Ola Electric Mobility Limited earnings call

Ladiesandgentlemen, gooddayandwelcometoOlaElectricQ2FY25EarningsConferenceCall. As a reminder, all participants’ lines will be inthelisten-onlymodeandtherewill beanopportunityfor youtoaskquestionsafter thepresentationconcludes. Shouldyouneedassistance during the conference call, please signal an operator by pressing "*" then"0" onatouchtonephone. Pleasenotethat thisconferenceisbeingrecorded. I now hand the conference over to Mr. Abhishek Chauhan fromOla Electric MobilityLimited. Thankyouandall toyouMr. John.

Thank you and good evening to everyone and thank you for joining the EarningsConference Call of Ola Electric Mobility Limited for the 2nd Quarter of Financial Year2025. To begin with, I would like to request Bhavish Aggarwal – Chairman and ManagingDirector. Ola and Harish Abichandani –GroupCFOof theCompanytotakeusthroughthe Results, but we will take5minutesbeforewestart. So, I will giveeveryoneaheadsupandthenwewill start thecall. Good evening once again and thank you everyone for your patience. I hopeyouhavegone through the Shareholders Letter now once again to begin with, I would like torequest Bhavish Aggarwal – Chairman and Managing Director of Electric, and HarishAbichandani – Group CFO of the company to take you through the Results. Over toBhavishandHarish.

