Gross Margin is a metric that we love to hate. It makes loss-making companies look good in the second line of the financial results. In common man speak, it is the difference between the Bill of Materials (BoM) cost of the goods and the sales price. It tells the world, “We are not selling things below the material input costs.”
It is a good window dressing for loss-making companies. For profitable companies, Gross Margin has no place in the balance sheet, as you can see in the Bajaj Auto financials.
A lot of numbers get added in the form of operating expenses after the gross margins. These are the numbers that matter the most, as you need to spend money beyond the BoM sheet to actually make vehicles and sell them.
So when we look at Ola Electric’s latest financials, we don’t pay much attention to the Gross Margin levels. Just for clerical purposes, let us mention that it improved from 18% to 19.2% on a year-on-year basis and deteriorated from 20.8% to 19.2% on a quarter-on-quarter basis.
In this analysis: Ola Electric Bleeds Profusely
First, The Numbers
Unit Sales Were Down
The Real Deal: EBITDA and EBITDA Margins
Annual Results
Warranty Costs
Things to Worry About the Most
The Company-owned Wide Network Will be a Cost Drag
The Cell Plant Would Take a Few Quarters to Mature
Ola Electric Keeps Amending its Communication
No Information on Roadster Motorcycle Orders
First, The Numbers
There is no good way to slice and dice these – every metric has deteriorated sharply. At the top-line level, revenues have declined from INR 16,550 million to INR 6,520 million, a nearly 61% drop on a year-on-year basis.
Unit Sales were down
The drastic drop in revenue was driven by a 55% drop in unit sales, from 115,386 units in Q4 FY 2024 to 51,375 units in Q4 FY 2025. It’s not that we were not aware of the collapse in unit sales. Successive monthly sales since January of this year have been bad. January 2025 was the last time Ola Electric had market leadership in monthly sales.
Apart from the drop in unit sales, the mix has deteriorated. In Q4 FY 2024, the Premium segment contributed to 56.9% of sales. This has come down to 30.7% in Q4 FY 2025.
The drop in Premium segment contribution is reflected in the sales transaction prices. We estimate that Ola Electric was making INR 143,000 per unit in Q4 FY 2024, which has dropped to INR 127,000 per unit in Q4 FY 2025. Note, these are simple estimates, and part of the revenue also comes from accessories, components, and paid service sales.
The Real Deal: EBITDA and EBITDA Margins
Gross Margins tell a very insignificant part of the story. There are major expenses that enter the equation after the Gross Margin. EBITDA and EBITDA Margins paint a better picture of the company’s health.
In Q4 FY 2024, Ola Electric reported EBITDA losses of INR 1,540 million. This has gone up by more than five times to INR 7,750 million in Q4 FY 2025. This has happened on a sharply declining revenue base. As a result, EBITDA Margins collapsed from -9.3% in Q4 FY 2024 to -78.6% in Q4 FY 2025.
Annual Results
We keep this way below in the analysis as Ola Electric is a ship continuously going down financially, and a better measure is the quarterly performance.
For FY 2025, Ola Electric sold 359,221 scooters, a 9% improvement from FY 24 deliveries. The company recorded revenue of INR 46.65bn, a 9.2% decline from revenue of INR 51.4bn.
For the year, the company reported an EBITDA loss of INR 1.109 bn, a 43% increase in EBITDA losses from INR 775m in FY 2024. EBITDA margin deteriorated from -15.1% in FY 2024 to -23.8% in FY 2025.
Warranty Costs
Ola Electric is still bleeding from service and warranty issues, and that reflects in the Q4 balance sheet. The company has made a one-time warranty cost provision in FY Q4 2025 of INR 2.5 billion to account for the S1 Gen-1 and S1 Gen-2 range of products. The company stated that going ahead, they don’t see any additional warranty costs arising from an accounting standpoint.
Things to Worry About the Most
From the results, there are several things that investors should be worried about going forward.
The Company-owned Wide Network Will be a Cost Drag
Ola Electric has 4000 outlets, out of which 3200 are company-owned. If that number is true, then with average monthly sales of about 20,000 units, each outlet is selling less than five units per month. That’s very low for a mass market manufacturer and venturing into Livewire territory. Mind you, every outlet is Ola-owned, operated, and manned by Ola employees or contract workers. In short, Ola is likely losing money on every outlet every month, and unless sales multiply from here, this is a business model that will bleed a lot.
The Cell Plant Would Take a Few Quarters to Mature
There are multiple concerns here. First, the cell plant is running late, and in the quarterly shareholder newsletter, Ola Electric shared that cell yields have now reached 63%. That is a cell plant that we estimate is unlikely to make any deployable cells in the next few months. Mature manufacturers like LG have cell plants that operate at 98 %+.
Second, global cell prices have collapsed and the Chinese are offering great deals riding on their excess capacity. So is Ola Electric investing heavily into manufacturing a commodity that is fast depreciating? Further, would Ola cell prices undercut Chinese suppliers in India. We don’t know yet and that’s a question for six months later.
Third, to use the 4680 cells, they would have to redesign all the packs and re-homologate them. At the same time, they would need to maintain an inventory of 2170 cells and packs to address battery warranty issues in the future.
Fourth, the pilot plant of 1.4GWh is more than enough to meet Ola’s entire vehicle demand for cells. The company plans to scale the factory to 5 GWh and eventually to 20 GWh but we cannot comment on where the cells would be used. Ola is unlikely to have the vehicles.
Ola Electric Keeps Amending its Communication
The product roadmap communicated in Q2 2025 was questionable as Ola Electric claimed that they would launch 19 new products by Dec 2026. It is unreasonable for any automotive manufacturer to develop so many products simultaneously even with component commonality benefits.
Within the newsletter, Ola Electric said:
This was amended in the Q3 Shareholder’s Newsletter to this.
They even claimed that “We are ahead of the product roadmap we had shared in Q2 2025.”
Then in the Q4 FY 2025 Shareholder newsletter communicated yesterday, the product roadmap has changed to:
The company further stated:
The S1Z, Gig/Gig+ scooters were announced in November 2024 with deliveries promised in April 2025.
Now, the company informs that they are delaying the scooters. No such information was disclosed during the previous quarterly results.
No Information on Roadster Motorcycle Orders
The company did make claims about the Roadster X/X+ social media reach and campaign. However, we did check the website, and it seems that the variants with 2170 cells are being promised for July 2025, and the ones with 4680 cells are being promised for October 2025 delivery.
(Left) Ola promises delivery of the Roadster X+ in July and that of the 9.1 kWh model (right) in October. The 9.1 kWh variant uses Ola’s 4680 cells. These dates have been amended multiple times.
These dates have been amended multiple times.
