Good day and welcome to the Ola Electric Q1 FY 2026 earnings conference call. As a reminder, all participants will be on the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. Before we begin, a few quick announcements for the attendees. Anything said on this call which reflects our outlook for the future or which could be construed as a forward looking statement may involve risks and uncertainties. Such statements or comments are not a guarantee of future performance and actual results may differ from those statements. To begin with, I would like to request Bhavish Aggarwal, Chairman and Managing Director of Ola Electric, Harish Abichandani, our CFO , and Ankur Agrawal VP Business Finance of the company, to take you through the results.
Thank you. Abhishek, hi everybody, this is Bhavish. This time we have shared a fairly detailed shareholders letter, so I hope all of you have had time to read through it, look at it. You know, one of the things we realized over the last couple of earnings calls was that we had to share a little bit more depth of our business details with all of you so that you can understand our business better. Obviously those who are modeling it can model it better. A few highlights that I will just talk you through in the report and then I'll try and leave more time for Q& A because this time I'm assuming there'll be a lot of questions from all of you and I hope there are a lot of good questions from the audience. This has been, in many ways, a transformative quarter for us.
As we write in the note, we have over the last couple of quarters transitioned our strategy from aggressive penetration to a more balanced, profitable growth strategy. Given where the industry also is after the initial hypergrowth phase, industry is steady and consolidating and there will be another growth phase in the next near future. Till then it's time for players to actually consolidate their operations and we believe we have a very strong competitive advantage in consolidating our approach on profitable growth. As you can see, our gross margins this quarter have been quite, quite good. As you can read in the note, this quarter's gross margins are largely without any incentive, so very strong performance from the team on delivering these gross margins. Our Auto segment was actually EBITDA positive for the month of June.
I think this is the first time we've ever hit this milestone and this was delivered by a bunch of factors, all of which we've actually been highlighting in the last couple of calls, improved gross margin which was as a result of our Gen 3 platform and also the Project Lakshya which helped us reduce our OpEx significantly.
Now, in addition to this EBITDA performance for the whole quarter and specifically in June when we turned positive, this time we've also broken out our cash flows for all of you by the segment and consolidated because we felt it was important for you to understand how because the Auto business and the Cell business are in different phases of investment and the Auto business, as you can now see, is actually getting to a reasonable level of maturity on both profitability as well as cash and in the near term we expect the Auto business to be operationally cash positive and also by the end of FY 2026 to be free cash positive. That's important highlight. In fact, in this quarter we were almost neutral on operational cash flows. This is because of structural improvements that we've made which we've called out in the report.
Things like working capital, inventory management, warranty claims management. All of that detail is there in the report. Another highlight I want to point out is this was the first quarter, first full quarter of our Gen 3 product in the market. Even the Gen 3 product is still ramping up in terms of presence across all our distribution stores, but it still accounts for almost 80% of our overall sales. It is a much better product in performance, in gross margins as well as in quality and hence warranty claims. Consumers have absolutely loved the product and we're getting very good traction. Gen 2 still exists in the market and we're using it as a dual strategy between Gen 2 and Gen 3 for penetration and for performance. Our bikes have been generating a lot of interest on the ground, a lot of social media interest and visibility.
We are, as we've guided before, we've been more calibrated about our bike scale up. The bike is now almost in 200 odd stores and through the course of this quarter, by the time Navratri comes, we will have our bike in almost all of the stores across the country and we're getting very good feedback. A couple of other important strategic points I want to highlight for all of you. There have been a couple of macro risks in the industry, specifically on rare earth magnet supply and the ABS mandate. On both we have our own unique solution because the company is vertically integrated and does all of its technology development in-house. On rare earths we actually have a dual strategy of managing through alternate suppliers for magnets and also coming out with a rare earth free motor which is in the next quarter.
It will be delivered to customers in the next quarter. We've been working on these technologies for the last year or two. Some of you who visited our factories would have even remembered seeing this on display at the time of our roadshows. Finally, the highlight, which is I'm sure highly anticipated, is this quarter we will deliver our 4680 cell vehicles to customers by Navratri, and we'll share more details on the 15th August event, which is our annual product event. Our 4680 Cell Gigafactory is cranking up now. We are ramping up. We are producing cells to be used in our vehicles already. It's not just test cells anymore, and through this quarter we will see a ramp up of that. Those are some highlights.
A few more things that I will just talk you through: in this report we have spoken about how our free cash flows in our Automotive business are also stabilizing. Operating cash flows are already getting to neutral, and our CapEx plans for this year, FY 2026, are not very large in the Automotive business. In fact, later in the graphs you will see a lot of our CapEx is actually R&D, which is capitalized. We don't expect any major manufacturing CapEx in this year for the Automotive business. There will be some for, let's say, our rare earth magnet supply, etc., but beyond that we don't expect any major manufacturing or growth CapEx for the Automotive business. The Automotive business is to get to free cash flow positive by the end of this year, which is what we are giving the outlook.
We do expect it to consume only about INR 400-INR 500 crore of incremental cash from here. Even at a consolidated level, you can see our cash flows improving significantly and profitability also improving significantly. This trajectory will continue through the course of this year. For the whole year of FY 2026, we are targeting to get to around INR 325,000 lakhs-INR 375,000 lakhs vehicle sales, driven by the festive season coming up and our plans on our Gen 3 and our bike products through the course of this year. For our Cell business, there will be CapEx. We already have done the CapEx of 1.4 GWh, and we will be completing the 5 GWh capacity that we have planned for, for which capital is already lined up through a term loan facility with the SBI consortium.