Hi everybody. Good to speak again after a quarter and this is this is Bhavish. This ispractically I think our first quarter in the public markets that we are giving you anupdateon. Beforethat actuallyinthelast quarter wehaddonetheIPOandinjust threedays after that, we had quarterly results. We have also changed our format of howweare updating all of you. We have also changed the way some financial metrics arebeing told or more around howindustry standards areonrevenue, etc. I amassumingmost of you would have gone through the Shareholders’ Letter that we have tried tocaptureall thefinancialsandsomeoperatingcommentaryalsoinit. What I will do is I will just give you some highlights and my remarks will beveryshortandthenwewill get intoquestionsdirectly. This quarter actually has been a good quarter compared to last year. If you see ourrevenues have grown about 40% over last year - 38.5%. Deliveries also almosttouching 1 lakhs (+98,000) and gross margin, especially for theautosegment is20.6%which is flat quarter-on-quarter whereas year-on-year it's about 12pointsupandthisis Page2of 19 despite the muchmoreenhancedcompetitivedynamicsintheindustry, whichI will talkabout inmyremarks. The key highlights for us in Q2 have been that we have maintained our marketleadership. Our market share is around 33% and this is also a quarter wherecompetitiveactiongot aggressive, andwewill comment abit onthat. One key area of focus for usgoingforwardonthemarket istoexpanddistribution. Wehave about 780 odd stores right now. And we are in the process of expanding thecompany-ownedstorestoabout 2000byMarch, whichisjust about four monthsaway. And in addition, we have also in September launched our Network Partner Programunder which third parties like multi-brand outlets, other people who are alreadyintheauto ecosystem from a retail perspective, can also sell our products. We have about1000 such partners live with our products now. The front-end distribution is a is animportant focus. Wecontinuetoscale. And asyouwill findinthedocument, for useachstoredoesalmost about 130salesperquarter. And that's almost 2x to 3x of industry average. So, we have much higherproductivity per store than theindustryandweareexpandingour storenetworksoweactually hope that we will be fairly competitive in terms of depth of distribution withabout 2000 stores of ours. Inadditiontothat theNetworkPartner Programwill amplifythedistributionnetwork. Second, I think more ontheindustrycommentary–for afewquarterstherehavebeenquestionsthat howisEVpenetrationdoing? Now actually if you see this quarter and even then after that October last month, wehave seen EVpenetration start to hit a bit of an inflection point, especially if you seethe Scooter EVpenetration because whenyouseeoverall it kindof getsaveragedoutduetothemotorbikes. But whenyouseeScooter EVpenetrationinJunetoSeptemberthis year itself it's gone from 16% to 21.5%. And even from September last year toSeptember this year, it's gone from 13.5% to 21.5%. Avery significant increase in EVpenetration despite the FAME subsidies and all tapering off significantly. We believethat the EV scooter penetration is actually at an inflection point now. And if you alsolook at it regionally, many states like Rajasthan, UP, Maharashtra, the big states arearound between 30%to 45%EVscooter penetration. Infact, Rajasthanisactually47%so this showswhilesomestatesareracingahead, eventuallyall stateswill get here. It'sa question of just adding distribution. So, that's a very good encouraging sign in theindustry. Page3of 19 And in many ways, while on a daily, monthly level, there's a lot of operatingnoise, thefundamentals of the EVtransition of Indiaremainverystrong. Andastheleader of thattransition, weactuallyfeel veryconfident of thisinflectionpoint. Another point which played out in this quarter isaswehadlaunchedour Massmarketportfolio a couple of quarters back, thisquarter iswhereit reallycameintoitsown. Wewere able to supply at almost full demand. Quarter-on-quarter our Mass marketproducts, the S1X portfolio, grew 15% and despite the growth in Mass market, ourPremium market products continue to be a majority of our revenues. We have a verygoodbalancebetweenthetwoproducts. And another point you will find in our Shareholders’ Letter as you read deeper wouldbe that our margin profiles across both Mass and Premium are actually not verydifferent because it's built-off platform architecture, so we are very easily able tocontrol some costs as we go down the Mass ladder and hence make similar grossmargins. Then I want to reiterate our strategy, which we have been consistently following overthe last couple of years or ever since we started this company. And every quarter Iwould like to give you guys an update on howour strategy is progressing. There arethreekeyelementsof our strategy: 1. Firstly, broadeningour product portfolio. Inthescooter segment anyways, wehavethe most largest product portfolio. With six scooters from Rs. 75,000 to Rs. 1.5lakhs and in August this year, whichisinQ2, welaunchedour motorbikeportfolio,especially the Roadster portfolio, and the first bike is on track for deliveries nextquarter. So, weareontrackwithour motorcyclelaunchandexecutionanddeliveryroadmap.● In addition to just the Roadster series, we also announced a bunch of othermotorcycleproductswhichwill comeout throughthenext year or two. Aswellas the Gen 3 platformon top of whichmorescooter productswill becoming,and you will see a chart in the Shareholders’ Letter where it shows you justthetimeviewonsomeof theseproducts.● There has been some media speculation in the past about us working on3-Wheelers. So, yes, we are building 3-Wheelers. The beauty is that it sharesthe same platform as our S1 in terms of electronics, battery architecture,powertrain, only the mechanicals are different. So, you see the 3-Wheelersproduct roadmapalsointhat chart.● So, net-net, very strong product line up over the next twoyears, almost (+20)products to be coming over the next two years. And more than actually oneper quarter. So, we are quite excited and starting next quarter itself, we willstart seeingalot of product rolloutsfromusacrosscategories. Page4of 19 ● So, that's strategy #1, whichisbroadeningour product portfoliosothat theEVtransition, EVevolution can be more broad based across the 2-Wheeler and3-WheelersindustryinIndia.2. The second strategy for us is to continue to expand our distribution and servicenetwork. And like I mentioned in a previous point today that we are growing to2000 stores. We already have 1000 network partner stores, and we will increasethat also by March. So, net-net by March, we will have more than 3000 retailpoints. 2000 or ours and a minimum of 1000 of network partners. Now thesestoresfor usasyouknowareco-locatedwithserviceinfrastructure.● So, as we are expanding our sales network, our service network is alsogetting expanded. Over the last quarter or so, especiallyinQ2, wehadabit of a capacity challenge in service. Our sales have expanded muchfaster than we had expanded our service network. But I would like toinformeverybodythat almost all of thebacklogthat wastherebecauseofthe capacity issue has been solved now. And we have added capacityalso as well as we have as one-time solved almost all of the backlogmorethan90%-95%.● And now in service our T + 1 service which is like say you give yourvehicle to me toservicetodayeither todayor next dayI returnit toyouisalmost 80%whichismoreor lessat industrystandard.● We are continuing to expand both sales and service infrastructure. Wehave invested very solidly as well as deeply into the back-end of thebusiness, which is the factory, manufacturing vertical integration. Wearenow focused on really expanding our distribution to be as close to thecustomer in both sales and service as we can be. So, that's strategy #2and in the Letter you will also see some maps and howthe network isdensifyingalready.3. The 3rd and most important in my view, is the continuing focus on technologyinnovation and vertical integration. So, in August this year, again just two monthsback, wehadannouncedour Gen3platform. Now, asyouall might remember, andsince you all trackthecompanyclosely, Gen2over Gen1 hadsavedabout 20%ofBOMcost and hence gross margin for us. NowGen 3over Gen2will beasimilarsaving, andI amactuallyveryhappytoannouncethat whilewehadsaidGen3willcome out in August next year, we are now bringing out Gen 3 products twomonths fromnow, which is January. So, the S1 scootersontheGen3platformwillbe coming out in January and then through the year the whole 20% of marginsavings will be step-by-step coming in. So, some savings will come in in Januaryandthenmanymoreeveryquarter asall of theGen3technologiescomeintoplay.So, that's a very good highlight. Our engineering teams and the manufacturingteams have really executed well to bring in very significantly from August toJanuaryour timelineonGen3. Page5of 19 So, threestrategieslikeI said: #1. Thebroadproduct portfolio. #2. Verylargedistribution, companyownedaswell aspartner. #3. Continuingfocusontechnologyinnovationandvertical integration. And finally on the vertical integration point, I wouldliketosharewithall of youthat ourcell project continues well on track. There's a program timeline in the Shareholders’Letter that you can refer to. We are on track for starting commercial production in Q1FY26 This quarter our testing as well as our trial production continuing toberampingup. We are seeing goodimprovementsinprocessaccuracy, inyield, etc. Thereisstill ajourneytogo. Wearebeingveryrigorousintermsof testingandprocessqualityfor thecell, so that'swhyQ1 isthetimelinewhereit will get commercial productionstartedandthen there are some images and videos for you to refer to on howthe Gigafactory isshapingupaswell assomeproductsthat wehave. AveryquickcommentaryonfinancialsandthenI will openit upfor Q&A. On financials, you can see year-on-year gross margins have improved significantly,EBITDAmarginshaveimprovedsignificantly. Quarter-on-quarter our grossmarginsareflat. Nowwehavehad3%-point improvementin gross margins due to BOM cost savings due to our vertical integration andtechnology. Part of that which is about 1%point we have invested backintodiscountsto growand then 1.5%points is actually a one-time timing issue onPLI Certificationofour newS1Xproducts. All of which is nowdonesothisquarter Q3wehavethefull PLIrecognitionfor theS1Xportfolioalso. And a general commentary I want to give on gross margins looking ahead also isbecause we have also pulled in Gen3andinadditiontoGen3, wehavebeendoingalot of other technology and manufacturing integration work. We can expect to seealmost every quarter a continuous improvement on gross margins, right. And part ofthe margins we will keep improving the bottom line. Part of it, we will invest intogrowingthemarket or competingwiththeaggressivecompetition. And our own estimates, we have we haveachart theretowardsPage#8I thinkwhereyou can see how our cost structure in our own estimates versus competition’s coststructure. These are two incumbent competition where we have about a 20%advantage on just BOM cost for a better featured product. Nowthis advantage onlygetsstronger becauseof our technologyandvertical integration. Page6of 19 Just to summarize this point, so in terms of gross margin, we expect about a20pointimprovement asGen3playsout over thenext 12monthsstep-by-step. Andthenasourown cell comes in, that's another 7-8 points of gross margin improvement so you cansee a nice start at the end on how even without incentives, our gross margins arelooking like at a target level. That's a steady state focus we are buildingtowardsthat.Andeveryquarter youcanexpect toseegrossmarginimprovementsfromus. Nowin addition to the grossmarginonfinancials, I alsowant tocomment onEBITDAalittle. Nowon EBITDA, there havebeensomeone-offexpenses. If youexcludethat ouroperating expenses are actually flat or slightly1%lower quarter-on-quarter. Andwearefocused on some cost efficiencies, and we do expect our operating expenses toactually be flat or maybe slightly lower over the next couple of quarters. As wecontinue to scale distribution and hence revenue and including product portfolio, sorevenue keeps growing and operating expenses will largely be flat or probably evendownover thenext coupleof quarters. In terms of one-off expenses, there isonewarrantyexpensethat wehavetakeninthisquarter. Now, in FY24, our warranty as a percentage of revenuewasabout 5.5%. Nowfor this year in the last quarter, we are accruing about I think 2.5% of revenue as awarranty. We are still waiting for our estimation model to stabilize. There are someone-time expenses in the warranty due to this backlog, but over the next couple ofquarters, we will stabilizethisandif weneedtoincreaseprovisions, wewill but broadlythrough the year, I expect the warranty to be at or lower than last year's number of5.6%. So. that's broadly the commentary and now I will actually let you guys ask yourquestions.

