 "Ola Electric share price dips below issue price; tanks 52% from record high")
Ola Electric Mobility share price dipped 3 per cent to hit a record low of Rs 75.20 on the BSE on Tuesday. Ola Electric share price fell below its issue of Rs 76 on the exchange in today's intraday trade amid heavy volumes.
The share price of the electric vehicles' (EV) manufacturer touched its lowest level since its market debut on August 9, 2024. It has more-than-halved, tanking 52 per cent, from its record high of Rs 157.53 touched on August 20, 2024.
Recent surge in complaints about the company's products and after-sales service has negatively affected the brand image, which can impact the company's volume growth, according to analysts.
The competitive intensity in the EV two-wheeler (2W0 space is increasing, which will weigh on Ola Electric's market share, they said.
At 10:55 AM, Ola Electric was trading 2.8 per cent lower at Rs 75.50 as compared to 0.6 per cent decline in the BSE Sensex. A combined 17.3 million equity shares have, thus far, changed hands on the NSE and BSE.
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Ola Electric is a pure e-2 Wheeler (e2W) original equipment manufacturer (OEM), enjoying a market leadership in the nascent e2W industry. It boasts a tech-focused integrated business model, highest incentives, and ahead-of-the-curve product portfolio expansion.
India is the second largest 2W market globally (by domestic sales volume) with the Indian 2W market constituting 15-20 per cent of the global 2W production in fiscal 2023. Despite having the second largest domestic 2W sales volume, e2W penetration in India is lower than Germany, China, France, Spain, and Ital. This, however, is expected to expand from approximately 5.40 per cent of domestic 2W registrations reported on the VAHAN portal in Fiscal 2024 to 41-56 per cent of domestic 2W sales volume by fiscal 2028.
Analysts remain optimistic about the company's growth prospects, led by EV adoption tailwinds, aggressive model launches at various price points and focus on R&D and vertical integration, which is likely to improve the profitability over the medium-term.
Analysts at Kotak Institutional Equities believe the company is well-positioned to capitalise on the EV opportunity, led by sectoral tailwinds with growing EV penetration in two-wheelers, pure play EV OEM with aggressive model launches along with no risk of cannibalising ICE sales, end-to-end vertical integration (which will aid in margin expansion), and most incentivised player that will help the company be aggressive in pricing to scale up operations.
Despite strong growth prospects, the brokerage believes Ola Electric stock is fairly valued as risks pertaining to market share loss due to growing competitive intensity, and product quality and after-sales service issues remain.
"While we acknowledge all positives are adequately priced in, there remains a risk associated with market share loss, led by growing competitive intensity and execution (spike in complaints about products and after-sales service) and its subsequent impact on brand," analysts at the brokerage said in their coverage initiation report .
The brokerage gave a 'Reduce' rating with a target price of Rs 80 per share. Notably, this fair value is higher than the stock's current market price.
Analysts at Ambit Capital, too, expect Ola Electric's market share to decline to 25 per cent by FY31E (from 42.4 per cent in FY25YTD) as new players enter (Honda and Suzuki in Q4 FY25), other e-2W OEMs expand their product portfolio and reach, and Ola Electric's incentives gets fully utilised. This, coupled with the risk of changes in government policies, heightened competitive intensity and thin profitability in a capex-intensive business model pose risks for Ola Electric, the brokerage firm said in its September month report.