In the year gone by, nearly sixty million two-wheelers were sold in the world. Most of them end up being mobility machines driven by the sole purpose of commuting from Point A to Point B. But then there is the fraction of the two-wheeled universe that works hard on the emotional connection between man and machine. This emotional connection is crucial. It is this that separates motorcycles from potatoes. It is this that makes some two-wheeler brands very profitable.
This is a controversial topic, especially since the electric two-wheeler industry is working hard to commoditize things and remove any semblance of emotional connection (excitement!) between the user and the machine. An electric motor is brutally honest and delivers dependable, seamless power. It is also boring and getting it to do anything special is difficult.
That is where Ather Energy comes in. In a sea of mediocrity, they try hard to make their scooters special, and we love them for that.
Ather, Who?
India is the biggest two-wheeler market in the world, and it is also the second-largest electric two-wheeler market, right after China. At the same time, the penetration of electric two-wheelers hovers around 6%. When all of these facts are combined, there is likely an unsatiable scope of growth for E2Ws in India.
Ather is the oldest E2W start-up in the Indian market. Founded in 2013, it launched its first scooters in 2016 and is now a prominent player, ranked fourth in terms of (only EV) sales volume after Bajaj, TVS, and Ola Electric. The first two in this list are well-established ICE manufacturers with high profitability and adequate cash reserves to fund their electric adventures. Pure-play EV rival Ola Electric did a public listing a few months back and can be called adequately funded for growth.
That leaves Ather Energy scratching for funds. The scooter manufacturer is now raising money through its first public issue in the Indian equity markets. The company recently filed a Draft Red Herring Prospectus (DRHP) with the Securities Exchange Board of India (SEBI) as a first step towards a public listing. The DRHP was recently approved, meaning Ather will be listed within the next few weeks.
Ather plans to make an INR 31,000m (USD 360m; 1 USD = 86 INR) sale of shares through the IPO. The exact valuation at which Ather plans to raise is not yet public. In India, these figures are disclosed just a few days before the book-building process starts. But to put it in perspective, rival Ola Electric has a market cap of INR 314.6bn (USD 3.66bn) as of January 8, 2025.
Ola Electric stock has declined by half since August.
Ola Electric’s market cap should not be a benchmark for Ather - the two are different players with radically different approaches to products, different market positioning, and even divergent ethos.
At the macro level, Ola sold more than 400k scooters in 2024, while Ather managed to sell slightly less than 124k scooters. At the micro level, Ola’s sales are declining fast while Ather has been holding steady, improving sales somewhat and gaining market share. We recreate two charts from Monday’s post to further emphasize things:
(Click for clarity) Ather has steadily gained market share in the second half of 2024, while Ola has steadily lost share.
Ather has managed to grow with the market and maintain volumes that are steadily above 10,000 units/month.
Even at the pricing level, we cannot compare Ather with Ola. Ather has maintained a premium positioning in the market while Ola has steadily gone downmarket to capture volumes, as is evident from the two charts below taken from the Ather DRHP.
The Rizta ‘Convenience EV’ scooter is priced at the higher end of the market.
The Ather 450 range is priced at the premium end of the Performance EV market.
Profitability?
Ather scooters are not cheap, especially in context of the Indian market. The 450 X, the Ather flagship, retails at about USD 1800 in a market where the best-selling commuter scooter, the Honda Activa, sells for about USD 1100. The Ather’s price is despite, and it has benefits of a thousand ₹10,000 Government subsidy and zero road tax in most states. Even then, the scooter is quite expensive. Yet they manage to sell about 12,000 of them every month.
When you sell expensive scooters and sales increase, profits should be good, right?
It doesn’t seem so.
We know that these are early days, and most E2W scooter manufacturers in India are on the ‘path to profit,’ with actual profits still many quarters away. However, with a premium positioning, one would expect that Ather would enjoy better (negative) returns on Net Worth than Ola Electric, but that does not seem to be the case here, as the below data from Ather DRHP suggests:
We can only compare Ather to Ola here as the other manufacturers are predominantly ICE; the above table is outdated as the Ola Electric share price has fallen to under INR 80.
Simply, it indicates that Ather Energy is losing more money per scooter than Ola Electric. That may not be a cause for worry as BoM costs are decreasing, battery prices are dipping, and Ather maintains steady selling prices. However, we believe the decrease in BoM costs over the last two years has not been aggressive enough.
From the Ather DRHP:
Ather brought down BoM costs by 26% over the last two years. This is disappointing.
With battery prices falling drastically over the last two years, Ather managing only a 4% savings in battery costs is disappointing. Even the savings in mechanical components are only 6% in two years.
Why are Athers Expensive?