Thank you very much. We will now begin the question-and-answer session. The firstquestion is from the line of Chandramouli Muthiya with Goldman Sachs. Please goahead.

My first question is just around someof theone-offthat Bhavishspokeabout just now.So, there seems to be a pick-up inbothother expensesandwagesquarter-on-quarterin spite of having flattish or slightly better gross margin performancequarter-on-quarter. So, just trying to understand around the IPO, were there anyflotation costs, were there any appraisal costs and also if youcouldsizeout maybein,in rupees crores, what thoseexpenseswereandalsojust thewarrantyone-offthat youmight havetakenthisquarter, what thesizeof that wouldbe?

Sure, Chandra, I will take a first attempt and then maybe Harish can add somespecifics. So, there were actually two or three one-off costs. Obviously, there was an Page7of 19 IPOlinked cost. Then therewasthisannual launchevent that wedo. Thereweresomecosts linkedtothat. Andthenthirdly, obviouslyour annual appraisal whichhappenedinthis quarter. So, all included I think these three added up toabout Rs. 36crores. Thenin addition, thewarrantywastheone-offthat wedidwasabout Rs. 64crores. AndlikeIsaid, I think my commentary on that is we are provisioning 2.5%of revenue. Over thenext coupleof quarters, wewill watchthat. Last year, likeI said, thewarrantywasabout5.6%. We do expect the warranty tobelower thanlast year acrossthisyear if weneedtoincreaseour provisionsafter aquarter or sowemight dothat.

Second question is just around the motorcycle launches you mentioned, we will startnext quarter. I amjust trying to understand we have done the launch in August so dowe have any order backlogcolor or anysort of demandcolor that weareabletosharearoundtheRoadster portfoliowhichmight start gettingdeliveredintheMarchquarter?

The Roadster series has generated a lot of interest andtherearethreeproductsthere– the Roadster. X, the Roadster, and the Roadster Pro. And these three are coming insequence. The first Roadster Xis coming, most likelyaroundtheMarchtimeline. ThenRoadster will happen most likely around the May timeline. And then Roadster Protowards the end of the year. Now interest is very high. Today I won't be sharing anyspecifics around reservations or ordersandall, bythetimethenext call comesaround,I will definitely share that. But there has been very significant interest onsocial media,on our stores, on our website for really understanding about this product as well asalot of peoplebookingreservationsfor this.

And my last question is just on the points that you made around efforts to bridge theservice network gaps. So, there are a lot of numbers floating around. I thinktherearesome press articles which have spoken about 85,000 to 90,000 incoming servicerequests per month. I think our installed base of vehicles is close to 8,00,000 to8,50,000 vehiclesat thisstage, soif youcouldjust giveussomeclarityonwhat aretherunratesthat wehaveonamonthlyincomingvehicleservicerequest.

There are a lot of numbers floating around. So, even if you take the 80,000 numberfromthe press so if you think of any typical OEMproduct, it hasonetotwoscheduledmaintenance per year, right? So, if you have, let's say 1 million install base, that's 1.5million to 2 million service touch points per year now, that makes it about 1.25 lakh amonth, right? So, and then in these 80,000 are not all complaints or issues with theproduct. Many of them are regular check-ins. The customer scheduled maintenance,more than 2/3 are actually just minor labor things. Something feels loose, or the guyactually doesn't understand how his software works, so he comes in and then weexplain to him. More than 2/3 are actually aroundthesekindof minor issueswherenopart is actually changed. Thentherearesomewherethereareaccident caseswhichisnothing to do with the product. And then there are some which are product warranty Page8of 19 cases, right? So, between these three, 80,000 number per month is not bad for an 8lakhsunit inoperationif youassumealot of it isjust scheduledor minor queries.