After that, most of the payments of that will also happen in this year and some will flow into next year. We don't foresee the need to expand Cell Gigafactory capacity beyond 5 GWh for the next three to four years. There is a rule of thumb calculation also here that 5 GWh means almost 1 million- 1.2 million units. We will make that installation of capacity this year FY 2026 and grow into it over the next couple of years. That said, there is some more detail on warranty here because warranty has been one of the talking points in the last quarter. We took a one-time provision of INR 250 crores. What I would like to highlight to all of you is every generation has kept on getting better for us in terms of quality and all traits.
Gen 3 is in fact the best ever for us and by our own estimates the best in the industry. This benefit obviously flows into the EBITDA by lower provisioning for Gen 3 on claims. Also, Gen 1 claims have been higher than Gen 2 claims and that is higher than Gen 3 at a similar aging. Gen 3 claims are actually looking fairly good and in Gen 3 over Gen 2 itself. One of the major areas we have improved the product design and hence quality is the Hub Motor. The Motor Controller, which were in Gen 2 supplier procured and in Gen 3 are all in-house, and our in-house motor, which was in Gen 2 in the S1 Pro, had a 90% lower failure rate than the Hub Motor. All of this is adding up to a very good profile on warranty.
A final point I want to highlight is our Gen 1 products are already 70% out of the warranty life. That is also reducing the claims on a monthly level as more and more of the claims outstanding or the warranty outstanding is on Gen 2 and Gen 3. We do not expect any more major one-time warranty provisions. There might be some minor learnings as we go along but nothing major expected over the next year or two on warranty provisions. In the note we highlight some beyond just operational commentary. We give you progress on key strategic priorities and as we have always communicated to you, our strategy in this business has been to build more manufacturing vertical integration, do more in-house technology development, and build a direct-to-customer channel for customer engagement with the brand directly.
On all these three we believe we keep compounding our competitive advantage as incumbents only continue building traditional auto business models, and that competitive advantage can be seen in the balance of volumes and profitability that we are now able to deliver. We talk about the rare earth magnet, which I commented on, so I will skip that. O n ABS a lso we are ready. We're the only EV company which has an ABS product on sale in the market. By the mandate timeline we will be ready with our own in-house ABS solution, further saving margins as well as giving consumers a product differential. O n the Gigafactory l ike I said, more details on the 15th of August, but our first products will be in customers' hands by the festive season.
The full budget for our 5 GW plant is INR 2,800 crores , including both the CapEx as well as some pre-operative costs. Out of this, we have already invested about INR 1,500 crores, and the remaining INR 1,200 crores will go in over the course of this year and some into next year. That will complete the 5 GWh . Like I said, for this we already have the SBI consortium facility which we are drawing down on. In terms of unit economics, the cell business at a free cash flow level breaks even for us at 5 GWh , and at a consolidated level it is cheaper for us to manufacture our own cells than procure from outside at the 5 GWh level. That's a very important milestone as we scale our Cell business through this year.
Starting this quarter, we are going to keep ramping up gradually the cell production to grow into the INR 1.4 crores first and then grow into the 5 GWh after that. There's some commentary on, you know, those of you who don't fully understand the cell technology and the cell cost structures, there's some commentary here for you to appreciate how the cell cost leadership works and it's very directly linked to technology, not just supply scale. O n product roadmap a gain, we highlight here our competitive advantage with a very broad product portfolio which is ready, very mature stage of development for the product portfolio. That said, we are not allocating manufacturing CapEx to all these products. We are going to be sequential in capital allocation. We are letting our current products scale and mature in the market and then one- by- one allocating manufacturing capital for new products.
From an R&D basis, we have many of these products under advanced stages of development. In that sense, as our distribution network stabilizes, as the new products step by step scale up in the market, and as the EV industry again inflects with the next level of customers coming in, we will again accelerate our product launch roadmap. Finally, in strategic priorities on our D2C Network, we have expanded our presence, but there's a lot more work to be done to institutionalize operations, consolidate operations, and deliver a good customer experience and a high productivity. We are already seeing gains from inventory reduction in the network, and you see that in the working capital movement in Q1 over Q4.
We will continue to see incremental gains on this going forward, but there's more work to be done to institutionalize the operations in the front end, and that's a core management focus for the remainder of this year too. Finally, we have a little bit of a note on financial planning. There have been some questions to us in the past on how are we, what is our cash allocation, capital allocation for different aspects of the business. For the Auto business, like we said, nothing major on CapEx planned. We expect about INR 4,500 crores of free cash flow requirement for the remainder course of this year, at which point free cash flow should turn positive.
For our cell business, there will be a CapEx of about INR 1,000 crore in this year and some more, and 70% of that, or roughly two thirds, 70% of that is funded through the existing term loan that we have and the remainder through equity. The cell business will have some operational cash flow requirements till we achieve a certain steady production rate, but in the hundreds of crores. For the business on a consolidated level, we don't foresee the need for any more cash than we have. We have about INR 3,200 crores on the balance sheet as of end of quarter. We do have some debt obligations. We have shown that in a graph in the note. We will be refinancing some of that debt, not the term loans, but some of the corporate debt that we had taken before our IPO.
We have already taken a Board approval for issuing fresh NCDs to refinance that debt. I guess that's it. There are some very interesting graphs in the note. Also, a couple of things. If I highlight on Graph 3 and 4, if you see our ASPs are flat, but our gross profit per vehicle is continuing to grow. This quarter it got to INR 31,000, which means in Graph 5 you see our gross margins, Auto Gross Margins with all incentives and without incentives. You can see this quarter actually we had very minimal incentives. The business, the product, the gross margin profile all looking strong. I will pause here and leave enough time for questions from all of you.
Thank you so much, Bhavish. We will now begin with the question- and- answer session. Anyone who wishes to ask a question may use the raise hand option. If you wish to remove yourself from the question queue, you may press the option again. Participants are requested to unmute themselves before asking the questions. Before asking a question, we also request you to introduce yourself, your name, and your organization. We'll take a minute and then we'll open the floor for Q&A. We take the first question from Mr. Chandramouli Muthiah of Goldman Sachs. You may unmute yourself and ask a question.
