Accelerating EV Adoption In India Will Fuel Global Mobility Revolution

Key Takeaways

• Vertical integration and cutting-edge battery and motor technology could drive industry-leading margin expansion and transform long-term profitability as the company scales.
  
• Aggressive product rollout, rapid EV adoption, and proprietary software services may accelerate market share capture and create diversified, high-margin, recurring revenue streams.
  
• Slowing EV demand, persistent quality issues, high capex, regulatory risks, and intensifying competition threaten Ola Electric's growth prospects, brand, and profitability.

Catalysts

Develops, manufactures, and sells electric vehicles in India.

• Analysts broadly agree that vertical integration of batteries and key components will steadily improve gross margins for Ola Electric, but this could be significantly understated; successful ramp-up of in-house 4680 cell production and rare-earth-free motors may enable margin expansion far exceeding peers, potentially transforming net profitability structurally as the company scales.
  
• The analyst consensus anticipates incremental revenue growth from expanded vehicle offerings, yet the rapid rollout of both electric motorcycles and new scooter variants-coupled with India's accelerating EV adoption and uniquely broad distribution-could allow Ola Electric to outpace industry growth rates and capture disproportionate market share gains, supercharging top-line revenue well ahead of expectations.
  
• While the market may not fully factor in the impact of global and domestic regulatory mandates to phase out internal combustion engines, Ola's first-mover scale, vertically integrated manufacturing, and readiness for upcoming safety/environmental norms position it to benefit outsized from these long-term structural shifts, driving multi-year volume and earnings acceleration.
  
• Proprietary software and connected services-already seeing strong subscription uptake via MoveOS+-signal the emergence of a recurring, high-margin revenue stream that could significantly boost blended net margins and provide resilience to cyclical swings in vehicle demand.
  
• Capitalizing on proven R&D and technology leadership, Ola Electric's advanced cell, motor, and electronics platforms could open substantial export opportunities and position the company as a global supplier of EV sub-systems, unlocking future revenue streams beyond domestic vehicle sales and contributing additional upside to both revenue diversification and profitability.

Ola Electric Mobility Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Ola Electric Mobility compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Ola Electric Mobility's revenue will grow by 45.5% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Ola Electric Mobility will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Ola Electric Mobility's profit margin will increase from -63.7% to the average IN Auto industry of 9.8% in 3 years.
• If Ola Electric Mobility's profit margin were to converge on the industry average, you could expect earnings to reach ₹11.2 billion (and earnings per share of ₹2.06) by about August 2028, up from ₹-23.6 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 54.2x on those 2028 earnings, up from -7.7x today. This future PE is greater than the current PE for the IN Auto industry at 30.2x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 21.12%, as per the Simply Wall St company report.

Ola Electric Mobility Future Earnings Per Share Growth

Risks

• A reset in industry EV penetration expectations and a deceleration in overall demand growth, partly due to waning government incentives and increased customer caution, could limit Ola Electric Mobility's revenue growth over the long term.
  
• Persistent quality, reliability, and warranty concerns-including a recent provision of ₹250 crores for historical warranty issues and ongoing challenges in scaling new products-pose risks to brand reputation and may suppress net margins through higher after-sales costs.
  
• Heavy capital expenditure in cell manufacturing and gradual scale-up of the Gigafactory, combined with a slower ramp-up phase and yield rates below efficiency targets, could constrain operational leverage and delay improvements in consolidated earnings.
  
• Ola Electric's reliance on the Indian domestic market, coupled with slow international expansion and evolving local regulatory requirements, exposes the company to country-specific macroeconomic downturns and policy changes, heightening volatility in both revenue and profit.
  
• An increasingly crowded and competitive two-wheeler EV market-with both established ICE incumbents and agile startups vying for share-may compress margins and constrain the company's ability to maintain pricing power, thus putting sustained pressure on earnings.

Valuation

• The assumed bullish price target for Ola Electric Mobility is ₹63.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Ola Electric Mobility's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹63.0, and the most bearish reporting a price target of just ₹30.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be ₹113.9 billion, earnings will come to ₹11.2 billion, and it would be trading on a PE ratio of 54.2x, assuming you use a discount rate of 21.1%.
• Given the current share price of ₹41.31, the bullish analyst price target of ₹63.0 is 34.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.