Thank you. Thenext questionisfromthelineof GunjanPrithyani withBankof America.Pleasegoahead.

Bhavish I just wanted to go back to the point that you madeinitiallythat EVsareat aninflection and market is growing. WhenI lookat thenumbersfor Ola, of coursethisisabusiness in nascent stages I would ideally think that the base of volume sold everyquarter should consistently go up, right? So, when I look at Quarter 2 volumesclearlyPremiumis something which is almost half fromlast quarter level. And I amjust tryingto understand, is it more to do with our focus on Mass expansion just the numberQuarter 1 to Quarter 2volumegoingdownissomethingthat if youcanexplainhowarewe approaching that because this is an expansion market, right? It is a very nascentmarket at thispoint of time.

See for usfor seasonal aswell assomeregulatoryreasonsQ2hasalwaysbeenabit ofa dip over Q1. So, if youseeFY24alsoQ2wasadipover Q1 andFY25, alsoQ2isabitof a dip over Q1. Now there is a seasonality also in the industry and also generallywhatever FAME reductionsthegovernment doesisaroundthestart of Q1 or theendofQ1 last two years that's been happening. So, what happened in Q1 FY25 was a lot ofthe deliveries which were there because March end was the FAME changeover. So, alot of customers hadorderedinMarchandthedeliverieshappenedininQ1. But henceI would actually say you should look at more broader time horizon where actuallyournumbers are going up. Like we had said, we sold more than 50,000 vehicles inOctober. Even this month, we are seeing a good growing traction. So, I feel ingeneralpenetration is going up, and our position remains strong. We do have to expanddistribution that's a very clear focus for us but quarter-on-quarter, you should seegrowthover thenext fewquarters. Q2over Q1, isalwaysabit of anoutlier.

The better way to look at it is just look at first half over first half, is that the way weshouldcontinuetoexpect likeat least 25%to30%growthonthebaseof volume?

See my expectation would be, we would year-on-year aim to grow around (+50%).That's our aim. Somequartersit might bemoresomequartersit might beless. So, nowwithin there is obviously seasonality. So, Q3will alwaysbeagoodseason, Q2will bealittle weaker season. I amsure you will apply the seasonality discount whenever youlook at it quarter-on-quarter. The other comment Gunjan was from you on Premiumversus Mass. So, Mass has obviously helped increase penetration. Our focus is to letboth of our portfolios – Premium and Mass grow in the market. We are not reallyworried about cost cannibalization since gross margins are broadly similar andPremium like I mentioned also makes just about 52% of our revenue overall so the Page9of 19 majorityof our revenuecomesfromPremium. Nowlookingaheadalsoevenafter Q2inOctober, we havehadthegenerallysimilar ratios. ThePremiumcontinuestoalsogrow,whileMassisreallytheonegrowingsignificantly.

The other thing that I wanted to get your thoughts on these regular schemes. Nowwhenever particularly BOSS when it got launched it just tends to create a lot ofnervousness aroundhowyouarethinkingabout themarginsbecausetheseareclearlyvery high discount schemes, right. So, how should we think about these recurringschemes coming back tothemarket andthenwearesort of gettingnervousabout isitchase for market share, how should we think about margin if you can share yourthoughtsonthisaswell please?

Absolutely Gunjan. So, our directional commentary on this is we will balancebetweengrowth and profitability. But given the balance, gross margins will continuetoimprovequarter-on-quarter because you saw, even in Q2 over Q1, despite the additionaldiscounts inQ2, wehaddiscountsaroundour Sankalpevent, wehaddiscountsaroundour IPO period, and we had discounts in September a little bit. So, despite morediscounts in Q2, we still kind of hadaflat grossmargin. So, likeI said, 3%went updueto BOMcost reduction and 1%we invested back into pricing and discount. NowinQ3also while we are investing into discounts, our general direction would be thatquarter-on-quarter gross margin will incrementally go up only. So, weareseeingBOMcost savings. Even while Gen 3 will come in next quarter, thereareother lot of verticalintegration activities that are playing out which continue to every monthactuallykeepimproving our BOMcost andhenceimprovinggrossmarginsandthensomeof that wekeep investing into pricing and discounts. Our strategyistocontinuetogunfor strongpenetration and market leadership and likeI said, wehaveaverysignificant BOMcostadvantage over competition, which is only increasing. So, while we areinvestingfromour margins, I think at somepoint competitionwill actuallyhavetoseehowtheyinvestfrombalance sheet versustheir grossmarginsfromthisproduct. So, tosummarize, youcanexpect increasinggrossmarginsdespitethediscounts.

And is it fair to assume that the savings that you will get fromtheGen3aswell asthebattery vertical integration, around 25 is I think what you have quantified at least 30%to 40% of that goes in terms of reinvesting in terms making the pricing better,enhancingtheadoptionisthat abroader wayfromamid-termperspectivetothinkof it.

