Ather Energy is facing a supply problem at a time when demand for its electric two-wheelers is growing. The company's manufacturing facilities are running close to full capacity, while customer inquiries, registrations and pre-orders continue to rise. The mismatch is already translating into lost sales, with management estimating that production constraints are preventing Ather from meeting demand for 18,000-20,000 vehicles every month.
The gap is evident in its Q2 FY27 numbers. Wholesale volumes increased 42% year-on-year to 93,211 units, while vehicle registrations rose nearly 60% to 92,589 units. Gross pre-orders more than doubled to 1.80 lakh during the quarter. However, Ather's Hosur manufacturing facility operated at 94% of peak capacity utilisation, leaving little room to increase production.
The company has responded with another round of capacity investments across its existing Hosur facility and its upcoming greenfield plant at Chhatrapati Sambhaji Nagar, also known as AURIC. These expansions are expected to take its annual installed manufacturing capacity to 11.4 lakh units by Q2 FY28.
The challenge is timing. Ather needs additional capacity immediately to convert existing demand into sales, but much of the planned expansion will take several quarters to become operational. Until production at AURIC stabilises, the company could continue to lose sales despite having a growing pool of potential customers.
Demand Gap
Ather's production is already close to the limits of its existing manufacturing capacity. In Q2 FY27, average monthly production stood at around 33,000 units against Hosur's peak monthly capacity of 35,000 units.
Meanwhile, customer interest continued to increase. Monthly inquiries averaged 3.34 lakh during the quarter, taking total quarterly inquiries to more than 10 lakh. Gross monthly pre-orders reached 60,000 units, translating into 1.80 lakh for the quarter, a 108% increase year-on-year.
Management estimates that actual monthly demand currently stands between 50,000 and 60,000 units. With average monthly production at around 33,000 units, the difference between demand and available supply is substantial.
This translates into an estimated loss of 18,000-20,000 potential retail sales every month. The problem is not a lack of customer interest but Ather's inability to manufacture enough vehicles to meet it.
The existing Hosur facility has little headroom to bridge this gap. Additional manufacturing capacity is therefore necessary if the company wants to convert its growing order pipeline into deliveries.
ALSO READ | Dixon's Working Capital Is Swallowing Cash As Receivables And Inventory Surge
Capacity Roadmap
Ather has approved further investments at both Hosur and AURIC to address the supply constraints. The expansion at Hosur is the immediate step, while AURIC is expected to provide a much larger increase in manufacturing capacity.
At Hosur, Ather is investing Rs 58 crore to add 6,000 units of monthly capacity. This will take the facility's monthly capacity from 35,000 to 41,000 units, increasing its annualised capacity from 4.2 lakh to about 4.9 lakh units.
The second phase centres on the AURIC facility. Trial production is scheduled to begin in Q3 FY27, with full installation expected in Q4 FY27. The first phase will add 42,000 units of monthly capacity, equivalent to five lakh units annually.
Combined with Hosur's expanded capacity of 41,000 units a month, this will take Ather's total monthly installed capacity to 83,000 units, or 9.9 lakh units annually.
The company plans another Rs 64 crore investment at AURIC to add a further 12,000 units of monthly capacity. Once this expansion becomes operational by Q2 FY28, total installed capacity will reach 95,000 units a month, translating into 11.4 lakh units annually.
However, the expansion schedule does not immediately resolve Ather's supply shortage. The company faces an estimated deficit over the next three to six months. Even after the Hosur expansion, monthly capacity of 41,000 units will remain below the estimated demand of 50,000-60,000 units.
AURIC is expected to provide further relief, but installed capacity and actual production are not the same. Management expects the greenfield facility to become fully operational in about two quarters. This means production could remain below installed capacity even after the planned installation is completed in Q4 FY27.
Consequently, supply constraints could persist until production at AURIC stabilises in H1 FY28. Until then, Ather may continue to forgo potential retail sales.
ALSO READ | Sambhv Steel's Stainless Steel Bet Raises the Stakes on Capacity Growth
Supply Strategy
With additional manufacturing capacity still some distance away, Ather is also changing its product launch and distribution strategy to manage available inventory.
The company is prioritising higher-margin products rather than launching all variants at once. This is intended to direct limited production towards products that offer better margins instead of spreading inventory across its entire range.
The approach is visible in the rollout of its new Konarc scooter platform. Rather than introducing the lower-margin entry-level SR1 model first, Ather launched the higher-margin mid-spec SR2 and SR3 variants.
The company has held back the high-volume entry-level model until additional manufacturing capacity becomes available at AURIC in Q4 FY27.
Ather is also introducing the Konarc platform in phases across different regions. Sales initially began in northern markets, including Uttar Pradesh and Rajasthan, before expanding to central and western states such as Madhya Pradesh, Maharashtra and Gujarat.
The company has deliberately delayed the launch in southern India, its largest and most active regional market. This decision is reflected in the registration numbers.
In Q2 FY27, Ather's vehicle registrations in South India grew 49% year-on-year. This was lower than the 65% growth in Middle India and 90% growth in the rest of India. Management directed available inventory towards these other regions, limiting the supply available in the South.
The regional strategy comes against the backdrop of a decline in Ather's electric two-wheeler market share, which fell from 17.2% in Q2 FY26 to 15.1% in Q2 FY27.
By rolling out products selectively, Ather can increase sales in markets where it has allocated inventory rather than spreading limited stock across its entire distribution network. However, this also means that demand in certain regions remains underserved.
The company has adopted a similar approach to its retail network. Ather has slowed the addition of dealer stores and put hundreds of letters of intent on hold until vehicle inventory improves.
During H1 FY27, the company opened fewer than 50 new experience centres, compared with 173 during the corresponding period last year.
The decision reflects the need to align retail expansion with manufacturing capacity. Opening more outlets without sufficient vehicle inventory could increase distribution costs without allowing the company to meet customer demand.
Management plans to resume network expansion by the end of Q3 FY27, in line with the expected improvement in production.
Growth Outlook
Ather's capacity expansion needs to be assessed across two periods: the immediate supply constraints in Q3 and Q4 FY27, and the additional production expected from AURIC by Q2 FY28.
In the near term, the company is unlikely to have enough manufacturing capacity to meet its estimated monthly demand. The addition of 6,000 units at Hosur will provide some relief, taking monthly capacity to 41,000 units. However, this will still be below the estimated demand of 50,000-60,000 units.
With AURIC yet to reach stable production, Ather could continue to miss out on around 20,000 potential monthly retail sales. This means the company may have to manage its product launches, inventory allocation and regional distribution carefully for the next few quarters.
The medium-term outlook is different. By Q2 FY28, Ather plans to have installed capacity of 95,000 units a month, well above its current estimated monthly demand of 50,000-60,000 units.
That provides the company with room to accommodate further demand growth, provided it can execute the expansion as planned.
However, the benefit will depend on how quickly AURIC completes installation, ramps up production and achieves stable capacity utilisation. Any delay could extend supply constraints into FY28.
There is also a demand-side consideration. The introduction of lower-priced entry-level variants could bring more customers into Ather's product range and increase demand further. If that happens, the additional manufacturing capacity will have to support a larger volume of sales than the company currently anticipates.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.