Hi, good afternoon and thank you for taking my questions. My first question is just on the volumes for the quarter, 68,000 volume. Could you help us understand what the split is between the electric scooters and electric motorcycles, as well as also INR 121,000 ASP? Where would the motorcycle ASP compare versus the scooter ASP?
Chandra, the split is still largely scooters because motorcycle deliveries only started to happen early June. Almost all of it is still scooters. The motorcycle deliveries are ramping up in June and now going forward. Also, in terms of ASP, the Roadster X and X+ ASPs are broadly in the range of the S1 X and S X+ ASPs, maybe 5% higher, 5%- 10% higher. It'll be one level lower than the S1 Pro and Pro+ but in that S1 X and X+ range. In terms of how it looks like against the INR 1.2 lakh, it might be INR 1.15 lakh as an ASP.
Got it. That's helpful. My second question is just around the ABS norms which have been proposed by the government of India. I understand you have ABS on some of your premium electric scooters as things stand. If you could just give us some color on what the negotiations seem to be with the government and what the industry representations are. Is this something that's a done deal for January 2026 or is it still sort of fluid? If you could give us some color on that.
Chandra, our stance is that sooner the better. You know, we should not compromise with the customer safety.
Got it. What is your estimate of additional cost? You did mention that you are looking to do an ABS kit in-house. If you could just give us some color on what your estimates are on additional cost.
See for us, let's say for industry when they do ABS, anywhere between INR 3,000-INR 5,000 they incur in terms of BOM cost. Depending on what kind of ABS, for us it'll be a small fraction, it'll be a fraction of that. Because these ABS products, as you can imagine, are high margin products for whoever is selling them, Bosch or Conti or whichever supplier is selling them. We have our own engineering capability. In fact, the way we have built the ABS is that our electronics are all combined into the same central electronics, so a lot of software defined functionality. In that sense, the content itself is lower in our ABS and obviously we saved all the cross margins.
This is, you know, actually Chandra, I would want to use this moment to highlight an important theme about our company which, while we've been executing on it, maybe it might not have been fully appreciated by all the people observing us, that as we keep doing each of these critical components in-house, be it the Motor, be it the ABS Electronics, Software, Cell, one- by- one, each of these things add a lot of gross margin benefit which is what you see in the end. Today our gross margin is about 26% and without any incentive also 22%+ despite not charging 20% higher than market. Right. This is a journey, it's only going to keep improving for us. For example, I was, you know, one of my finance team members pointed out to me that the largest motor supplier in India actually has a gross margin of 60%.
Now we make our own motors. That's a clear saving of, you know, a large high single digit thousand rupees over there for us. Same will happen in ABS, same happens for us in electronics. It's not just saving from off the shelf parts. We are able to combine parts better and hence actually reduce content itself. For example, in ABS the electronics will actually be combined with our central electronics.
Got it, got it.
That's helpful.
Lastly, if I can squeeze in just one of the state of the union update on net debt. You did mention that you've got cash of about INR 3,200 crores. I can see that the graphs talk about debt repayment obligations. If you could just give us what the gross debt number also is, just in the context of what your quarterly cash investments are.
Sure. I think excluding short-term debt, which is largely working capital, [Ankur,] to about INR 2,000 crores. Yeah, INR 2,000 crores, and it's getting paid down over the next two years. All the corporate debt is getting paid down. Term loans will continue long.
Got it.
Thank you very much and all the best.
Thank you. We'll take the next question from Mr. Arvind Sharma of Citibank. You may unmute yourself and ask the question please.
Yeah.
Hi.
Hi.
Thanks for taking my question, and thanks.
For sharing the guidance for FY 2026. In the overall guidance for FY 2026, what would be the exit rate? Because one quarter, we already know the numbers, but it's a pretty steep jump from here on. What would be the drivers for these volumes going forward?
Okay, Arvind, thank you for your question. I'll start with a small nuance. It's more an outlook than a hard guidance. What we want to start doing is also giving all of you a little bit of an outlook into what we see ahead for us and also call out the risks that exist to achieve that outlook. There is a macro environment which is sort of moving parts, supply chains, etc. There are enough things we need to navigate still through the year. We'll keep updating every quarter now the key levers to deliver these volumes.
Actually, if you see this quarter, we delivered 68,000. This quarter is actually probably one of the lowest quarters in the year. On festive and just volumes, we expect, you know, an industry bump up on festive about 50%, 40%, 50%. Whatever the industry.
This meeting is being archived.
Industry itself is growing at about . Yeah. Hold on, I don't know what happened here. Yeah, I hope. Arvind, you can still hear me? Arvind, can you hear me? Is the meeting still on? Can anybody hear me?
Yes, we can hear you Bhavish.
Okay. Okay. Okay. I guess the meeting, I hope, is still on. I'll complete Arvind's answer. I don't know why Arvind dropped off till then. We're going to check if some other people can hear me beyond Harish also. Just to complete the point, we expect seasonal uplifts. In general, industry is going to grow at 20%.
Now, given that a lot of the competitive intensity has already been played out, we do expect us to grow at or above industry rates. We also expect our bike volumes to increase through the year and a few more initiatives we are doing on the productivity of our front- end. All these added up should get us to those volumes. There are some macro risks which we will navigate and keep sharing updates.
Thank you. Now we'll take the next question from Gunjan Prithyani of Bank of America. You may unmute yourself and ask a question please.
Can you hear me now?
Yes, Gunjan, we can hear you.
Okay, thanks for taking my question and really, you know, to see the significant improvement in the gross margins. Couple of questions from my side. I think firstly on the gross margin, I just wanted to understand on the Gen 3, are all the cost savings fully realized on the 80% transition that you saw in this quarter? I'm just trying to understand the roadmap of this 25% to 35% to 40% that you've called out in your update.