Our focus is to have a gross margin of about (+/-30%), right? And that'swheretheICEindustry also broadly operates. So, at that level with a much more efficient front-enddue to the B2C nature of it, we actually believe our EBITDA margins will be in themid-teens at a certain volumescale. Right now, wearealmost at that volumescaleandthat's why quarter-on-quarter youseearesegment EBITDAinthenegativesingledigitsroughly. So, if there is a higher competitive intensity in the quarter, we might invest a Page10of 19 little bit more, but wewill keepfocusingongrowingtheheadroomonthegrossmarginso that we can invest out of gross margin. So, so that's the overall direction I wouldshare.

ThirtybywhenBhavish, isthereatimelinearoundthat?

No, not a timeline, but specifically if youseeGen3likeI saidisstartingJanuary, not allsavings will be in January, but as all the ideas on January roll out through the nextcalendar year, we will get about 20pointssavingsfromtoday'sgrossmargin. Andthenon top of that, the cell startsinQ1 FY'26, again, not all of our vehicleswill start withourown cell on day one, but there will be a 1-2 year period when step-by-step differentvehicles will come on to our own step. So, that's a step-by-step journey. It will take acouple of years, and I am not giving any timeline on it. And also there is an openmarket dynamic which as market competitive dynamics evolve we have thewherewithal to continue to be aggressive while maintaining a certain level ofprofitability.

Harish, I think I just want to get a sense on what part of the portfolio got PLI in thisquarter, maybeif youcanquantifythat asapercentageof revenueinQ2?

So, on the PLI front, last year we got our Air PLI certifiedandProcertifiedinFebruary.And in this quarter, the entire X portfolio, 2, 3, 4, we all got PLI certified during thecourse of the quarter, three of themhappened in August and oneor twohappenedinSeptember. So, as of nowthis quarter we will haveobviouslytheentirePLI andacrossthefourthquarter.

I think in Q2 there was about a 5% as PLI. So, PLI is about 5%of revenue, which isaccountedfor inthegrossmargins.

The next question comes from the line of Yogesh Agarwal from HSBC. Please goahead.

Couple of questions. Bhavish, firstly on Gen 1 versus Gen 2 and Gen3, youtalkaboutcost advantage, but what's your views on general quality improvement, were younegatively surprised with Gen 2 issues and are there any learnings when the Gen 3comes, areyouexpectinglower issues, sowhat areyour viewsonthat?

If you think of our product quality, our product quality isactuallyintermsof number ofdefects per hundred vehicles or amount of warrantyreplacements, etc., broadlyinlinewith industry within India and even globally. Gen 2 is actually better thanGen1. That'swhy I said in FY'24 we had a certainwarrantycost, inFY'25wewill haveslightlylowerthan that and that'sbecauseof theGen2transition. InGen3, wehavealsofocusedon further makingmanyreliability, quality, serviceabilityimprovementsintheproduct, fairlysignificant ones actually. For example, onethingthehubmotor isactuallyaveryhigherprone to quality issues. So, we're actually in Gen 3 moving to a complete mid mountmotor across the platform which actually helps reduce cost also as well as helpsimprove quality significantly. There's almost a factor of 10just inthemotor qualityoverthere. So, many such things which have helped improve quality in Gen 2 and thenfurther inGen. 3. So, wedoexpect afurther reductioninwarrantycostsonGen2.

And thentheother thingis, just curioustoknowyour viewsonthelong-termbrandandthe product positioning strategy, the ASPs have been falling, right, andit'sprobablyinline with your COGS, but wearestill fallinginthelast manyquartersnowandthisisledby all these flat, discounting andmassmarket products. Andwehaveseeninthepast,once you go down that curve, it's very tough to upgrade the portfolio as well. So, isitsomethingyouworryyour volumesandcost of that amount here?

See, we think of firstly product and then volumes and brand isanoutcomeof productexperience of the ownership experience and obviously at thescaleat whichyoudoit.So, that's howwe think of this. See, our premiumproductsareholdingverygood. Ourmarket share in the premium, let's say the S1 Pro or the S1 Air segment is fairly high,and even the product is much better than what anybody has beenabletobuildsofarin competition and there are very strong loyalist customers, many of them havebrought multiple S1 Pro, S1 Air, etc., So, I personally don't worryabout thebrandgoingdown. One of the reasons for ASPisgoingdownandASPisactuallyprobablyawrongproxytothinkof intermsof brandbecauseASPisgoingdownfor tworeasons; oneisamix which you rightlysaid; secondisactuallyjust asFAMEisreducingover thelast twoyears that FAME has come out of revenue. So, for the whole EVindustryFAMEwouldbefallingandhenceASPswouldbefalling.

Thenext questionisfromthelineof Rishi VorawithKotakSecurities. Pleasegoahead.

Just onthemassmarket portfolio, right?Obviouslyonasequential basis, wehaveseena double digit volume growth. But now, given that wherever pricing is versus the ICEscooters, when will that next leg of growth as per you will come through because Ithink our models are there in the market for last two, three quarters. So, what isstopping the customers to now shift from ICE to EVs even now the upfront cost ismaybesimilar or inlower insomecases?

