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Bhavish Aggarwal’s confidence belies the struggles his dream company Ola Electric is going through. Even as consumer complaints, product challenges, and senior management churn rise, Aggarwal considers these as inevitable ripples in a disruptive business model. Will Ola Electric end up a pioneer or just another good idea?

By: Prerna Lidhoo
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Ola’s 425,000 sq. ft office campus in Bengaluru’s Koramangala exemplifies how the company’s 36-year-old Founder and CEO Bhavish Aggarwal sees the future of mobility in India.

Just like he consolidated different offices in the city into one campus, he wants to build a similar mobility ecosystem so that his ride hailing, electric vehicle, used cars and other businesses can form a mobility super app of sorts. Impressive? Yes. But like most things in life, it’s easier said than done. However, Aggarwal is unperturbed. “Any disruption will have its challenges. Maybe going forward, we have to become better at anticipating them,” he says, in an interaction with Business Today for this story.

In February 2021, Aggarwal commenced the ambitious task of building the world’s largest two-wheeler factory with 10 million annual capacity spread across 500 acres, 33 per cent of which is fully operational today (the current conventional two-wheeler market leader, Hero MotoCorp, has an annual capacity of 9 million across eight factories). Ola’s factory is expected to be near completion by the end of 2022. Aggarwal’s vision of building a mobility ecosystem depends a lot on Ola Electric’s success. But that journey has been far from sweet.

Any disruption will have its challenges. Maybe going forward, we have to become better at anticipating them.

Bhavish Aggarwal
Founder and CEO
Ola

After having made bookings in July 2021, customers had to wait till December for the deliveries to begin. Then there were scores of customer complaints on social media platforms, safety concerns kept aggravating, and senior-level exits put a question mark on the company’s work culture. Despite the troubles, Ola Electric has taken pole position in the nascent electric two-wheeler space in FY23 (see chart ‘The Upstart’). To sustain this growth momentum, though, Aggarwal will need to course correct as he moves to launch an electric car in two years.


Turbulent start 

During its e-scooter launch in August 2021, Ola Electric had promised to deliver the scooter by October. After much delay—made worse by semiconductor shortages and other supply side issues—Ola S1 scooters finally started rolling out of the new Krishnagiri factory in Tamil Nadu in mid-December. At least five former employees told BT that concerns around battery overheating were well known from the start, yet there was pressure to meet the December deadline.

Soon after it began delivering door-to-door, one customer complained that the front suspension had broken. In another case, the company made a customer’s telemetry data public while defending itself against an accusation that a faulty scooter led to the rider’s accident. While a few complaints were related to safety concerns, many customers said the scooter didn’t come with all the features promised at the launch. They were later told that much-hyped features such as digital key, navigation and cruise control would be available later. These features are currently in the beta phase.

“We’re a social-focussed brand. Our spend on marketing is zero. So, it’s logical that complaints will also come on social media. But our complaints are not anywhere out of the ordinary. It’s just amplified more. We’ve tried to break a norm, and that’s why we’re being targeted. Our model is unique in many ways,” says Aggarwal.

“They are a new OEM that basically tried to fast-track things a little bit and are finding out that in the automotive industry, you can’t curtail development time the way you can in software and other things. It’s also largely a regulatory failure. They had all the required approvals, but it still wasn’t good enough,” says Subhabrata Sengupta, Executive Director of Avalon Consulting.

A big setback came in March 2022, when a video of a parked Ola scooter catching fire for no apparent reason went viral. Soon after, scooters of other EV makers also reported fire incidents. The Central Consumer Protection Authority (CCPA) sent notices to Pure EV and Boom Motors after their e-scooters started exploding in April. Okinawa, another leading electric two-wheeler maker, reported at least four such fire incidents, forcing the company to recall over 3,250 units. “A few cases after four to five years doesn’t define our quality; it’s a new technology and a learning curve for everyone,” says Jeetender Sharma, Founder and MD of Okinawa. “We’ll follow whatever regulation is set by the government. It’s good for the industry. Finally, the technology will benefit the customer and the environment. We should embrace it.” The company aims to sell 300,000 EVs this fiscal and plans an investment of Rs 1,200-1,500 crore over the next two years.

