Is Energy Storage The Answer To Ola Electric's Profitability Puzzle?

“The budget for the full 5 GWh plant is INR 2,800 Cr… We will be completing the 5 GWh installation by the end of FY26… Given that the EV market has evolved slower in recent quarters, we don’t foresee the need to expand beyond 5 GWh till FY29.”

This was what Ola Electric said about its cell manufacturing capacity in its Q1 shareholders’ letter in July 2025. But, within three months, the company has had a change of plans. It now intends to scale its capacity to 5.9 GWh by March 2026 and further to 20 GWh by the second half of 2027.

Behind this change is the Bhavish Aggarwal-led company’s transition to becoming an electric vehicle and energy storage company, rather than just the former. The question is if this would be enough to help the company go past the profitability line.

But, before we delve into it, let’s first take a look at the company’s headline numbers for Q2 FY26.

The company managed to reduce its consolidated net loss by over 15% YoY and 2.3% QoQ to INR 418 Cr during the quarter on the back of cost control and improvement in margins. However, its operating revenue plunged 43% YoY and 16.7% QoQ to INR 690 Cr in September 2025 quarter.

Behind the sharp decline in revenue was reduction in vehicle sales and market share, even as the company said the auto segment turned EBITDA positive in the quarter if its total income was taken into consideration.

Auto Segment Turns Focus On Profitability

Lower operating expenses, cost-cutting measures, and vehicles built on its Gen 3 platform helped Ola Electric’s auto segment post an EBITDA of INR 2 Cr and improve gross margin to 30.7% in Q2.

With the company beginning the deliveries of vehicles integrated with its in-house manufactured Bharat 4680 cells, it expects the auto segment’s gross margin to rise to about 40% by the end of FY26 and operating expense to reduce to INR 225 Cr by Q1 FY27 from INR 258 Cr in Q2 FY26.

However, the EBITDA improvements came at the cost of declining vehicle deliveries and market share. The company, which once held around 50% market share in the two-wheeler EV market, has slipped below Bajaj Auto, TVS Motor, and Ather Energy in terms of market share.

Ola Electric attributed the decline in market share to discounting tactics employed by its rivals amid slowing growth of electric two-wheeler (E2W) sales. “While the market has been flat, competition has intensified. Many OEMs have chosen to pursue short-term market share through aggressive discounting and elevated channel incentives, at the cost of profitability,” it said.

Ola Electric, on the other hand, said it is focussing on improving cost structure and driving margin expansion for profitable growth. For a company which once had a growth-at-all-costs approach, the focus on profitability might seem surprising at first glance. However, it signals the profitability pressure which Ola Electric is facing.

The EV maker has been posting losses and burning cash at a high rate. While it managed to slow down this pace, it still saw a net decrease of INR 294 Cr in its cash reserves in the September quarter. These factors have resulted in a crash in the company’s shares, which closed at INR 46.79 on the BSE yesterday. This was over 38% below the IPO price.

“This profitability amid a steep sales decline suggests that Ola Electric has temporarily shifted its focus from scale to sustainability. While the margin gains are encouraging,… the company now faces the crucial task of balancing cost optimisation with renewed volume growth,” said Harshal Dasani, business head of INVasset PMS.

Founder and CMD Aggarwal said in a post-earnings call that while Ola Electric is currently focussing on improving margins and profitability, it still aims to be among the top two players in the E2W market with about 25% market share.

However, this is not going to be easy, especially considering the product and after-sales issueswhich Ola Electric’s vehicles have been facing.

Acknowledging these challenges, the founder said, “We are working on the ownership experience – the service network. It has been slightly more challenging. And some of the challenges, by the way, are not just company linked. The challenges are because we’re the largest EV company, have the highest number of deployed vehicles in the market, and the biggest challenge is lack of trained technicians.”

While the company’s one-day service guarantee, rolled out a year ago, seems to have failed in solving the timely servicing issues of customers, Ola Electric is now banking on its decision to open its HyperService platform for everyone to allow purchase of its genuine spare parts directly through the Ola Electric customer app and website to address the after-sales service challenges. The company also sees this as a high-margin growth avenue.

Despite this, it doesn’t seem to expect its vehicle sales or market share to go up in the short-term. This is evident from it cutting its earlier revenue and sales guidance. Ola Electric now expects to deliver 2.2 Lakh vehicles in FY26 as against its earlier guidance of 3.25-3.75 Lakh units.

It has also lowered revenue guidance for the year to INR 3,000-3,200 Cr from the INR 4,200-4,700 Cr figure it gave in its Q1 shareholders’ letter.

Ola Shakti: Bhavish Aggarwal’s New Hero

Ola Electric’s Gigafactory has been commissioned with a cell manufacturing capacity of 2.5 GWh and the company expects to migrate all its vehicles to its in-house produced cells in the next six to nine months, creating a baseline demand of 2-3 GWh annually for the cell business.

However, the decision to increase cell production to 20 GWh by FY27 was attributed to the company’s new hero product – battery energy storage system (BESS), which will be sold under the name ‘Ola Shakti’.

The project was unveiled last month and marked Ola Electric’s foray into the residential energy storage market. The new offering is aimed at going from an EV company to an “EV + energy” company and potentially as a hedge against competition in the automotive segment.

Ola Shakti is said to have received “strong interest” post launch and the company now expects the segment to earn a revenue of INR 100 Cr in Q4 FY26 and INR 1,000-2,000 Cr in FY27. These figures warrant caution, given that product deliveries are not expected to start until mid-January next year.

However, the company is so bullish on the segment that it now plans to provide BESS solutions for commercial, industrial, and utility-scale use, ranging from 100 kWh to 5 MWh systems. It is for this reason that it has decided to increase its cell production capacity by 8 times.

While the market for energy storage is big, the sudden focus on the newest offering is a result of Ola Electric’s struggles to turn profitable amid mounting investor pressure.

If the first few years of Ola Electric were all about growth, scale and EVs, the tanking stock price has made it turn its focus to addressing quality and service issues and foraying into completely new segments to return to the black.

“In Ola Electric’s case, we have seen a constant shift of focus. From scooters to motorcycles to three-wheelers to cells and now Shakti. Unfortunately the results haven’t been great as can be seen from plummeting scooter sales, serious quality issues, adverse market feedback on service and repairs. Net result is serious value destruction for the company and shareholders,” said automotive industry veteran and ADM Prime Consulting’s MD and CEO Deb Mukherji.

And, even after all these, profitability seems to be a distant dream. The company would need to make investments to scale its cell manufacturing capability and market the new product, further putting strain on its bottom line.

While the “EV + energy” combo has potential in the long term, there seems to be much more pain ahead for Ola Electric in the short term.

Not once was net profitability at company level mentioned in the Q2 shareholders’ letter. One hopes it is not completely off the table.

[Edited by Rai Vinaykumar]

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