Indian electric scooter startups face mounting challenges, with significant losses and uncertain regulations causing hesitation among investors. Despite their substantial market shares, competition intensifies as traditional automakers increase their presence in the electric vehicle (EV) sector.
Ather Energy, a leading sales startup, experienced difficulties raising funds. While seeking a valuation of over $1 billion, potential investors hesitated, leading the company to opt for a rights issue. In September, they announced a $108 million fundraising via shares issued to existing investors, Hero MotoCorp and GIC. According to Tracxn, Ather’s previous valuation was $732 million. Their sales have increased, selling 72,436 vehicles until August this year, surpassing the total sales of 2022.
Ola Electric, backed by SoftBank, saw a slight increase in valuation to $5.5 billion following a $140 million funding round in September. After launching its first scooter, Ola’s valuation reached $3 billion in September 2021, which rose to $5 billion by January 2022. The company has now established itself as India’s top electric two-wheeler producer, claiming about a third of the market.
However, the moderate enthusiasm for Ola and Ather’s fundraising rounds is considered concerning, especially given India’s growing focus on eco-friendly mobility. An investor in Ather emphasized the need for startups to enhance gross margins and seek profitability. While they may manage with limited fundraising, long-term growth demands more substantial rounds.
Financially, Ather reported a significant increase in revenue for the fiscal year ending March 2023, but losses also increased. Ola Electric’s latest financial data remains undisclosed, but in fiscal 2022, their revenue was $45 million with losses of $94 million.
These startups also face external pressures. The government recently reduced subsidies that previously made electric two-wheelers more affordable. In response, companies raised their prices or introduced models with smaller batteries. Consequently, electric two-wheeler registrations experienced a decline.
For startups, the challenges are multifaceted: increasing sales and mitigating losses to lure investors. Unlike traditional companies, Harshvardhan Sharma of Nomura Research Institute emphasized that startups lack the luxury of cross-subsidizing their EV ventures.
Major Indian automakers, including Hero MotoCorp, Bajaj Auto, and TVS Motors, are accelerating their EV strategies. But these traditional players face their challenges. While startups have room to grow, legacy manufacturers grapple with the dilemma of transitioning from their conventional vehicles to EVs, balancing profitability concerns with evolving market demands.
