Maharashtra to close 90% of Ola showrooms over permit issues
What's the story
Maharashtra is set to close nearly 90% of Ola Electric's 432 inspected showrooms in the state, as the company lacks a permit for vehicle storage. The decision could disrupt sales in India's largest battery-powered scooter market, especially as Ola Electric faces stiff competition from rivals. The Maharashtra transport department has already taken action against stores that did not have the required trade certificate, a regulatory requirement for unregistered vehicles and sales facilitation, as per a letter seen by Mint.
Market shift
Once a leading electric scooter seller, now 3rd
Once a leading electric scooter seller, Ola Electric has now fallen to third place behind TVS Motor Company and Bajaj Auto Ltd. The company's decline is particularly evident in Maharashtra, which accounted for about 12% of its over 344,000 scooter sales in the last fiscal year. The state recorded sales of 212,000 electric two-wheelers in the fiscal year ending March 31, making it India's largest electric scooter market.
Regulatory scrutiny
What does Ola have to say?
The Maharashtra transport department found that 44 out of 432 inspected showrooms had trade certificates, while 388 without them were shut down, the letter reads. In response to the allegations, Ola Electric called them "speculative, incorrect, and misplaced." The company added that it is working closely with the concerned authorities in Maharashtra to address any specific queries or concerns. However, it did not specify what these queries or concerns are.
Network expansion
Total of 4,436 stores in the country
Ola Electric has a total of 4,436 stores in the country, out of which 3,365 are company-owned. The company follows a direct-to-consumer (D2C) model where buyers can purchase directly from its app. But, despite these measures, regulatory issues have continued to plague the company. In April alone, the Maharashtra transport department decided to shut 121 stores and issue show-cause notices to another 270 for operating without trade certificates.
Registration issues
Discrepancy between total sales and actual registrations
Ola Electric's stores have come under increased regulatory scrutiny after the company reported disruptions in its registration process. This led to a discrepancy between total sales (25,000) and actual registrations (8,500). The trouble with the sales network comes at a time when Ola Electric is trying to regain lost market share. In June, Ola Electric sold 20,120 battery-powered scooters and bikes as per Vahan data (excluding Telangana data).
Market outlook
Company's market share has fallen
Ola Electric's declining market share has raised concerns over product quality and execution. In Q1 of the current fiscal year, the company sold some 60,500 vehicles with its market share falling to 19.6% from 33.4% a year ago. Meanwhile, TVS, Bajaj Auto, and Ather Energy gained market shares of 25%, 21.5%, and 13.7%, respectively. Despite these challenges, a broader market recovery could support a rebound in Ola Electric's stock, driven by efforts to reduce losses and stabilize its market share.