A few cases after four to five years doesn’t define our quality; it’s a new technology and a learning curve for everyone.

Jeetender Sharma
Founder and MD
Okinawa

Experts say recent cases of fires could be due to defects in battery cells that might be unsuitable for Indian conditions; problems with design of battery packs and modules; and cost-cutting measures by some companies. Ola Electric, which sources its cells from South Korea’s LG Energy Solution, recalled more than 1,400 of its EVs and has appointed an external agency to understand the safety issues better. “Almost all manufacturers have gone through it,” says Aggarwal. “It’s a fact that it’s a mechanical and electronic device. Our battery pack matches up to all industry standards in India—current and proposed. There will be these rare occurrences. It happens with petrol vehicles also. Data from other countries where EV penetration is much higher—like the US or UK or Europe—show that petrol vehicle fires are 10 times more than EV fires.”

Aggarwal has a point. According to American firm AutoInsuranceEZ, which studied the frequency of fires in automobiles in 2021, vehicles with conventional internal combustion engines reported 1,530 incidents per 100,000, while fully electric vehicles had just 25 per 100,000.

Nonetheless, the safety incidents have got the government to start a process of forming guidelines for EV companies. “It is most unfortunate that some people have lost their lives and several have been injured in these incidents. We have constituted an Expert Committee to enquire into these incidents and make recommendations on remedial steps,” Transport Minister Nitin Gadkari wrote on Twitter. He added that if any company is found negligent in its processes, a heavy penalty will be imposed and a recall of all defective vehicles will be ordered.

Need for speed

Bengaluru-based Ather Energy was one of the first movers in the electric two-wheeler space way back in 2013. Unlike Ola, it went slow and steady initially, but is now ramping up production and distribution capabilities. “An EV needs a whole lot of testing in real world conditions, which a lot of OEMs bypass. Simulations don’t work. There’s no substitute for running for lakhs of kilometres, getting data, rectifying and refining till you launch commercially,” says Ravneet S. Phokela, Chief Business Officer of Ather Energy. “Which is why it took us five years of development of the battery before we launched our first scooter in 2018.”

Ather’s first commercial launch was limited to Bengaluru with just 150 units per month initially to be sure of the quality before starting to scale up. “Our customers have driven 128 million km so far and we’re already supplying 3,000 units on a monthly basis,” says Phokela. Since the company turned unit profitable a few quarters ago, it’s now adding four to five new cities every month and is targeting 90-95 cities with 120 experience centres by the end of this financial year. “It’s not a one-year journey to get this right. [A] revolution takes time,” says Phokela.

An EV needs a whole lot of testing in real world conditions, which a lot of OEMs bypass. Simulations don’t work. There’s no substitute for running for lakhs of kilometres, getting data, rectifying and refining till you launch commercially.

Ravneet S. Phokela
Chief Business Officer
Ather Energy

For Aggarwal, though, speed is everything. “We had to set up a national logistics, warehousing, and RTO [regional transport office] engagement system on Day One, because we also wanted to sell and distribute nationally, which no brand has done in automotive. Incumbent brands go city by city, dealer by dealer. We wanted the whole country to experience the product at the same time. Why should a Bengaluru customer have priority over a Bagdogra customer?” he questions. This ambition, perhaps, is what helped him achieve the highest EV two-wheeler sales in April-May 2022. But there’s much to deliver yet. When it opened bookings in July, Ola Electric had claimed to have received orders for 100,000 units for its S1 model in the first 24 hours. Cumulatively, since January, it has delivered 36,043 scooters till May 31, according to the Federation of Automobile Dealers Association (FADA). This means, around 60,000 customers are still waiting for their vehicles to be delivered.