Yeah, some of the gross margins are still to be realized, Gunjan. There is an incremental goodness on some of the Gen 3 margins that will come through this financial year. On top of that, 25% gross margin this quarter didn't have any PLI. PLI, whatever you guys model, will also come on top.
Okay. This doesn't capture any of the savings from the captive, which, you know, of course is more going to be a FY 2027.
Cell, you mean?
Yes.
No, this doesn't capture the cell. The Cell will ramp up through this year. It'll have a small component of cell in gross margin, but the real cell savings at scale will be in FY 2027.
Okay. The other expenses should more or less sustain at these levels. Now we've gotten to a level of stabilization with the cuts that we took over the last couple of quarters.
Yes, OpEx is now stable. In fact, incrementally there will be some more opportunities for efficiency and productivity through the year. INR 100 crore of auto OpEx and INR 150 crore of total consolidated OpEx right now over the next quarter or two quarters, we should be further able to reduce another 10%- 15% of OpEx at similar volume levels. As volume grows, some of the OpEx will grow with volume.
Okay, got it. The second question, a little bit on the pivot that you called out, that we're moving from aggressive penetration to a balanced, profitable growth. It just sounds to me that there has been a reset in the EV penetration expectation itself. Right? I mean, if you can sort of share your thoughts on how do we then think of EV adoption at an industry level and why do you think that there has been this reset of expectation? Because prices, if at all, have only come down, and it's got a lot more competitive in terms of value proposition to the customer when you compare with ICE as well. Why the reset in industry adoption levels?
See, firstly Gunjan, if you see EV 2 Wheeler industry growth versus ICE 2 Wheeler industry growth, EV is still 3x of ICE. In that sense, ICE is growing at 6%, 7%. EV is growing at 20% odd, give or take a few here and there. EV is still growing very much faster than ICE. It has definitely come down from the absolute aggressive growth in FY 2023, FY 2024, and early part of FY 2025. A couple of reasons for that. Firstly, government incentives have also come down. That definitely has made manufacturers as well as some customers think about their choices in terms of pricing as well as in terms of purchase for the customer. Second, the early adopters have now largely adopted EVs. The S- curve of the penetration will go through the S- curve.
There will be an aggressive growth, then there will be a consolidation phase, and then there will be an aggressive growth again. The middle customer is now considering EVs actively. In our own surveys, brand surveys that we do, consideration for EVs is very, very high. They're probably waiting for their friends and all to live with one generation of their craft, the EV products, waiting for some of the anxieties around range, etc., resale value. All of these are anecdotal things, and actually many of them are not true. It's not like two-wheeler EVs have range anxiety. It's not true that there is a view on resale value. If you see, these values are reasonable in the market.
It's more just an overall feeling that the cautious customer has now, that let me just wait it out another six months, one year, till my friends who were the early adopters have been through their full cycle experience, and we see that now slowly also turning. In bigger cities, there are some pockets of increasing growth again, but it's early. We do expect the S- curve to play out first high, then consolidating around 20%, 25% a year, and then maybe next year onwards another aggressive growth.
Okay, got it. Just last question, if I can just get your thoughts on the battery plans as well. You know we are now sort of limiting to 5 GW if you can just sort of share what is, what does it mean in terms of the government PLI scheme? What does it do to the captive cost benefit that we were thinking about? Because a lot of those captive cost savings were also premised on yields and scale that you get on that battery plant, right, cell plant. If you can share what does it mean for the overall cost improvement and PLI scheme?
Gunjan, at 5 GWh we will already be saving money versus procuring from outside. At 1.4 GWh we will be saving money at a gross margin level, but the OpEx of the cell plant will not be fully leveraged for the scale that it is built to. The unit that we had designed was the 5 GWh unit for ourselves. 5 GWh is one unit. At 5 GWh unit we will be saving money versus procuring cell from outside. We don't need to go to 20 GWh for that. In terms of PLI, yes, definitely. This will mean an implication on PLI. The government PLIs are our timelines on 20 GWh were what they were and we will not need those timelines. In our profitability case, we have not built any benefit from PLI. If there is any, it will be goodness on top.
That said, Gunjan, we're also the only company that has really put up a cell plant and made it productive. We are and we will engage with the government to probably relook at some of these timelines and in the broader interest and encouragement to industry, probably relook at those timelines.
There is no penalty we need to be really worried about in that context. If there's a change,. there is [crosstalk]
There is a maximum of about INR 100 crores of penalty, and we are actually accruing that every quarter in our P&L already.
Okay, got it.
Yeah.
All right. Thank you. Thank you so much. I'll join back the queue.
Thank you. We'll take the next question from Rishi Vora of Kotak. Please unmute yourself and ask the question, please.
Hi, I hope you can hear me.
Hi Rishi.
Hi Bhavish. Congratulations on sharp improvement in profitability.
I'm waiting to read your report.
Yeah, just a follow up on Gigafactory. Right. One of the premises for us to set up a Gigafactory was also PLI incentives. If I remember it correctly, our expectation was through the course of going till FY 2029 the capital employed will become half because 50% of it we were expecting to come from PLI. Let's say if you're not able to get a PLI, then does it make sense for us to set up our own Gigafactory given that tomorrow the technology might evolve, we might be a little slow versus the global giants. Does it merit to have a Gigafactory on our own given that if PLI [audio distortion].
Rishi, the reason to set up a Gigafactory is strategic and long- term. Our reason to set it up was never PLI. In fact, we actually started our Gigafactory before the PLI scheme came in. That's the reason we came into the scheme because we're the only ones who started before the scheme even was conceptualized. The reason is threefold, Rishi. You actually see a version of that playing out with the rare earth thing in supply chain risk. The first reason is long- term strategic business continuity and control of your supply chains. That's not just an opportunity for us at Ola Electric but also an opportunity for us to play into in the broader India context as India's cell lithium cell needs scale up. In that sense, it's a long term strategic bet. Second, cell is not a commodity, Rishi.
