Ola's EV Foray To Hit TVS Motor The Most, Says Credit Suisse

Ola’s foray into electric two-wheelers is expected to affect TVS Motor Co. the most, according to Credit Suisse.

The research house said the Chennai-headquartered two-wheeler maker could take the maximum hit on its operating margin by FY25, followed by Bajaj Auto Ltd. and Hero MotoCorp Ltd. That’s because TVS Motor’s exposure to the EV segment is the largest—at around 48% of its Ebitda—which Credit Suisse considers to be at risk.

“In the scenario that EV mix for each is in line with our FY25 industry penetration forecasts and Ebitda margins are close to breakeven, we find TVS could have the largest hit of nearly 110 basis points,” it said in a note authored jointly by analysts Satyam Thakur and Mum Taggu. It pegged the margin hit to Hero MotoCorp and Bajaj Auto at 48 and 81 basis points over the same period, respectively.

The note also said Ola Electric's aggressive pricing on its S1 and S1 Pro battery-powered scooters wouldn’t hurt it much, given its deep funding. “They could keep up the level of competitive intensity for long, thus raising the costs for other two-wheeler incumbents.”

The hit to TVS, the note said, could be higher if:

• Margins remain lower as is the scenario today.

• If its internal combustion engine portfolio starts seeing margin dilution too as growth in the segment goes away with rising electrification.

TVS' valuation multiples, too, may be at risk, the research house said, if its consensus margin expansion is disappointing as a result of incumbents having to match Ola on competitive intensity.