“Traditionally, auto OEMs had a way of working. Ather and Ola are trying to bring in a different kind of culture and technology in the auto space: mobile dashboards and connectivity. There is a culture clash that’s happening. Eventually, Ola will also mellow down and find an equilibrium,” says Sengupta of Avalon Consulting.


d2c disruption

Another disruption is Ola Electric’s direct-to-customer (D2C) selling model by bypassing the age-old dealership model. “Consumers are used to the D2C model in other domains but not automotive, because the industry is more complex and slower moving. It’s expected that the incumbents will feel a little uncomfortable with our approach. We started in December. It was slower than we would have liked and we’ve been very open in acknowledging that,” says Aggarwal, accepting that he underestimated the process. “We’ve delivered across the length and breadth of this country, but we underestimated the complexity, especially the logistics aspect and the interface with the RTO system. So, in December, when we got into it, obviously we were not delivering in the time that we had promised.”

Initially, Ather Energy also tried to sell directly to customers through its experience store in Bengaluru before shifting to the dealership model as it expanded to newer cities. “We assumed customers will love this idea of buying automobiles online. Then we realised people still want to come to dealerships and test the product out, touch and feel it. Having traded purely online after four years of selling, we’re building physical stores,” says Phokela.

Ola Founder Bhavish Aggarwal on Why he is Confident of Beating Legacy Companies

Since last February, when he announced his mega electric two-wheeler project, Ola Founder Bhavish Aggarwal has been in the news for both the right and wrong reasons. In an exclusive interview with Business Today, Aggarwal, 36, talks about electric cars, Ola’s IPO plans and the incidents of fire. Edited excerpts:

By Sourav Majumdar and Prerna Lidhoo


On online complaints

We’re a social-focussed brand. So it’s logical that complaints will also come on social [media]. But our complaints are not anywhere out of the ordinary. It’s just amplified more. We’ve tried to break the norm—that’s why we’re being targeted. Our model is unique in many ways. Not just the product, which is a huge disruptor in itself. There were electric two-wheelers made before us, but none of them were disruptive enough… Then the timeline in which we did it—we built that factory in seven months. The third piece is the go-to-market model. Consumers are used to a D2C model in other domains but not [in the] automotive [industry]… It’s expected that the incumbents will feel a little uncomfortable with our approach. We started in December... In April and May we’re much better off than December. Our goal is that [a] large majority of customer complaints should get solved in 24 hours... My prediction is that in a few years most automotive sales will be D2C. We’re the first ones so we’ve [had] to face the music of building the infrastructure, building the capabilities and also opening people’s minds.


On EVs catching fire

There’s been one such incident. Almost all manufacturers have gone through this... Our battery pack matches up to all industry standards in India, current and proposed. It matches up to European standards. We have quality checks at every step. We tested our vehicles for millions of kilometres before we launched. [But] there will be these rare occurrences. It also happens with petrol vehicles. It’s normalised in our society so we don’t account for it. Data from other countries where EV penetration is much higher show that petrol vehicle fires are 10 times more than EV fires. We want to engage with the relevant authorities and share our perspective on future standards.


On IPO plans and the path to profitability

We were very close to filing. We saw the markets turn softer and the global geopolitical situation take over. We as a board took a call to do it later. It could be later this year or early next year because we’re ready… Our investors are very supportive… There’s no urgency for us to list. Our Ola Cabs business is profitable... That’s why we don’t need to perpetually keep raising funds. When we come to the market, some people will be positively surprised... On our electric vehicles business front, we’re the largest EV-revenue company in India, ahead of Tata Motors, which sells cars. We have more monthly revenue than them. [Within] four months of our launch of Ola Electric, we were No. 1 by market share. By numbers we would be 25-30 per cent of the EV two-wheeler market. On Ola Electric, when we come out with our financials, people will be surprised to see our capital efficiency. We would beat all incumbents hands down. Our target profitability will be early next year for the two-wheeler business.