Cell is a technology component and I write about that in the note also, you can see that paragraph. A lot of the cost benefit is driven through technology, not through just supply glut coming from another country. Unlike Solar Cells or other components where manufacturing conversion costs are a majority of the cost of the overall component itself, cell is not like that. Our technology leadership is actually now well established. The first product is 4680 cell. We also write about our cell technology roadmap where we are leading already beyond the version one of the cell. We already have version two and LFP versions already under development. All of that will come in step- by- step. We now, Rishi, have already proven this business model in our auto EV business.
Look at our gross margins versus look at all other companies' gross margins and that's a function of technology and manufacturing vertical integration. Those are the three reasons it makes long- term strategic sense to do the cell in- house in terms of capital returns purely. Also, you know at 5 GWh itself it'll be reasonably a reasonable return. As we scale higher, the return will only keep getting better. The scale can be from our own internal requirements. The scale can be potentially from export opportunities that our 4680 cell opens up. The scale can be from BESS opportunities in the future that we might get into in different business strategies. In none of those cases do you need PLI to make the business worthwhile.
All of this is worthwhile if you have a strong technology leadership in the cell and if you are building a long- term Indian supply chain because the Indian market long- term is only going to grow. We take a very long- term lens on the strategic benefit and optionality of our Cell business.
Yeah, thanks for that. Just on the provisions, right, can you just give us the absolute amount of provisions which we took in 4Q and what would be that in the first quarter?
Provisions for warranty.
Yeah.
In fourth year we had called that out, INR 250 crore of one-time provisions. We won't be, we can't share with you exactly how much we do quarter- on- quarter on warranty provisions, but as a one-time thing last quarter was INR 250 crores.
Understood. Just lastly on the motorcycle launch, right, can you give us, you know, how has been the feedback? I think somewhere I read that we have just started with around 200 touch points. Is there a thought process of when we'll be scaling it up to all the touch points which we have at this point in time?
Rishi, the feedback has been overwhelmingly positive. You can yourself go on social media and just search for Roadster feedback. You will get all the views, all the kind of feedback. Very, very positive. Customers are loving the bike. I myself, by the way, I ride around Bengaluru on the Roadster X+; that's become, instead of a car, that's become my major commute vehicle. Almost always on a signal I get stopped and asked, sir, and I've done some sales also, by the way, on the roadside. That said, the reason we are scaling up a little more in a calibrated way is because it's a new category. We want to make sure manufacturing, quality, warranties, all of those are in check as we scale, and hence our production ramp has been more calibrated and gradual.
We expect by Navratri to hit majority of our stores, and that's when the bike volumes will also be starting to spike.
Just one last question. On a sequential basis, ASPs have gone up by 2%, and this is despite the mass market scooter mix going up. Is there a portion of non-vehicle mix that has gone up which is driving the ASP increase?
It's a mix of two things, Rishi. Gen 3 mix has gone up. If you remember, last quarter Gen 3 was very small, and Gen 3 is priced slightly higher. Gen 2 is priced slightly lower, and second, obviously, Move OS +, which also we comment on, has been increasing in penetration. In fact, I actually want to use this opportunity to underline and highlight Move OS+ . A bunch of our software features, especially the premium software features, which frankly we have the best in the industry given that we do our electronics, hardware, and software together in sync. A bunch of those we productize into Move OS+ , and that became a subscription for customers, and the penetration rates of that is now actually on a run rate basis almost 70%. We expect through this quarter for that to rise to 80%, 80%, 85%.
Almost everybody is buying the Move OS + subscription, be it for premium or for mass scooters. That also brings in a certain advantage on ASPs.
Understood. Thank you and all the best.
Thank you. We'll take the next question from Mr. Arun Kejriwal of Kejriwal Consistency. Please unmute yourself and ask the question.
Thanks Bhavish for giving me a chance to ask you questions at the outcome. Acknowledge that.
In the middle. Sir, can you just reset?
Yeah, I'll repeat it. I said thanks Bhavish for giving me the opportunity to ask you some questions. At the outset, let me congratulate you on a set of numbers which has caught quite a few of us by surprise. The turnaround witnessed has been phenomenal to say the least. My question is, sir, one of the objects of the issue was to increase the Gigafactory capacity from 5 GW to 6.4 GW. Now that we are scaling down the expectation of the Gigafactory to around 5 GW, which would take care of about 1.2 million scooters, what would be the change in our fundraise that we have done? Would the objects of the issue be sort of tweaked, changed, and the funds deployed additionally or what?
Sure. Mr. Kejriwal, thank you for your comments and for your recognition of the numbers. It's been definitely an important quarter for us. Sir, like you say, like we gave in our commentary, 5 GWh is what we feel will be enough through FY 2029. That covers roughly 1.2 million vehicles and that should be enough for us, or even if we have some non-Ola customers eventually that we are selling ourselves to. We don't foresee the need to expand beyond 5 GWh over the next three years at least. You are right, we had raised some money in anticipation of this expansion from 5 GWh beyond 5 GWh in our IPO. As we go along, we might look to redeploy that capital into other productive uses.
Right. Just a related question to this. Considering the fact that we are now sort of scaling our target for sales of vehicles, I'm not saying you've said that in as many words, but 1.2 million is what you believe is where we could be say till FY 2029. Is there a change in the company or your thinking of EV penetration going forward, is there some rethink on the way penetration is happening? Somebody earlier had also asked that prices are softening. Are customers a bit reluctant to buy EV or what?
