From Ola’s announcement to the stock exchanges on Aug 12th.
Bhavish Aggarwal’s framing was characteristically expansive: “The revision transforms the economics of our cell business by converting an earlier milestone overhang into a five-year, quarterly PLI opportunity.” He added that no incentives had been factored into projections after the company overshot the original timelines.
The market’s response was a shrug. The stock closed around ₹39.70, up under a per cent.
That left us befuddled. Such a major announcement should have resulted in an upper circuit for the stock. After all, the cell plant is the ever-tightening noose around Ola’s neck. The government announcement gives it some respite and should have been looked at more favorably by the market.
The Numbers
On the face of it, the numbers look very impressive. ₹7,240 crore (USD 760 million) is roughly 40% of Ola’s market capitalisation. Just a 1% uptick in the stock, with such a number being thrown around in the company’s Press Release, tells you that either the market is badly mispricing Ola, or the market does not believe the ceiling will be reached.
The market always wins.
The market understands that the ₹7,240 crore number is not a pot of money waiting to be claimed. It is what Ola gets from the government if it builds 20 GWh, runs it at capacity, hits the domestic value-addition thresholds, and sells the output, every year, for five consecutive years.
Starting today.
Today it has 12.5% of that allocation installed. The programme agreement was signed on 28 July 2022. Four years and a fortnight later, 2.5 GWh is on the floor. At the promised 6 GWh by quarter-end, it will be at 30%. We won’t hold our breath for the 100%.
What has Actually Changed
Strip away the language, and this is a penalty being lifted, not a subsidy being granted.
OCT received a notice from IFCI, the project management agency for the ACC PLI scheme, in March 2025 over delays in meeting investment milestones. Ola carried a ₹57 crore provision for liquidated damages against that exposure, and reversed it in Q1 FY27, a reversal that made numbers look somewhat sane but still produced a net loss in the region of ₹336 crore.
So the actual sequence is: Miss the milestones -> Receive the notice -> Provide for the penalty -> Get the milestones moved -> Release the provision -> Announce the incentive ceiling as though it were news.
That’s Ola being Ola.
In actual terms, MHI has done a rebasing. The clock has been reset to a schedule Ola can actually meet, and the schedule it originally signed up to has been retired.
Is all that bad?
Nopes.
Despite criticising Ola for vehicle quality issues, seedy PR practices, misrepresenting tech, and various other issues, we have always maintained that Ola’s cell gigafactory is an important milestone for the nation.
The PLI-ACC penalty was not a single issue. It is not just the government penalizing you for not meeting deadlines. It effectively canceled any subsidy that you were going to get for future sales. Now, with the clock getting reset, Ola has a chance of getting the subsidies, if not for 20 GWh, at least for 6 GWh.
Finding customers for that 6 GB of capacity remains a steep hurdle to cross.
In the history of the company, Ola has done two things remarkably well. First, it set up the scooter plant in record time. From unprepared farmland to one of the (theoretically) largest two-wheeler plants in the world, the journey was remarkably completed in 11 months.
Second, Ola has also moved at a fast pace with its cell gigafactory. The nature of the beast is that it doesn’t move very fast, so at times the company’s PR speak is many quarters ahead of actual results. Still, on an honest basis, the Cell gigafactory has progressed fast, considering that Ola has done most of its R&D in-house.
InsightEV – Global Electric Mobility
In comparison, every cell programme in India has slipped. Even giants like Reliance, another beneficiary of the ACC-PLI scheme, are many quarters behind Ola.
As an aside, the government regulation was likely drafted to favor Reliance, and Ola is a side benefit.
To be fair to the government, they are finally realizing that made-in-India cells are more important than crossing the T’s and dotting the I’s on a regulation that was lazily drafted in the first place.
The 20 GWh Challenge
Actually, we can call it the 6 GWh challenge as well. The question remains the same: Who buys the cells?
Ola’s own two-wheeler demand does not come close to consuming 20 GWh. Take a generous run rate of 20,000 units a month, well above where the company has been sitting, and an average blended pack size of 6.0 kWh. That is 240,000 units a year and 1.44 GWh of captive cell demand. Round it up, call it 1.5 GWh.
The nearly immediate installed capacity is four times that. The allocation is 20 times that.
The Ola 4680 NMC is an excellent cell, except it’s 4680, and it’s NMC. It’s an excellent cell for a Tesla if Elon were producing that in India, except India doesn’t have a Tesla plant and will not likely get one.
Every other car manufacturer in India has moved to LFP and is happily buying from BYD or any of the other Chinese. The only ones that remain NMC are the Koreans, but hey, they are the Koreans. They buy from Korea.
That narrows Ola’s playing field considerably, giving it very little TAM to play with. You can fit the cell to certain drones, as Ola’s PR would like you to believe, but you don’t get volumes with that. Even if Amazon decided to roll out thousands of delivery drones tomorrow, each drone hardly needs six to ten cells. Amazon has no such plans.
4680 NMC is also a sub-optimal fit for any BESS system, the Indian market for which is likely to get hotter than the Indian market for E2Ws. The country would need a few 100 GWh of BESS every year, and that’s what Reliance is targeting.
Ola knows that, and they were quick to show a 46100 LFP cell. Except it was a cell on the MD’s table. We are many quarters away from the 46100s coming out at a steady pace from the Gigafactory.
In a market where LFP cells arrive from China at prices that Indian gigafactories have not yet matched, and where, as we argued, the lowest-hanging fruit in BoM cost reduction has already been plucked, the assumption of endlessly falling cell prices is exactly what the industry can no longer rely on.
Undercutting the Chinese on quality and prices, with a 6 GWh line, is ambitious.
Merchant cell sales are a brutally unsentimental business. Ather, TVS, Bajaj and Hero will qualify a cell on cycle life, consistency and warranty support, not on a founder’s launch event. Almost all of them buy from Gotion and BAK. Some of them will shift their supply agreements to battery giant Amara Raja’s upcoming 2170 NMC supply in the near future.
Our Take
This is genuinely good news for Ola. The penalty is gone. The door to get free money from the government is open again. This is a second life for Ola Electric.
As analysts, this is also good news for us. We can now monitor the PLI receipts from the Government of India to check how many cells Ola actually produced and sold.