On the electric car

Our vision for Ola Electric is to accelerate the e-mobil-ity transition in India and to become a global leader in new-energy domains… our vision is to build the world’s largest two-wheeler product portfolio and manufacturing scale, sell in India, sell in key markets like Asean, LatAm, Europe, etc., and also build cars and focus on segments relevant to India like mid-sized and small cars. In the EV four-wheeler landscape globally, Tesla started the game; their cheapest car is Model 3, a $50,000-60,000 car, which is expensive for most parts of the world. Most European and American carmakers are focussed on that segment. We want to be the world leaders in four-wheelers in mass market vehicles—`10-30 lakh. There’s a range of products relevant to India which nobody is investing big in and creating genuinely disruptive products. The third part is to build our own technology and building the cell will enable this whole revolution. We’re setting up a very large cell innovation centre and have 100 engineers working on that. That’s why I say Tesla for the West, Ola for the rest. We’re looking to launch in two years from now and build a fresh product and a factory for it.


On legacy players

They [the legacy players] know the ICE [internal combustion engine] vehicle game, which is very different from the EV game. This [EV] is much more core technology. And we have many more engineers and much more capability around all aspects of EV technology. The game has changed. They don’t know the game, we [do]. I run a million-plus drivers every day. Traditional automakers don’t even do any core technologies themselves, they just assemble. They’re reliant on the supplier ecosystem and we’re building our own. They’re largely a sales and marketing company and that too they… sell to dealers… They don’t know how to maintain customer relationships; [I do] because I come from consumer internet [and] have 150 million consumer relationships.


On funding

I was the only one in the start-up community talking about profitability four years ago. We’ve to focus a lot more on value creation rather than valuation. ‘Funding winters’ are cycles which come and go... In general, companies should focus on business fundamentals than vanity growth. This is the time when a lot of vanity growth companies will be separated from the ones who’ve genuinely built value. Valuations can fluctuate but that doesn’t bother me. Our capital profile is fairly broad. We’re much smarter about capital efficiency; we don’t have the need to keep raising [capital] every few months. Investors will have their own business models and challenges. Tech valuations have gone down and these are cycles which evolve. Periodically we’ve given exits to investors. In six months, things will be more optimistic, investors will be happy again but our strategy is not dependent on our investors’ mood. Our motivation is built on a long-term future. It’s not to sell out or to cash out partly. That’s not who I am.

D2C is a new thing for India. This could be the new disruption coming in the market. We’re only talking about transparency and customer service. We have nothing against Ola personally.

Vinkesh Gulati
President
FADA

Okinawa’s Sharma, too, says dealerships have their advantages. “We have to understand it’s an automobile; it’s not a gadget. One has to first go to a dealership and do a test ride and then take a call. Dealership model is always better, especially for the Indian market,” he says, adding that Okinawa has 500-plus dealers in the country. It also has a system to book vehicles online, but delivery happens only through these dealers. “If some problem happens, they can go physically and talk to the person who sold the vehicle. In online, who will you complain to? A hybrid type of model will emerge in the future,” says Sharma.

Ola Electric, initially, also had a brush with FADA. While the company in January claimed that it had increased production to a thousand a day, according to FADA it had sold just 1,102 electric scooters in the month. FADA puts out monthly data sourced from the Ministry of Road Transport and Highways, which is, in turn, sourced from nearly 87 per cent of the country’s RTOs. FADA had then said that Ola’s daily production claims are not true. Typically, it takes three to four weeks for dispatching vehicles, and around a day to three days for delivery once a customer makes the full payment, and another two to three days for the RTO. “D2C is a new thing for India. This could be the new disruption coming in the market. We’re only talking about transparency and customer service. We have nothing against Ola personally,” says Vinkesh Gulati, President of FADA.

