ICRA Ltd. has reduced the credit rating of Ola Electric Mobility Ltd.’s automotive division as the path to profitability appears increasingly uncertain due to declining sales.
The Mumbai-based credit rating agency downgraded four debt instruments of Ola Electric Technologies Pvt. Ltd. from ‘A’ to ‘BBB+’ while maintaining a negative outlook, according to a statement on its website.
According to ICRA, “The downgrade in ratings and the continuation of the negative outlook are attributed to the slower-than-anticipated increase in electric two-wheeler sales, which has led to a prolonged cash burn period, extending the timeline for the company to achieve profitability.”
As a result, the company may need to seek additional funding sources within the next 12 to 24 months, as its existing cash reserves are expected to diminish.
In April, Ola Electric’s monthly sales dropped to their lowest point since the company went public in August of the previous year, falling 42% year-on-year to 19,709 units. During the same timeframe, market share decreased by 31 percentage points to 21%. In contrast, the electric two-wheeler sales of Bajaj Auto Ltd., TVS Motor Co. Ltd., and Ather Energy Ltd. have seen increases of 151%, 152%, and 31%, respectively.
“While the market is expanding, competition has significantly intensified recently. Established players, particularly Bajaj Auto and TVS Motor Co., have collectively grown their market share to about 40%, up from just 7% in FY22,” noted ICRA.
The disappointing sales figures and shrinking market share are expected to impact earnings negatively.
ICRA forecasts that Ola Electric will incur a full-year loss of Rs 1,900-2,000 crore in FY25, compared to Rs 1,600 crore in FY24. However, the pressure on profitability is likely to ease in FY26 and beyond.
“A series of new product launches—such as the third-generation scooter and a new motorcycle—are anticipated to accelerate revenue growth and profitability, as these products utilize a common platform,” ICRA mentioned. “Ola Electric has also increased its sales outlets to 4,000 as of March 2025, up from 900 in March 2024. Furthermore, enhancements in service infrastructure are expected to resolve past service backlog issues.”
“Moreover, recent cost-cutting measures, including workforce reductions and optimizations in sales and service, will help minimize losses and support the journey toward breakeven.”
Currently, however, the path to profitability seems challenging. Ola Electric has encountered difficulties with its rapid expansion, as numerous stores were found to be operating without proper trade certificates. The company’s social media channels are still filled with complaints regarding service and quality. Additionally, the delivery schedule for the Ola Roadster X motorcycle has faced delays for the second time in two months, and layoffs have led to significant leadership turnover.
Furthermore, the Bengaluru-based electric vehicle manufacturer is now under regulatory scrutiny from at least two central ministries in New Delhi, as well as India’s market regulator in Mumbai.
Despite this, the company has sufficient cash reserves—Rs 3,100 crore as of March 31—but without a sales increase, those funds may not be enough.
Ola Electric must sell 50,000 units each month for an extended period to reach breakeven, founder and billionaire Bhavish Aggarwal stated to investors after the company’s third-quarter earnings report in February. A representative later expressed confidence that the company could achieve EBITDA positivity in the first quarter of FY26.
“If the unit sales growth continues to be hindered, the company will be forced to seek additional capital-raising opportunities, which introduces funding risks,” ICRA remarked. “Nevertheless, ICRA believes the company has the capability to secure fresh funding.”