Like I had mentioned in the opening commentary also, the industry is entering a different phase now. Prices are softening a bit. If you see our ASPs, for example, it is flat over the last four quarters. The industry is also recalibrating a little. Customers are also recalibrating. The early adopters have already adopted EV in full confidence. Now the middle mass, what we call of customers which are a little more cautious about new technology, they are starting to consider EVs. Their consideration cycles are a little longer. They are looking at their friends who have already bought EVs and increasingly so they're also getting converted. That is why the EV industry is still growing at 3x the growth rate of the ICE industry.
We do expect this next few quarters to be a little bit more steady in EV penetration growth and then maybe another acceleration will happen as new products come in as some of these next set of customers finally take decisions at scale to buy EVs as our own distribution network becomes more productive in the smaller towns of India, specifically on the bike, as that unlocks a new category. All of these levers will be playing a part in the next phase of growth. For now, the industry is in a steady growth phase. It is still growing 3x of the ICE industry. Hence, we've also taken up sort of a maneuvering to consolidate our product, our business, our operations to get ready for the next phase of growth.
Thanks, Bhavish, for that. Wish you all the best and hope we have some more promising news when we meet next quarter. Thanks.
Thank you, Mr. Kejriwal.
Thank you. We'll take the next question from Mr. Vipul Agrawal of HSBC.
Thank you. Thank you for taking my question. First of all, congratulations. You delivered what you said about 68,000 units in the first quarter and the cost saving, that's pretty commendable. My first question is on the COGS side, as the cost per vehicle is down from almost INR 100,000- INR 90,000, now the difference is around INR 10,000. Can you pinpoint certain parts and related cost saving?
Vipul, I can give you general direction on that. Gen 3 as a platform has definitely helped Gen 3, and we had shared even in August when we had launched Gen 3 that it'll be a major change in the cost structure. That is what has happened. This was the first real quarter of full Gen 3, and that has led to improvements in the BOM cost item by item. Also, our Motor, for example, is now in-house. The motor controller is within the Motor itself. All of these things save money in the bike. For example, the wiring harness is the flat wiring harness, which is a unique innovation by us. Our electronics are more centralized, saving some number of ECUs. All the regular things which I keep saying every time I meet you guys, and all of those things have kept on incrementally adding benefit to us in the gross margin.
Sure, thanks for that. One related question would be on the wiring side, like how are you saving? Is the tech which is globally not available or is it something new which you have developed on that front? How does it work?
Vipul, it is our own in-house IP and we actually had shared it in our bike launch event in February. You can see the video reference it there. It's a much lighter, much more lower cost to manufacture wiring harness technology which we've developed in-house. Normally, again, I will reiterate this to everybody. Sometimes, you know, we can assume that suppliers will have better technology. Almost always suppliers never have the leading technology, especially in cutting edge areas like EVs. It is OEMs which have the leading edge technologies which over time suppliers build slowly, slowly because the incentive to build technology is always with the OEM, not with the supplier. For the supplier, it's the incentive to continue old processes because they're not customer facing. The OEM is customer facing. That said, as a result, we keep doing our own R&D, be it wiring, be it motors.
For example, our rare earth free motor is something we've started developing more than a year or two back. Some of you who visited our factory a year ago would have seen this. We were quite transparent about it, things which we keep doing on R&D and step- by- step they keep coming into our products. Actually, internally in terms of process, we have a very rigorous process of two parallel roadmaps. One is a product roadmap and one is a technology roadmap. As technologies go above the technology maturity ladder, we keep bringing them into our product roadmap. It's a very rigorous process that we run within the company of two parallel roadmaps.
Understood. Like you mentioned, OEMs have a cutting edge technology. I agree to that point. Coming to the cell business on the same front, you will be increasing from 1.4 GW to 5 GW now, and globally on the cell manufacturer, it's tough for them to cross 15% EBITDA margin level. Even for the small players, it is less than, it is high single digit, double digit. How do you see profitability on your business, maybe when you go from 1.4 GW to 5 GW or next two to three years? How will cash burn go down? Maybe if you can touch a bit on technical part of it. How are you different from the Chinese cell manufacturers or Korean manufacturers? If you can touch a bit on that.
See Vipul, firstly, small correction there, it's gigawatt hour, not gigawatt. I just want us to be technically correct.
Yes.
On the cell, firstly, I would like all of you to look at us as a vertically integrated cell manufacturer, not a standalone cell manufacturer. That makes a world of difference in business model and cost structures. Firstly, I have to only build one or two cell platforms. If you think of a standalone cell company, they build multiple cell platforms for multiple customers, whereas I am only building the 4680 platform. Hence, my manufacturing is linked to that. My R&D is linked to that. Now, I'm building a platform which can be used in my products and global products also because it's a fairly standard industry standard platform.
I'm not building pouch cells, I'm not building prismatic cells, I'm not building 2170, I'm not building 1865, I'm not building some other concept. I'm only building a future industry standard cell platform, and hence that limits my manufacturing and R&D requirements. Second, since I'm vertically integrated, I have a large anchor customer, I have less SG&A costs as well as an immediate benefit on springing up my production basis, my internal customer. The same cell will go into other non-automotive products also, like Home Energy Storage, etc. There are other verticals where we can get, I would say, revenue without having to build new cell platforms. That is the essence. Vipul, what differentiates us versus a standalone cell company? Good cell companies have mid-teens EBITDA margins. Our cost structure will actually, over time, get better than them on OpEx, on gross margins, and BOM cost.
Large cell companies will have an advantage over us till we become large enough. There's also an arbitrage on duties, etc., on bringing these cells into India. All of that balances out into a balanced business model opportunity for us.
Thanks. Just last one question on the yield part. How has your yield improved over the last six months? What would be the select? You are already importing sales from the suppliers, so when you are producing by yourself, what sort of breakeven would you have at the cost? What kind of yield would you need at Ola 's plant and what kind of production would you need at Ola 's plant to break even with the cost of import at this point in time? Any math you have done around that?