So, Rishi, like I mentioned in my opening remarks, we actually believe there is a EVpenetration inflection that ishappeningalreadyinthescooter industry. Thereweretwoor three key drivers for this and manyof themhavecomeinplaceover thelast coupleof quarters and some still have to be done over the next couple of quarters. Firstly,purchase price parity. Nowthat isall donemoreor lessespeciallyfor our portfolio, and Page12of 19 a better cost of ownership for EVs with the purchase price parity is a very compellingproposition and customers are starting to recognize that. Second is distributionpenetration. Now, while we have 800 stores or so, competition is nowsellinginmorestores, about 3,000 to 4,000 each of them tell in their analyst commentary. But ourstores sell much morebecausewehavethebest product at thebest price. Now, asweexpand our stores to 2,000, we actually believe we will be much closer to customersfor them to truly experience the best EV product and at the best price and the bestoverall package. So, that's #2. And third is also the expansion of the serviceinfrastructure for us. Service infrastructure in EVis also not just anOlaproblem, it'sanindustry problem because training the mechanics in EV, EV battery maintenance,motors, electronics, software, all these are newthings. So, we are investingeffort intodoing this, which I believe is probably the last leg of confidence the customer needs.We don't see any major concerns or questions around charging in this ecosystembecause 2-Wheelers arenot verydependent onpubliccharging. All of thesethingsarecoming together. In many states, for example, I told Rajasthan, actually, Rajasthan has47%EVscooter penetration, and thisisbasisour estimatesof thescooterizationof theRajasthan market. UP. Madhya Pradesh are around I think 35%-odd, Maharashtra,Karnataka around 25%, 30%. But these are the states which are large enough statesand yet have high scooter EVpenetration and this penetration hasactuallyhappenedin the last 6 to 9 months as our mass market portfolio has come on. So, as nowwehave almost a million units in operations, 8.5 lakh or so, more peopleareseeingtheirfriends, so more people are getting more confident. So, it's a matter of again just allthese things falling in place and these all-different themesactuallycompoundoneachother, right? So, that's where you are seeing already an inflection in EVpenetration. Ihave a chart in my shareholder Letter on page 5. If you see it'll showyou howin thelast one year we have grown, the industry has grown EV penetration despite in thesame time FAME subsidies falling from almost 60,000 to 10,000. It just shows howindustryandthepenetrationhasgrown.

Just on the premium portfolio, right? Well, I do understand the seasonality part, buteven on a YoYbasis our volumes are down 26%and this is despite I thinkour pricingbeing lower than what it was a year back. So, istheresomethingwhichweneedtobeconcerned about or is something which youthinkisaveryquarterlyphenomenonthatshouldstart normalizinginthesubsequent quarters?

This isaquarterlyphenomenon. I wouldn't betooconcernedabout it. Therewill alwaysbe some cannibalization when we launch mass products which we have. From ourvantage point, likeI said, mycommentarytoall of youwouldalsobethat, don't assumemass products have lower margin. That's why if you see even though the ratio in Q1FY'25 and Q2 FY'25 has changed, yet the gross margin is actually flat. And that'sbecausebroadlythegrossmarginsareinthesamezonefor usbroadlyfewpointshere Page13of 19 and there. For usmanycustomerswerebuyingpremiumEVsearlier, but theywantedaproduct for TCO. So, nowthere's mass market products for them. But parallellywhat'salso happening is many customers who are buying let's say 125to150CCmotorbikes,slightly mid-market motorbikes are actually buying the premium EV scooters now,because better performance, better torque, better functionality of a scooter versus amotorbike in urban areas. So, there are many market dynamicswhichareveryhardtoforecast beyond a point and that's why our strategy and effort is to just let theseproducts be in the market, there will be some cannibalization, the premiumportfoliowill do of motorbikes, some it will growwithinthepremiumscooter segment, themassof scooters will cannibalize our premium, but the mass will also much largelycannibalize the ICE scooters actually and even actually the mass is cannibalizing theICEmotorbikesegment wewerelookingat somedata.

And just the last question is on the distribution side, right. Before our IPO, ourexperience centers were at I think around935, currentlyweareat 782andinour RHPwe had guided that we will have 300 experience centers by FY'26. Why there is achangeinstrategiesmorebecauseof pressuresor isthis-?

See, the 900 to 780-odd was just some real estate which was not performing, weremoved that and then we consolidated our stores into the performing ones and allthese stores are performing well, like I said, the average isabout 130-oddper quarter,which is 2 to 3 times the industry average. Now, when we were planning ourexpansion, we actually had initially thought we will do more incrementally, a fewhundred, but we're now seeing that the EV penetration is actually at this inflectionpoint. So, we nowactually want to go deep into many markets. For example, let'ssaywhile in urban centers, we haveenoughstores, but let'ssayinacitylikeBangalorewehave about 25, 30 stores, whereas an incumbent 2-Wheeler company might have 70,80 100 stores. So, we will do some densification. We don't needtobe1:1 becauseourproductivity per store is much higher. And then even if you think of other tier 2 cities,let's take my hometown, Ludhiana, the whole district, we have only about one to twostores in the wholedistrict, anincumbent ICEcompanywill haveabout 7to10storesinthe whole district. So, there are places where the closest OLAstore is about 50, 60kilometers away, yet these are towns with a 1-2 lakh population, there is enough2-Wheeler cells over there. Andasour motorbikesarealsocomingin, wefeel wehavethe product portfolio to nowgo into up country in terms of distribution. So, that's theoverall thinking and hence we decided to allocate some more capital to a fasterexpansion.

The next question is from the line of Jinesh Gandhi from Ambit Capital. Please goahead. Page14of 19

Couple of questions frommy side. One is we have talked about 20 percentage pointreduction in cost due to Gen. 3. Would it be possible to get somebreakdownhowdowecometothat 20%number, wherearethesavingscomingfromwithintheGen. 3?

