Ola’s Dream of World’s Biggest E-Scooter Factory Hits a Hurdle

(Bloomberg) -- Ola Electric Mobility Pvt., the Indian startup that’s pledged to build the world’s biggest electric scooter factory, doled out a handful of brightly-hued bikes earlier this month, complete with drummers and a saxophonist to mark the occasion. Founder Bhavish Aggarwal came to thank some 100 customers who brought along family and friends..But beyond the colorful proceedings, Ola isn’t living up to its lofty ambitions. Mass production of its e-scooters is likely to be pushed back until at least January, according to people familiar with its operations, who asked not to be identified because the information isn’t public..The Bengaluru-based unicorn, which has already delayed initial deliveries to mid-December from October, is pledging to fulfill rest of the orders by February. But people familiar said Ola, which counts heavyweights SoftBank Group Corp. and Tiger Global Management LLC as backers, is struggling to iron out manufacturing wrinkles and is able to make only as many as 150 units a day -- a slow pace if it has to deliver on time the 90,000 orders Aggarwal said it had received. The company’s body shop is operating at half capacity and its paint shop isn’t up and running, the people said..Hobbled by the global chips dearth, and what analysts call an over-reliance on imported components, Ola Electric’s woes are a microcosm of the challenges that India’s automobile industry will have to navigate as it pivots toward electric vehicles..They also underscore the hurdles India, the world’s third-biggest emitter, may face as it attempts to become net carbon zero by 2070. The ability of Ola, valued at more than $5 billion in a recent fundraising round, to deliver on its promise is being tested at a time when ANI Technologies Pvt. prepares to woo investors ahead of a planned initial public offering in Mumbai next year. ANI Technologies used to own Ola until their common founder Aggarwal bought a direct majority stake in the electric vehicle maker and left ANI Technologies with a minority holding. .Customers waiting for their bikes are already voicing their unhappiness. When Ola began taking orders in September, it said deliveries would begin in October, which later got pushed to November and then to Dec. 15. .Many disgruntled customers -- some of whom paid the entire 99,999 rupees ($1,323) upfront -- have taken to social media..The company’s manufacturing unit is “operational with automated weldline, battery line and the general assembly line and an installed paint shop,” Chief Marketing Officer Varun Dubey said by email. “We had a minimal delay of two to four weeks instead of much longer delays (months and up to a year) that are common in the industry,” he added, attributing the hold-ups to the global semiconductor shortage, which has hobbled automakers globally..Ola Electric declined to share its production numbers citing confidentiality. .The chip shortage has been “an unpredictable beast for everybody,” Aggarwal, 36, said during a Reuters Next conference earlier this month. .“It’s never a great look for anyone if you’ve got a consumer base that’s not happy with delivery timelines,” said Anthony de Ruijter, a senior associate at U.K.-based global investment research firm Third Bridge Group Ltd. “I would expect this is going to be an issue for the sector, not just Ola Electric.”.According to Ruijter, there’s still a lot of reliance in India on the import-and-assemble model, not just within Ola’s ecosystem but among automakers in general. This in turn creates too many factors a manufacturer can’t control and often results in a product that isn’t customized for the local market, he said..Critical Component.India currently imports around 70% of electric vehicle-parts from China, a situation that deprives local carmakers of an indigenous and reliable supply chain -- a critical component for mass production. .That’s worked to keep EVs in the nation at 1% of overall annual auto sales, versus 30% in some parts of China. Yet the need for cleaner transport solutions is urgent: New Delhi battled the world’s most toxic air last month and according to World Bank estimates, such pollution is costing the South Asian nation 8.5% of its gross domestic product..Read MoreWorld’s Largest E-Scooter Factory to Make EV Every 2 SecondsRecord Fuel Costs Convince Scooter-Loving Indians to Go ElectricIndia’s Electric Vehicle Ambitions Are Arriving on Two WheelsChip Shortage Delayed Ola E-Scooter Deliveries, Co-Founder Says.People familiar with Ola’s predicament say because Ola’s in-house paint shop isn’t functional yet, scooters are being transported to a plant near Chennai owned by South Korea’s Seoyon E-Hwa Co. .Representatives at the Seoyon E-Hwa plant didn’t answer phone calls seeking comment. Ola Electric’s Chief Marketing Officer Dubey said the company works with multiple suppliers across the value chain and declined to comment on any one of them individually..The pressure on the company is likely to amplify if it has to ramp up its annual production capacity to 2 million units in the first phase as planned. Aggarwal’s plan, shared in March this year, was to expand it to 10 million vehicles annually by the summer of 2022, or one e-scooter every two seconds..Some of those who test rode the e-scooter in November found it underwhelming. .Pradeep M, a YouTuber who reviews automobiles on the video-sharing platform, test drove Ola’s e-scooters for about five kilometers (three miles) in Bengaluru last month. He said in an interview with Bloomberg News that some slowed down and eventually came to a halt altogether when accelerated to their top speed of 115 kilometers per hour..Software Issues.While Pradeep says India’s hot climate requires adequate motor cooling systems and without one, engines don’t run as efficiently, Ola Electric denied there were any issues around over-heating of the scooter motor. “We had provided scooters with the beta software during the media test rides” due to which a handful of scooters had some software calibration, Dubey said. “These have been fixed in the final version that has been released for customer deliveries.”.Pradeep, who has one Ola e-scooter on order and owns another electric bike from rival Ather Energy Pvt., also said that Ola e-scooters use a horizontal suspension at the rear to make room for boot space. But a vertical suspension is better at absorbing shocks from bumpy tarmac. .“The horizontal layout leads to a superior ride and handling and weight balancing,” Ola Electric’s spokeswoman said in an emailed response, adding that its scooter’s suspension is “industry leading” and rides on one of the larger tires. .“Quality issues are more prevalent in the low-speed electric two-and three-wheeler segments in India,” said Komal Kareer, analyst at BloombergNEF in New Delhi. “The segment is flooded with small players that directly import vehicle components from China. After so much anticipation, the delivery delays by Ola are making customers anxious.”.2 A.M. Meetings.The pressure of meeting delivery targets is getting to the top management at Ola with Aggarwal holding meetings as early as 2 a.m., people familiar said. .Ola’s quality assurance head Joseph Thomas left last month, Money Control reported. The exit came amid broader attrition at firms founded by Aggarwal. The executives didn’t immediately respond to requests for comment made over LinkedIn..“Extraordinary outcomes require unreasonable efforts,” Dubey said, saying Ola was trying to make industry-changing products. “That takes immense effort.”.Ola’s rivals, meanwhile, are gearing up. Hero MotoCorp Ltd., the world’s largest maker of motorcycles, plans to launch its first e-scooter in March, while Bajaj Auto Ltd., an auto-rickshaw maker based in Pune, is planning to start deliveries of its Chetak electric scooter by the second quarter of next year..The Indian automobile industry is in the midst of a transition that is led mostly by startups and OEMs without decades of experience in the electric vehicles markets, according to BNEF’s Kareer..“Ola will be absolved of its delays if it delivers a high quality and a high value product soon,” she said..©2021 Bloomberg L.P.

Ola’s Dream of World’s Biggest E-Scooter Factory Hits a Hurdle

Mass production of its e-scooters is likely to be pushed back until at least January.

Choose a plan