ICRA Downgrades Ola Electric’s Automotive Unit On Sales Decline

ICRA Ltd. has downgraded the debt of Ola Electric Mobility Ltd.'s automotive unit as the road to profitability turns hazy amid slowing sales.

The Mumbai-based ratings agency ascribed a rating of 'BBB+' on four debt instruments of Ola Electric Technologies Pvt. Ltd. from 'A', while persisting with a negative outlook, as per a note on its website.

“The downgrade in ratings and continuation of the negative outlook are due to the slower-than-expected scale-up in electric two-wheeler sales volume, which has resulted in a longer-than-expected period of cash burn and has elongated the road to the company's profitability,” ICRA stated in the note. 

“Consequently, the company may need to explore additional fundraising options over the next 12-24 months as existing cash balances gradually moderate.”

In April, monthly sales of Ola Electric fell to their lowest since listing in August last year, declining 42% year-on-year to 19,709 units. The market share, over the same time period, has declined by 31 percentage points to 21%. The electric two-wheeler sales of Bajaj Auto Ltd., TVS Motor Co. Ltd. and Ather Energy Ltd. have grown by 151%, 152%, and 31%, respectively, since then.

“While the market is growing, competition has intensified materially over the recent past. The entrenched incumbents, particularly Bajaj Auto and TVS Motor Co., have collectively captured around 40% of the market…up from a mere 7% in FY22,” the ICRA note stated.

The lacklustre sales and eroding market share are certain to show in earnings.

ICRA estimates Ola Electric's full-year loss at Rs 1,900-2,000 crore in FY25, as against Rs 1,600 in FY24. The profitability pressures are likely to ease in FY26 and thereafter.

“An array of new launches—third-gen scooter, new motorcycle—are expected to facilitate a faster and more profitable revenue scale-up, as these products share a common platform,” ICRA said in the note. “Ola Electric has also expanded its sales touchpoints to 4,000 in March 2025 from 900 in March 2025… A ramp-up in service infrastructure is also likely to address service backlog issues faced in the past.”

“In addition, several cost rationalisation measures taken recently—reduction in headcount, sales and service optimisations—will help cut losses and aid the road to breakeven.”

As things stand now, though, the road back to profitability looks like it may be a weary slog. Ola Electric has had troubles with its expansion overdrive, as hundreds of its stores were found to be operating trade certificates. The company's social media is still packed with service- and quality-related concerns. The delivery schedule of the Ola Roadster X motorcycle has been delayed for a second time in two months. And layoffs have resulted in an exodus in leadership.

Additionally, the Bengaluru-based EV maker is now facing regulatory scrutiny from at least two central ministries in New Delhi and India's market regulator in Mumbai.

Still, the company has enough cash to burn—Rs 3,100 crore as on March 31—but without a ramp-up in sales that may fall short.

Ola Electric needs to sell 50,000 units every month for a long time to achieve breakeven, founder billionaire Bhavish Aggarwal had told investors after the company's third-quarter earnings in February. Later, a company representative said it's confident of becoming EBITDA positive in the first quarter of FY26. 

“If the unit sales scale-up remains impacted, the company will be compelled to explore more capital-raising options, which pose funding risks,” ICRA said. “Nevertheless, ICRA expects the company to have adequate capacity to raise fresh funding.”