Yes, absolutely. Good question. Our yields right now are in the 60% range, which is what I've shared about a month and a half ago. We are ramping up with a balance of two KPIs. One is yield and one is output, the scale of output, because both have to go up in hand. We are in that ramp up phase through this year. We are going to be in that ramp up phase. The break even on consolidated operational costs of building our own cell, putting it in our vehicle versus buying the cell from outside, the breakeven point is around 3.5 GWh- 4 GWh at about low 80% of yield. That's the breakeven point. At 5 GWh, we will actually be slightly more than just breakeven.
Understood. That's all really helpful. Thanks.
Thank you. We'll take the next question from Amin Birani of JP Morgan Chase. I'm sorry, you might unmute yourself and ask a question.
Yes. Hi. Thanks for the opportunity and congrats on the strong sequential improvement in line with what you highlighted in the last quarter. I had a question on the ABS. Interesting comments from you. I just want to understand, right now are you saying that you will be assembling the ABS? Are you making some of the sub components? A related question would be that even right now for the CBS that goes into most of the scooters, are you also doing a lot of it in-house? Some color on that will be helpful.
The CBS is a simple component. We probably do portion of the engineering of that in-house, and some of it must be bought out by two suppliers. For the ABS, what we're doing is we are engineering the whole thing in-house.
Okay.
We will work with some suppliers to build some components of it, and some we will build in- house. As you know, we don't manufacture everything in- house. Some of the more traditional processes like fabrication, castings, or others, machining, etc., we don't do those things in- house, but we'll definitely design the whole thing. Electronics and software, these are the more critical components over there, which is what we will be integrating largely in- house.
Okay, understood. Secondly, just, you know, slightly on the numbers thing. I think last quarter obviously there was this challenge of, you know, Vahan registration not reflecting, you know, entirely with, you know, what your numbers were this quarter also, and please correct me if I'm wrong, it seems that there is some difference. If you can explain the difference in your deliveries number between and between what we can see on Vahan and the related question is if you actually take your deliveries number and the industry number that you have on your, you know, shareholders letter, your market share actually should be much higher. Just trying to understand, you know, if there is any, still any lead lag into the deliveries and the registration number.
Yeah, good question. I'll take a minute and explain this in two, three levels. Firstly, last quarter we had a lag on deliveries and higher. Hence our revenue was lower. Vahan was higher. That delta is almost the same delta in the opposite direction this quarter. We have a slightly higher delivery number and a slightly lower Vahan number than delivery number. That's because of the covering up of last quarter in this quarter. February, March, April were the impacted months and April onward we have started covering up that delivery gap.
Okay.
Market share, you know, you can say is it a function of registrations or is it a function of deliveries? Both are different definitions. I will leave the market share question out of this. In the end, roughly our market share in the high teens or 20% thereabouts right now. Let's leave it there. Specifically on our delivery backlogs, our business model has traditionally in the last two, three years run a backlog on deliveries. Whereas a Business Model Automotive dealership will not run a very large backlog, they will finish off all the deliveries in three to four days. Whenever a customer places an order, the order to delivery cycle is three to five days. For us, even now it is higher than that, and that is actually a room for improvement to drive more volumes itself because some of the customers, we lose because they say so.
We are focused on improving that through this quarter and next. As we improve, we do expect some incremental demand goodness also.
Okay, great.
Thank you. Thanks for the opportunity.
Thank you. By the way, since this time there are more questions, we would be happy to stretch another 15 minutes if anybody would have any questions. It's up to the audience. If you want to ask me questions, we are here.
Thank you, Bhavish. We'll take the next question from Mr. Raghvendra Goyal of Ambit. You may unmute yourself and ask the question.
Thank you. Thank you so much for the opportunity, and congrats for the great set of numbers.
Would you be a little louder, please? Raghavendra?
Hello. Is it better now?
Better.
yeah. I just wanted some sense of for cell business. We'll be, you know, commercializing it fully next year. At least for next one or two odd year we can assume we won't be, you know, selling it to any third party or any third OEMs. In that sense, we won't be looking at that direction. Right.
Raghvendra, we are not right now focusing on selling our cell to other OEMs. What we are exploring on a little bit of R&D stage is definitely using our cell to build battery storage for homes and for grid. Not that we are doing any capital allocation to that as a business opportunity, but as R&D, we are definitely exploring that over the next few quarters as our cell operations scale up and stabilize. We will definitely look to enter into those dimensions before we actually go to other OEMs.
Okay, sure. Second thing, if you can give a quick brief about who all would be our customers for bike. I mean, if we have gotten any interest, are these the ones who were preferring a pure 100cc motorcycle or they were evaluating EV scooters and then shifted to bike? Any sense on cannibalization of our existing products or any qualitative [crosstalk]?
Our scooters, we are not seeing because as you can imagine, two very different audiences. In fact, we are seeing a lot of interest from semi-urban or smaller towns also for this bike. What that would mean is we would be starting to get consideration in the customer cohort which is the 100-125 cc range, 110 cc more so. It is still early; over the course of this quarter, we will actually see how it plays out.
Sure. Thank you. That was all from my side.
Thank you. We'll take the next question from Mr. Pramod Amte of InCred. You may unmute yourself and ask the question.
Yeah, hi.
Thanks. Am I audible?
Yes.
Yeah.
Yeah.
Thanks for the opportunity. Two questions on gross margin. If I had to look at your gross margin versus the other two-wheeler conventional makers or ICE OEMs, it looks very near to them. If I add on to the PLI benefit as and when you claim, you seem to be much nearer into the same in that context. Wanted to understand your thought process. How do you see the PLI? Do you see it retaining with yourself, or to drive your ambitious volume guidance, you think you need to pass it on to the consumer first?