They don’t cut corners, and that is a double-edged sword. The same attributes that we like in Ather scooters are what makes them expensive. It is a tightrope walk that the company has to do - keep the scooters likable while reducing BoM costs steadily. That is not an easy thing to do, especially when the present platform uses aluminum castings extensively. There is a high focus on quality, and Ather has managed to maintain an edge over the competition in product attributes.
Take the battery:
It is an all-aluminum battery. Using aluminum for the battery casing improves thermal conductivity and optimizes cooling. At the same time, this lends robustness to the battery. Ather displayed this in a series of commercials a year back. Here is the Ather battery drop video from a 40-feet tall crane:
And another one where the battery is tested inside an industrial oven:
Then there are other components. The main frame is aluminum as well. That is great for sporty handling and keeping the weight under check; it is terrible on the BoM cost front.
The mainframe of the 450 and Rizta use the same mainframe constructed of aluminum.
Or take the two-stage reduction drive. This improves the torque at the wheel, making the 450 Apex the quickest scooter from a standstill to 20kph (that matters in commuter scooters in India operating in stop-go traffic). The two-stage reduction also adds some BoM costs.
The two-stage reduction takes the overall torque multiplication to 7.2, improving bottom-end acceleration.
Even in the Rizta, which is supposed to be a convenience EV targeted at families (and expected to be a more logical than discretionary purchase), the only cost reductions seem to be with the steel (not aluminum) sub-frames and a lower-powered motor.
Ather decided to keep the same battery and main frame (as the 450) for the Rizta to achieve volume efficiency and shorter development times.
Ather understands the BoM cost problem. The core components are fixed hard points linked to commodity prices, and costs cannot be easily shaved off. Ather is also unwilling to sacrifice the brand attributes of quality and performance to save costs, which Ola did to create the lower-priced S1X range.
The only viable solution is to design from scratch, which Ather indicates in the DRHP.
“We are currently developing two new E2W platforms: a new scooter platform (the EL platform) and a motorcycle platform (the Zenith platform). The EL platform, which is in an advanced stage of development, will serve as a more cost-effective and versatile platform for our scooter lines. It will incorporate a new powertrain, electronics and chassis platform, while utilising elements of the battery and Atherstack from the Ather 450 platform. The EL platform will allow us to develop a diverse range of scooter models tailored to various domestic and international markets needs, and reduce our costs.”
However, the more significant news on the product front is the Zenith motorcycle platform.
“We are developing our Zenith platform, which is designed to support new E2W models targeting the 125 cc to 300 cc motorcycle segments.”
The 125cc - 300cc product range is the fastest-growing segment in the Indian market. This is a significant chunk of the market (more than 60% of motorcycle sales). Importantly, the 125cc+ buyers have greater price elasticity than the 110cc buyers.
With Zenith platform development underway, we would expect the first Ather motorcycle to start rolling by the end of 2026.
The other product developments are on the expected lines: LFP-based batteries and rare earth magnet-free motors to reduce costs.
Things we don’t understand
From the Ather DRHP:
It seems that a significant chunk of the IPO proceeds would go towards setting up a new manufacturing plant in the western state of Maharashtra. The current factory is in Hosur, Tamil Nadu, in south India, not far away from Ather’s corporate offices in Bengaluru.
A second factory indicates that the company is looking at volume growth in the near term, which is great news. However, Ather’s present factory has a capacity utilization of only 29% and is not likely to improve in a hurry. So, the only reason Ather may be looking for a new factory is to set up a different plant for motorcycles and optimize logistics.
Quoting from a report that they paid for
Most of Ather’s DRHP quotes a report from the rating agency CRISIL, which Ather commissioned and paid for.
Let’s read that again.
Ather commissioned a report, and some analysts from a private firm wrote it exclusively for them. Then, Ather quotes heavily from that report in the DRHP, a document that essentially acts as an advertisement about Ather and the industry in which it operates.
According to Indian laws, this arrangement is not legally wrong. Even rival Ola did the same, commissioning a report from research company Redseer Strategy Consults.
We find this practice of quoting from an exclusive research paid for by the company questionable. We would have been less worried if the report only alluded to facts. However, the report goes beyond that and projects industry growth rates, forecasts future volumes, and the penetration levels of electric two-wheelers in the future. Since no one can look into the future, these are intelligent data guesses by analysts from CRISIL, paid for by Ather Energy in this case.
CRISIL is a part of S&P Global.
As per the report, the Indian two-wheeler market is expected to grow to about 29-30m units by FY 2031. The market was 18.4m units in FY 2024. Then, optimistically splitting the market between ICE and E2Ws, CRISIL believes that while E2Ws will grow at 41% CAGR, ICE 2Ws will only enjoy a 2% CAGR.
The chart above suggests that ICE 2W growth would fall off a cliff.
That’s hard to believe, even when we run an EV industry newsletter.
Insight EV tracks more than 220 electric mobility players and the world’s most important 2W markets. Connect with us on X at @editor_ev
