Ola: India’s Electric Vehicle Pioneer Faces Growing Challenges

Founded in 2010, Ola rapidly expanded into electric vehicles, but recent falls in scooter sales and substantial losses have raised concerns. The company grapples with competition, regulatory issues, and consumer dissatisfaction, highlighting the challenges faced by startups in the hardware sector.

The story of Ola, once celebrated as India's most promising startup, is now marked by a troubling decline. Established in 2010, the company made waves by diversifying from ride-hailing services to electric vehicles (EV) and battery manufacturing, positioning itself as a competitor to established players like Uber. In 2023, Ola's foray into AI with "Krutrim," India's first AI start-up valued at over $1 billion, further boosted its innovative image.

However, the ambitious growth faced headwinds recently as Ola Electric, the company's EV division, has experienced a plummet in value—down nearly 70% within seven months of a $734 million initial public offering (IPO) that had been hailed as India's largest of 2024. Sales figures paint a stark picture; electric scooter sales have decreased drastically, dipping to under half compared to the same period last year. Increased competition from longstanding two-wheeler manufacturers and growing regulatory scrutiny has compounded the difficulties faced by the company.

Ola’s reputation has taken hits over safety concerns following reports of electric scooters going up in flames and incidents of breakdowns mid-ride. Government inquiries regarding the legitimacy of operational licenses for numerous showrooms are underway, and a vendor's insolvency plea has added to the tangled issues. Moreover, delayed payments have driven away essential suppliers and logistics partners, leading to growing operational strains.

To navigate these crises, Ola has embarked on a path of restructuring, which has included job cuts and automation to enhance cost-efficiency. Reports suggest more than 1,000 employees have been let go since November, indicating the severe impact of declining sales and mounting losses, which have ballooned to $65 million in the last fiscal quarter—a stark increase from $43.6 million a year ago.

While CEO Bhavish Aggarwal initially positioned Ola as the Tesla of two-wheelers, experts now suggest the company fails to grasp the market dynamics effectively. Former employees have reported that the electric scooters were hastily developed, with insufficient adaptations made from an acquired model from Dutch startup Etergo. Accusations of rushed design processes and overlooked safety data have aggravated the situation.

The emerging competition from well-established brands has pushed Ola’s market share down from 52% to just 19%, though it managed to recover to 25% recently. The company's ambitious goal to sell 50,000 units per month for profitability now seems increasingly unrealistic. Despite Ola's claims of substantial sales figures, discrepancies have been noted by governmental agencies, raising further doubts about its market performance.

To revitalize consumer interest, Ola is introducing discounted pricing and newer models; however, dissatisfaction with customer service remains a critical issue. With unresolved complaints piling up and limited service centers accessible to customers, many feel abandoned. In response to public relations challenges, the company has acknowledged service shortcomings and is planning to open over 4,000 stores—although these have come under governmental scrutiny for licensing issues.

Behind these market struggles lies a disconcerting trend: a rising number of executive exits from the company, including key leadership roles across several departments. Observers have pointed out that a culture of top-down management along with high-stress expectations may be detrimental to product development, raising alarms about the startup's long-term viability.

As Ola grapples with these multifaceted challenges, the outlook for the company hangs precariously, stirring anxiety among investors drawn in by high IPO valuations. With a significant role in India's green transition through electric vehicles, Ola's potential must contend with external pressures and internal restructuring, as it navigates the difficult road ahead.