Jinesh, there's actually a very nice video in the Shareholders’ Letter which maybeoffline, you can see if you haven't seen already, it'll give you a very good conceptualarchitecture of the Gen 3 platform, but somehighlightsare, we'redoingrearchitectureof the motor platform which reduces cost, increases power density. We're doingrearchitecture of the electronics platform to lower the number of ECUs into smaller,largelyasingleboard, we'redoingsomeverycool workonbatteryasastructurewhichtakes away some layers of plastic, we're doing some veryinterestingworkonthewaythe mechanicals, the fabrication of the vehicle happens in the factory, which reducesthe manufacturing cost, we're doing more automation in thefactory, we'redoingmorevertical integration, some things which we were outsourced to suppliers like forexample, the motor tier twos, we might bring some of those things also into our ownmanufacturing, becauseweseeaveryquickreturnoncapital onthosethings. So, all ofthese added up, get you the 20% savings. More specifics we won't be sharing eachidea, but you can assume each of these broad categoriesof mechanicals, electronics,powertrain, etc., all of themaddup.

And effectively by next quarter 3Qour PLI should go up from5%to 14%given all ourproducts have beenapprovedwhicharethereinthemarket today. Isthat theright waytothinkabout PLI?

See, theentirequarter wewill havePLI accrual for all theproductsinQ3andQ4. Thereis also slabs in PLI likeactuallycangohigher than13%basedonwhichslabyouareonthetopline, etc., So, I thinkbut minimum13%ontheproduct isgiven.

With respect to the cell manufacturing, which will come from 1Q FY26, what kind ofsavings doweexpect, I mean, whereareweintermsof our current cell cost, whichhasbeen imported and what would be the cost of manufacturing for us for the upcomingcells?

See, on cell, I will actually comment first on the segment P&L because you'll have tolook at the cell segment P&L differentlyandtheautomotivesegment P&Ldifferentlyatthat point. But if I give you right nowa consolidated number, see, the cell at a grossmargin level will be much more profitable on day one versus procuring fromoutside,but there will be some costs we will beincurringfor scale, whichwewill growintothatas the cell production scale. So, roughlyabout 5GwHiswhenour owncell productionwill be much cheaper than procuring fromoutside. Andthat'stheseventoeight pointsof savingsfurther. So, that will happenbythetimeweget tobetween3to5GwH. Page15of 19

Lastly, canyoutalkabout theCAPEXplanfor FY'25andFY'26?

So, on the CAPEX plan, what we have also highlighted in our book and continue toengage on that is that a), there is a cell project which is currently happening. You willnote that we have completed 1A, 1B's in progress, thenthat will befollowedbyscalingup from 5 GwH onwards, for which around 1,200 crores as we already raised in theIPO. That's the current road map fromnowfor FY'25 and FY'26 and then beyondfivelater. The auto side, there is obviouslynewproduct launchwhicharehappeningat themotorcycles and the 3-Wheelers we spoke about. That will require a certain level ofCAPEX followed by capacity expansion from a current 1 million onwards to 2 million.These are the largely broad buckets of CAPEXiswheretheinvestment will gointothecomingcoupleof years.

If I add to that, Harish, on the product development CAPEX, therearetwothings. Oneis factory expansion and the second is actually the R&D or the investments on thetooling, etc., which is more on the product things. Since thefactoryisalreadybuilt outfor much larger scale, factory expansion CAPEX will not be similar to what we havedone so far. So, that will be much more tapered down even as we increase volumes.But for each newproduct we build, there will be some capital expenseacrosstoolingandtestingandsomehomologation, etc.,

So, first half we invested roughly about 280 crores, there should be close to 800 to1,000croresgiventhat investment will alsoculminateintermsof thecashflowcell?

On the cell side, theroughmathisroughlyaroundUSD45toUSD50millionper GwH,it continues to taper downaswescaleup, andinthegoingupfrom1Bproject itself wehave got around 1,800 crores of debt facility from SBI and already invested our400-odd crores that takes us tofiveandthenbeyond. So, that'stheroughmathonthecell side.

The next questioncomesfromthelineof PramodAmtewithInCredEquities. Pleasegoahead.

So, first question is with regard to your grouppresence. Lookingat youareexpandingfromscooter to motorcycles and if I lookat your peerswhereyouhadanadvantageofproduct launch earlier in scooters versus motorcycle, do you see financing as a bigenabler for EVs, andinthat context, doesit makesensetohavecaptivefinancing?

See, financing is a very important thing for 2-Wheeler customers. But even if youlookat our scooter financing percentage, it'sI thinkintheearly60spercentageof productsbeing financed. It doesn't feel like it'saconstraint for penetrationright now. Banksandall areverycomfortablelendingtoEVsnowcomparedtothreeyearsago. Andwehave Page16of 19 our group company, Ola Financial Services, whichdistributestheloan. Wekeepaverylarge part of the margin. So, in that sense, we are actually generating margin withoutusing any balance sheet. So, we are able to monetize some of the lending andinsurancecommissionswithout havingtodeployour balancesheet.

And what proportion of your sales are funded through this entity, right, if you canjustsupport it?

There's no funding of sales. This entity is also just a platform. This entity doesn't takeany balance sheet also. It's just banks like IDFC, HDFC, Axisor other NBFCswhichdotheloansactually.

And the second one is with regard to the pricing action in the EVspace. Consideringthat you come from a completely different background as compared to a typicalautomaker who are very sacrosanct about thesellingpriceandthewaythebrandsarepositioned, sohowdoyoulookat aproduct -- isit morelikeaconsumer durablewherethe price points are very drastically to make it more affordable at any given point oftime? Second, where you can play around with a muchwider scopeof variantsandalltokeeptheconsumer excitement alive?

