Ola Electric's China import costs surge 37% in FY24 amid rising expenses

IPO-bound Ola Electric's overall material costs in FY24 reached around Rs 4,390 crore, marking a 75% increase from FY23

IPO-bound Ola Electric saw a notable rise in its import costs from China during the financial year 2023-24, despite receiving financial incentives from the Indian government intended to boost local production of electric vehicles and battery cells.

The company’s Red Herring Prospectus reveals that imports from China accounted for 37 per cent of Ola Electric’s total material costs in FY24, up from 19 per cent in the previous financial year. This increase underscores the Bengaluru-based EV manufacturer’s reliance on Chinese suppliers for essential raw materials, according to a report by Moneycontrol.
 

In FY24, Ola Electric’s overall material costs reached around Rs 4,390 crore, marking a 75 per cent increase from FY23. Of this total, imports from China amounted to Rs 1,624 crore. For FY24, imported materials made up 37.03 per cent of the total cost, while domestic materials constituted 62.97 per cent, the report said.
 

The company, set to launch its Rs 6,145.96-crore initial public offering (IPO) on August 2, has credited its recent growth to expanded production capacity and the acquisition of critical components like lithium-ion cells, magnets, amplifiers, and electronic integrated circuits. 
 

These supplies were obtained from various countries including China, Singapore, South Korea, Thailand, and Malaysia. However, the company has reduced its reliance on imports from South Korea, Malaysia, and Thailand, as detailed in the Red Herring Prospectus.

The company’s cost of imports from South Korea dropped significantly from 11.65 per cent in FY23 to just 0.01 per cent in FY24. Similarly, the costs from Malaysia decreased from about 0.08 per cent to 0.02 per cent over the same period, the report added.

During a pre-IPO press meeting on Monday, Ola Electric founder and chairman Bhavish Aggarwal said, “We plan to increase our factory’s localisation especially for our new gigafactory... Overall, we are bringing down our import dependence.”
 

The increase in imports and associated costs highlights the significant dependence of the electric vehicle (EV) industry on China for essential raw materials, such as lithium, crucial for battery production.

In the past, Ola has procured limited amounts of cathode active material (CAM) and anode active material (AAM) from Chinese suppliers for research, experimentation, and testing purposes on a purchase order basis.
 

As Ola transitions to in-house cell manufacturing at its gigafactory, it intends to maintain its supply of these raw materials from Chinese sources.
 

In an official statement, the company said, “As such, we may be exposed to the possibility of product supply disruption and increased costs in the event of changes in the policies, rules and regulations of the Indian or Chinese government, including as a result of any political tensions, which could result in trade tariffs, increased freight charges or prices of CAM and AAM, or a complete halt on imports from China.”