Yeah, sorry, let me answer your first question and then I'll go to the next. That's a good question, Pramod. Firstly, you know, good that you recognized how our gross margins have improved. Like we said, we are going to actually further see improvement even before the PLI improvement. On top of that, PLI will come in. Our gross margins for EVs will actually get very competitive with ICE over the next year or two. We've been saying this for the last year that as our vertical integration strategy scales, as our subsequent generations of products keep coming in, we will keep getting benefit on gross margins. That story will keep playing out for us. Secondly, on PLI, the way we look at our margins is we will maneuver around industry dynamics as in how they evolve and use our margins accordingly.
There's nothing that I want to share today in terms of pricing strategy, but as industry maneuvers around it, we will definitely maneuver around it too.
The reason to ask that is also if you have seen in case of some of the electronic products, the PLI is already passed on in the highly competitive environment. Once the leader, and there is a possibility to come back to a leadership considering your advantage. That's the reason to ask you. The second one is with regard to the motorcycles versus scooters, how do you see the gross margin profile emerging as we progress a couple of quarters down the line as the EV penetration in motorcycles may also start improving.
The gross margin profile for scooters and bikes for us will be very similar. The reason is the bikes are also built on the Gen 3 platform. In that sense, the components, the engineering, and the supply chain are all the same. In fact, the manufacturing lines are also the same. We don't feel any major difference in the gross margin profiles on motorcycles. The area we are focused on a lot as a management team is making sure the product quality in the ramp up phase remains high quality so that potential warranty risks don't happen. Because it's the first generation, it's the first product in motorbikes, we want to make sure that's the reason we are being a little more calibrated in the ramp up. That calibration strategy seems to be paying off for us in terms of product quality of the bike.
You see the end product pricing situation is different in case of motorcycles versus the scooter, what is brought into the table as a value proposition.
The pricing is largely similar. Pramod, the motorbikes for a start at INR 99,999 for a 2.5 kWh product. I think the S1 starts at 2 kWh . Each motorbike variant has a little bit higher battery for us versus the equivalent scooter variant. That is the real price differential, INR 5,000, INR 10,000 over the scooter variant.
I appreciate the pricing points, which are well discovered. I was looking at more from a competitive dynamics, enhance your capability to get the pricing.
Yeah.
Yes. Pramod, our ability to lead with pricing is a function of our margin profile. The margin profile in bikes will be the same as scooters. In that sense, as the market evolves for EV bikes, we will definitely be competitive and aggressive even vis-à-vis ICE bikes. Our EV pricing is already reasonably close. It's not exactly the same, but reasonably close. With maybe another generation of bikes next year onward, we will actually be equal to or lower than ICE bikes also in pricing for the equivalent product.
Sure.
The third one is with regard to the cell, as you are almost about to commercially productionize the cell and I hope you are already testing it on your vehicle. What to look forward as a customer benefit other than as we are looking from an investor to change the product positioning much better in the marketplace.
Pramod, great point again, you've asked some very relevant questions. The customer benefit of the cell is two, three things. Firstly, it'll have a very different charging performance because it is a bigger cell, more capable cell. Second, it'll allow you to pack more energy. For example, the first product in which the cell is coming is the 9.1 kWh Roadster X and the 5.3 kWh S1 Pro. These are really high range vehicles which for some customer makes a lot of difference. Thirdly for us, the benefit obviously is that the cost of using these cells keeps coming down. Now once this 4680 platform is established, every year as our cell technology improves, we keep improving the energy density and hence cost without making any changes to our manufacturing process. That's a very meaningful point for us and for the customer.
Imagine today the 4680 gives you 5 kWh range. One year from now the same pack will give you 5.5 kWh of range without anything changing from our manufacturing because it's just the technology recipe in the cell that we will change. The speed at which we can bring these iterations in the market is much better than competition relying on vendor cells.
Thanks and all the best.
We'll now take the last question from Mr. Ajox Frederick , you may unmute yourself and ask the question, please.
Hi. Thanks again for taking the question. Sir, my question is from a near term perspective of this 325,000 vehicles which we aspire to sell for the year, how much are we penciling in for the bikes or in that range? Just a broader stroke would give us some clarity.
Sorry Ajox, could you repeat? We lost you in the middle.
I wanted to understand how much of this aspired 325,000 or 350,000 vehicles for the year.
Yes.
Are we penciling in for the bikes?
Ajax, today we're not sharing that specific guidance, but we do expect 15%, 20% should be a reasonable target of this for bikes.
Okay.
Okay. Got it, sir. INR 30,000 per month is more driven by the industry itself picking up and the festival also helping us.
Got it.
Yes.
Yeah. Secondly, sir, on the revenue front, INR 4,200 crore. How much of that is battery in that? Or do we not add battery in that g uidance?
That's consolidated revenue Ajox . Since we're only selling the battery to ourselves, there's an arm's length transaction. C onsolidated all of that.
Got it. Got it. Got it. Sir, that's just a couple of clarifications from my end. Thank you.
Thank you. You will take the next question from Mr. [Udit Jaiswal]. If you can unmute yourself and ask the question.
Congratulations Bhavish on great result. I just.
Are you the same guy who messaged me on social media?
I think so.
Okay, go ahead, ask your question.
I just have a quick question about Battery as a Service which your competitors have started to offer. Is there any plan for Ola Electric on that front?
No. We have a product on the removable battery which is the Gig and the Gig+ . As of now we have not kicked off the manufacturing of that. We will do that as the market matures.
Okay. That was my question, I think. Thank you. All the questions. Already covered. Thank you so much for taking up. Thank you.
Thank you so much. With this, we will have to end our session here. We really appreciate your time and all of your questions during the call today. Thank you so much for joining us, and we look forward to meeting you all during our next earnings conference.
Have a good day.