Interestingquestion. See, onpricing, if youlookat current -

Intermsof pricing, right, thewayconventional autosaredesigned, similarly–

So, we think very first principles about these things. So, we think of a pricing basiswhatever is required for penetration as well as whatever our margin structure canafford us. I don't believe the modern customer really holds a brand and pricinginterplay. Brand is built by product, not by pricing. And if you think of the currentcontext also with competitive pricing actions, I actually feel these competitors, they'renot goingtobeabletosustainthesedeepdiscountsastheindustryscalesupbecausethey don't have the margin structure and then you guys are all the smart people onunderstanding their margins. So, I just don't feel they have the vertically integratedmanufacturing for EVs or technology capability to truly sustain some of theseat scale,whereas we have really deeply invested in those. So, that gives us the ability topriceaggressively, andwewill alwayscontinuetobemoreinnovativeonpricing.

But do you feel it's more inclinedastheEVspaceevolvesinIndiatoo, likegloballythepricingcan't besacrosanct consideringtechnologycurveisverysteep, right?

See, I don't think pricing and brand are linked. I think product and brand are linked.That'sthequestion. Page17of 19

But does technology alsoplayasubstantial role, right, whenyoulookat costingversuspricing?

Absolutely. 100%. See, the reason we are able to growour margins, and all the whilealso pass on some benefit to consumers is because all of this is through technologydevelopment. Technologyenablesbetter marginsbecauseit bringscost down.

The third question is with regard to the cell plant. What is the update in terms oftechnology development drive process and how far you have gone in terms ofstabilizationof thesameif youcanupdate?

Our cell process has actually evolved a lot. There are two steps in the cell process.First is in the lab, we call that the R&Dstep. Second is in the factory, we call that themanufacturingprocessvalidationstep. So, our R&Dandlinkcertificationswereall donelast quarter itself. And since over the last I think three to four months, we have beenfocusing on the factory process stabilization, now we have developed both Wet andDry electrodes, the Dry isabit of amoonshot, wehaveverygoodprogressontheDryelectrode also. The Dry electrode will be cheaper than theWet electrode, but our Wetelectrode also is actually fairly advanced and if you recall, maybe if wespokeearlier, Iwould have shared that the first cell, actually the generation one cell that wedeveloped was the Wet electrode cell and then we continued to evolve the Wetelectrode technology for us as well as we added our Dry electrode asanExperiment.So, we have both options. Wet is obviously very mature. We have that cell systemready, the giga factory is being tested, all productionsystemsyoucanseeimageof allthese, the mixing, the electrode formation, the cell assembly and winding, theelectrolyte as well as the formation stage. All of themare goingthroughveryrigorousdesign of experiments. The Dry one also the only thing that changes the electrodemanufacturing, everything else downstream remains exactly the same. So, as we aredeveloping Dry technology, onceit matures, wemight actuallychangeover toDry. TheWet isanywaysmaturefor us.

Thenext questioncomesfromKapil SinghfromNomura. Pleasegoahead.

I am curious to understand, some of the states have seen very good EVpenetration.Any thoughts you have what has gone right in these states, what are the enablingfactorsthat arehelpingusmuchfaster EVpenetration?

See, states which have had very sharpriseinpenetrationinthelast sixtoninemonthslike Rajasthan, UP, etc., are the states which are actually more price-sensitive. So, themass market portfolio has really taken off over there. And nowwe are also doublingdown with increasing our distribution in those states. Our distribution was actuallySouth and West heavy. And now we are increasing in the North as well as the Page18of 19 Northwest part of India. So, we feel asour S1Xproduct goesevenbeyondintodeeperupcountry, there'll beaverystrongdemandfor it. IntheSouthandWest marketsalso, ifyou look at, urban markets are more penetrated, deeper rural marketsneedalittlebitmore distribution access fromus, which also over the next 2-3 months asweadd, wefeel confident that those markets will also growand even the premiumportfolio will Ifeel that in rural areas in these SouthandWest regions, thepremiumportfoliowill alsosell.

And anything on electricity availability as well you feel is making a difference insomeof thestates?

No, I don't think electricity availability is a challenge anywhere. I don't know whichstatesarelowonelectricity, but I haven't heardthat fromtheground.

Just one morequestionwasoncell chemistry. YouguysaredoingNMCandalso4680.Any thoughts whether therewill beaneedfor LFPbecausesomeof theOEMsgloballyaswell asinIndiaarealsoexploringLFP. So, just your thoughtsonthat?

So, we are actually working on both. Thefirst cell that will comeout inQ1 FY'26will bean NMCcell, but the same platformof the cell which is the 4680 platformcandoLFPalso and we have anexperimental project workingonLFP, wehavecell systemswhichare undergoing testing on LFP, although we are still maybe a year and a half or twoaway from productionizing it. So, the first step is actually to get the NMCcell up andgoing, andtheninthesamecell system, thesamemanufacturingfacilitywecandoLFPalso.

Ladies andgentlemen, intheinterest of time, that wasthelast questionfor today. I nowhandtheconferenceover toAbhishekfor closingcomments.

Thank yousomuch, everyonefor your timeandall your questionsduringthecall todayand once again, thank you so much for joiningusandwelookforwardtomeetingyouall duringour next earningsconference. Thankyou.

On behalf of Ola Electric, that concludes this conference. Thankyoufor joiningusandyoumaynowdisconnect your lines. Page19of 19