Ola, Ather close in on profit playbook of their ICE rivals

Gross margins closer to levels of Hero Moto, Bajaj, TVS, but net margins are still distant

- Ayaan Kartik

India's electric two-wheeler upstarts are beginning to look more like their legacy rivals-at least on profitability. Ola Electric and Ather Energy are now reporting gross margins closer to the levels of internal-combustion engine (ICE) leaders like TVS Motor Co., Hero MotoCorp, and Bajaj Auto, even as the legacy firms work to improve margins in their own EV portfolios.

During their latest quarterly earnings calls, both Ola and Ather highlighted their improving unit economics, with gross margins close to the levels of legacy rivals. However, the operating margin picture still differs sharply.

On gross margins, Ola Electric closed the September quarter with 30.7% gross margins, up more than Il percentage points from a year earlier. Ather Energy's gross margins also rose-up three percentage points to 22%. These figures are now comparable to the 29-34% gross margins typically reported by Hero, TVS, and Bajaj.

But on operating margins, Ather posted a -10% Ebitda margin and Ola Electric reported its first positive operating margin of 0.3% in the same quarter, compared to the 14-18% margins of the legacy companies. Ola said it expects 5% Ebitda margin and 40% gross margins in January-March.