola Electric executive, speaking on condition of anonymity, highlighted this challenge: "Electric vehicles, no matter, except say e-rickshaws, which is the lead-acid battery, your local mechanics can't really repair them. They don't know the science of the battery… if you bought an Ola, you would give it to the service centre and not trust your local mechanics."

The problem is further exacerbated when EV vehicles are not designed well enough for reliability. The policy analyst quoted earlier explained that most testing agencies in the country conduct all standardisation tests without really focusing much on reliability testing. “They leave the reliability factor to market forces...The moment you add reliability to it, then that becomes another huge area. And then the number of tests will quadruple overnight. And then it becomes an absolute nightmare for anyone manufacturing or anyone manufacturing vehicles,” the analyst added.

Also Read:India's Automotive Ace: Why Even Harley Plays By Local Rules

Service Snafus

While the FAME subsidy controversy and regulatory scrutiny are significant challenges, the core of Ola Electric's problems lies in its service centres and after-sales support. A closer look at Ola's DRHP reveals a grim picture. As of October 31, 2023, Ola Electric had 414 service centres and 1,140 employees. This translates to a meagre average of 2.75 employees per service centre, a ratio that raises serious questions about the company's capacity to handle customer issues effectively.

These service woes are reflected in Ola Electric's declining market share. While the company achieved a peak of 49% market share in Q1 FY25, it has been steadily losing ground, dropping to 27% in September 2024. This decline can be attributed to both increased competition and the persistent after-sales issues plaguing the company.

The EV policy analyst quoted earlier pointed out that the FAME-2 subsidy requirements are surprisingly lenient when it comes to service centres. "Companies only need a minimum of 25 dealerships and service centres across at least two states to be eligible for the subsidy," the analyst revealed. This low threshold, aimed at helping local EV manufacturers get off the ground quickly, may have inadvertently contributed to the current situation, where companies like Ola Electric prioritise rapid expansion over robust service infrastructure.

"The ministry designed the policy with good intentions, aiming to prevent foreign players, especially Chinese companies, from dominating the market," the analyst explained. "But the policy hasn't been implemented in the right spirit. Many companies have prioritised short-term gains over building a sustainable service network. It's like those use-and-throw pens – sell the product and forget about the customer."

The analyst also cautioned that Ola Electric's rapid expansion efforts could exacerbate its service challenges. "EY has been brought in for course correction, to address the gross negligence on the service centre side," the analyst noted. "But it's not just about strategy; it's about execution. Training takes time. It could take years to build a competent service workforce. Will Ola Electric slow down its sales to focus on service? I doubt it."

It is well known that EV servicing in India, be it two-wheelers or four-wheelers, has suffered because of the lack of skilled technicians.

The former senior Ola Electric mentioned earlier, added another dimension to the issue: "The one part that gets missed out in all of this is how long it takes to train someone. It's like going to an ITI and saying, 'I will train X number of people for my service centre.' That's one side of the story… It's one thing to say that we need a hundred people, but those hundred people also need to be trained. So, it could take years."

The former employee pointed to a larger problem within Ola Electric, which is its high employee attrition rate of around 35-40%. This further complicates the situation and makes it difficult to maintain consistent service standards and training protocols. “With employees and processes changing frequently, ensuring that service centres are adequately staffed with properly trained personnel becomes a significant hurdle,” said the former Ola Electric executive.

Earlier reports suggest that the toxic work culture at Ola Electric and its parent company, ANI Technologies, which houses the ride-hailing unit, and the constant exits in the senior management ranks are contributing factors to the high churn rate. This creates a never-ending cycle where departures at the top trigger further departures throughout the organisation.

Currently, Ola Electric's financial performance paints a mixed picture. While the company has seen significant revenue growth, it continues to operate at a loss. In Q1 FY25, Ola Electric's revenue increased by 32% to Rs 1,644 crore, but its net loss also widened to Rs 347 crore. In FY24, the company reported Rs 5,010 crore in revenue and a substantial loss of Rs 1,584 crore.

To put things into perspective: Bajaj Auto, the second-largest EV two-wheeler maker in India as per market share reported a whopping Rs 46,306.45 crore in revenues in FY24. But this also includes revenue from its ICE engine vehicles and both four- and two-wheelers.

Unless Ola Electric gets its house in order, these numbers may not improve soon.

Also Read: Poor After Sales Experience Biggest Challenge In Electric Scooter Adoption