He says there are some positives of going through dealers and even if Ola didn’t want to, it should have planned certain things before launching a product. “They launched a product without a system, service or registration setup. And then they blame the RTO, which we’ve been working with for the past 50 years. Whatever Bhavish has done for the Indian EV segment is no doubt outstanding. Even the negative publicity that Ola is getting is changing EV adaptability in India. The kind of hype it has created has motivated a lot of customers to buy an EV. If they’re not satisfied with Ola, they’ll buy others, but the demand will grow.”


questions on transparency

Debate also abounds around Ola’s lack of transparency from an ownership perspective. Ola Electric was incorporated in February 2017 by Ola (ANI Technologies, which operates India’s largest cab aggregator business) as its 100 per cent EV subsidiary. According to documents filed by the company with the Registrar of Companies, on December 19, 2018, Aggarwal acquired 9,250 shares at Rs 10 each from ANI Technologies, giving him a holding of 92.5 per cent. Then in January 2019, Aggarwal transferred 2,185 shares to Indus Trust and OEM Employees Welfare Trust, bringing his stake down to 70.7 per cent while ANI Technologies owned 7.4 per cent.  

A month later, Ola Electric raised Rs 306.2 crore ($42.2 million) in a Series A round at a valuation of Rs 1,789.9 crore from Matrix Partners, Tiger Global and Sarin Family India LLC, and Aggarwal’s stake in the company fell to 57.7 per cent. And without producing or delivering a single EV, the company became a unicorn in July 2019 after raising $250 million from SoftBank. After a series of fund raises, Aggarwal owns 36.6 per cent stake in Ola Electric and 8.7 per cent in ANI Technologies as of April 2022. 

Some analysts question how investors in the parent entity (ANI Technologies) got on board with him buying the company’s stake in a subsidiary for a small sum and then garnering huge funding. “As a company, Ola was into the taxi aggregator business. Then why are the resources being deployed in setting up the EV factory? The business for which you’re known and are raising money [for] is different from the business that you plan to do [EVs]. Till now, nobody is clear as to when the business changed and why the shareholders of this company that is going public (Ola Cabs) is not part of that company (Ola Electric). There’s a lot of ambiguity here,” says Arun Kejriwal, Founder of Kejriwal Research and Investment Services, on the proposed Ola Cabs IPO.

But there are others who see nothing wrong in Aggarwal buying shares of a subsidiary at a low price. “It will only impact the investor, and they are informed investors. If they chose to fight it or if they were unhappy with it, they would have taken it up in the court of law. It’s their headache. It can’t happen without their knowledge. The only thing is that there’s no voice for the minority shareholders in the company. That could be a concern,” says Shriram Subramanian, Founder and MD of InGovern Research Services, a proxy advisory firm. “Why should they [Ola] be transparent? Only when they come for listing, we should be worried because the level of disclosure and scrutiny that’s required for a public investor is a completely different ball game.”

Former employees BT spoke to also accused Aggarwal of pulling down Ola Cabs on purpose because his stake in the company is low.

Kejriwal also questions why money needs to be raised for an asset-light business (Ola Cabs) that is no longer burning cash:  “Why can’t it run a business without asking [for] the kind of money it has asked [for]? The market is worried about it. There needs to be a segregation of the ownership of the two companies. Anybody new coming [in] will face the brunt. There will be more scrutiny for these start-up IPOs,” he says. Former employees BT spoke to also accused Aggarwal of pulling down Ola Cabs on purpose because his stake in the company is low.

To Aggarwal, however, the two businesses are clearly delineated. “The corporate structure is very simple. There are two companies. There’s Ola, which is the ride sharing and related consumer tech companies (financial services), Ola Dash (grocery delivery) and second hand used car business (Ola Cars). Ola Electric is the Ola S1 and we’re building a car, cells, etc. If investors are giving me money, they’re doing it after much thinking through,” he explains, adding that in its run-up to the IPO, Ola investors will be positively surprised. “We’re profitable. We crossed that path a year or two ago. That’s why we don’t need to perpetually keep raising funds. And for Ola Electric, when we come out with our financials, people will be surprised to see our capital efficiency. We would beat all incumbents hands down. Our profitability target will be early next year for the two-wheeler business,” he says.


The work culture

Ola’s businesses have seen at least 15 top-level exits in the past two years, including Dinesh Radhakrishnan, who handled engineering functions across both Ola Electric and Ola Cabs; Arun Sirdeshmukh, head of the used car business Ola Cars; Ola’s chief marketing officer Varun Dubey and CFO Swayam Saurabh; Ola Electric’s head of quality assurance Joseph Thomas; and Ola’s chief operating officer Gaurav Porwal. Many have highlighted the company’s tough work culture behind its constant churn of talent. Aggarwal counters that forcefully: “We’re the best actually in senior talent retention in the industry. Our culture is one of impact. We’re an ambitious company; we have an agenda and a mission. We want to change our industries, disrupt them; we want to help create new industries in India. That’s what drives us. There’s a certain kind of people who work well in that environment; those who are also ambitious and focussed on impact.”

Several former senior employees have complained of unrealistic deadlines, midnight working hours and a verbal abuse culture in office. “I joined the company because I was told we were building the future of mobility, but what I got in return was absolute lack of respect and an abusive work environment. Because of the pandemic, the entire focus has shifted to Ola Electric and no interest was left in changing things on the internet business side,” a former senior employee told BT on the condition of anonymity. “In one year, I probably aged 10 years.”

There are others who speak less harshly. “It’s a choice someone needs to make. You have to decide whether you want to be Tiger Woods or Michael Schumacher. We’re not playing golf here; we’re in Formula One. You have to be prepared for it,” another former employee says. Most former employees BT spoke to said that Aggarwal is detail-oriented, over ambitious and a visionary, and that working at Ola is not for everyone.

Aggarwal’s take is straightforward: “Obviously, Ola is a very ambitious company. We want to lead the industries that we’re focussed on. The culture we have is that we want to experiment, take big shots. As long as most of them succeed, we’re comfortable. If a person wants to do life-changing work, we’re the best company to do that. We question the status quo a lot more than any company. Expectation on work is in general slightly higher than other places, and so is the reward.”

the road ahead

Apart from getting the scooter right and also launching a sub-`10 lakh electric car by mid-2023, Aggarwal is bubbling with big plans: “Our vision is to build the world’s largest two-wheeler product portfolio and manufacturing scale, sell in India, also sell in key markets like Asean, LatAm, Europe, etc., and also build cars and focus on segments relevant to India like mid-sized and small cars. We’re also setting up a very large cell innovation centre and have 100 engineers working on that because we want to control the technology. Over the next decade, we’ll see a lot of innovation, be it solid state batteries, sodium ion batteries... we’re looking to launch in two years from now and looking to build a fresh product, and also build the factory for it.”

He says that taking on legacy four-wheeler players wouldn’t be easy but he’s up for the challenge: “Absolutely, we can take on legacy four-wheeler players. Have I built a car before? No. But had we built a scooter before? No. Had we done ride hailing before? No.”

Subhabrata Sengupta,
Executive Director,
Avalon Consulting

Most analysts feel that the bad days are behind Ola Electric. “Given the valuation they’re commanding and the amount of money being given to them, my bet is they’ll be able to turn it around. They will get it right eventually. That said, the thin-skinned responses and the way they have come out on PR hasn’t helped. But they’re trying out many things that will eventually be good for the industry,” says Sengupta. “Their product is not a disaster. They can fix this with some solid engineering work. My sense is their four-wheeler plans will be delayed a bit because it makes sense to first stabilise their two-wheeler business and then get into four wheelers.”

Avalon projects the electric two-wheeler market to reach 7-8 million in five years. “Therefore, even if they hold their ground, they’ll be able to sell 700,000-800,000 vehicles just like that. They have a viable product on ground. It needs some course correction, that’s all, as long as the company is humble and willing to work with customers to resolve it,” says Sengupta. “It’s more like a blip than a long-term trend.”

Starry-eyed Aggarwal says Ola is the world’s most unique company in that it has a ride sharing business, auto retail capability, financing and insurance of vehicles, its own electric manufacturing and, now, even cell manufacturing. “The ride will always remain rough when you want to win in a big boys’ game, and that’s exactly what we’ve set out to do.”

Whether he succeeds or not, one thing is certain: Aggarwal and Ola would have turbo-charged the EV ecosystem like none other.

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Story: Prerna Lidhoo
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