Loss: On 25th April 2022, Ola Electric recalled 1,441 units of its electric two-wheelers in the wake of incidents of e-bikes catching fire. These scooters will be inspected by engineers and will go through diagnostics across all systems. The overambitious strategy of CEO Bhavish Agarwal has failed miserably.
Has the Ola electric revolution failed? Imagine a customer paying you Rs1 lakh for a product that hasn’t even been made yet! You must have a pretty good track record right? But what if you don’t have any track record? If you’d never made a product before? This is exactly what seems to have happened in the case of Ola Electric, a company which trumped-up so much hype and anticipation around their S1 and S1 pro electric scooters — that one lakh people bought them within the first two days of the online launch! Believe it or not this provided Ola with Rs1,100 crore ($144 million) in revenue. The question now is will all the hype end up backfiring catastrophically for Ola Electric? This is because if they are unable to fulfil the promises made to customers they will look for someone to blame. Some are already pointing to the company’s management, others to the ambitious deadline set by OLA CEO Bhavish Agarwal himself. But the reality of the situation goes much deeper than this….
By Joshua George
BHAVISH AGARWAL started Ola in 2010 and for the first decade or so of the start-up’s operations —they were a loss-making company! The company didn’t break even until the financial year of 2021 when it finally brought in a crore profit. For many people this may come as a surprise because by 2017 India’s cab market had reached a saturation point in terms of growth.
With this in mind Ola decided to diversify its business. They tried to get into food delivery, grocery delivery, financial services and the selling of used cars, even started a pizza brand. None of the initiatives took off the same way Ola hoped they would, at least not until Ola Electric was presented. The mission of Ola Electric was both simple and extremely ambitious: Start an EV revolution in India!
The company dabbled in setting up charging stations introducing Ola branded EVs to their fleet like the Kinetic Smart Auto, Mahindra’s E2 plus as part of its taxi fleet and Goldstone BYD busses (electric busses). It was not until May 2020 when Ola acquired Amsterdam-based electric scooter start-up “Etergo” that Indian consumers started to get excited. However, at this point, Ola Electric didn’t realise what it was getting into.
NO SHOW IN TIME
OLA Electric’s initial plan was to take Etergo’s app scooter and make some minor modifications and tweaks and launch it in India. Sounds simple right? Not so. The Etergo app scooters were designed for the Netherlands, a country that is known for having some of the best roads in the world and also cold weather, with average summer temperature high between 20-25 degrees celsius. India in contrast is a fairly hot country, especially during summer times. You also have to factor in heavy flooding in some cities as well.
In many places in India for example, city roads with deep potholes make driving recklessly dangerous. Especially during the monsoon months when the potholes small and large are hidden beneath dirty water. This was one of the factors that forced Ola to redesign the Etergo app scooter to meet the unique needs of Indian roads and Indian conditions in general. They also only gave themselves one year to execute these changes and start production.
Another factor was that Ola had never worked with hardware so extensively before. The startup was primarily a software company. While their acquihire of Etergo staff included hardware engineers these foreign engineers had a knowledge gap when it came to India and so Ola’s first task was filling this gap. The modification of the app scooter involved a complete overhaul of the engine, batteries and the software, all of which were extremely complicated and challenging. Once the modifications were complete Ola needed to figure out how to manufacture the scooters at scale. The company had to set up a factory. Bhavish Agarwal was adamant that all this had to be completed in a year. He and his team settled on a game plan and road map on how the company could meet the strict deadlines.
Ola Electric went on a massive hiring spree by recruiting 2,000 people globally with more than 1,000 engineers. The idea was to solve all the problems that Ola Electric would face like the software, mismatched design, and battery technology. In December 2020 Bhavish announced plans to build the world’s largest electric scooter factory named the future factory. The factory had the capacity to produce 10 million (RS1 crore) scooters per year. Bhavish also announced that the staff of 10,000 workers would be made up of exclusive women!
ON HYPE ALONE
THE hype around Ola Electric hogged so much light among the Indian public, that when Ola opened pre-bookings for these electric scooters on July 15, 2021 more than one lakh people reserved a scooter. Keep in mind there were no specifications or prototype design of the scooter available at this time. The scooter’s speed, range and charging time were all unknown. But despite this people chose to put their faith and trust in a company that had no track record when it came to making vehicles.
On August 15, 2021 the scooters were officially launched in two variants the S1 and S1 pro. Much to everyone’s delight, the specifications didn’t disappoint. The standard Ola S1 was listed as having a top speed of 90 km/h and a range of 120 km and the S1 pro has a top speed of 115km/h and a range of 191km. Besides this, the scooters had interesting software like hill hold, cruise control and remote unlocking. At this stage, everything seemed to be going well.
But then the bad news started rolling in. From the September 8 Ola pushed the booking date to September 15, 2021. They said they were still fixing glitches on their website to ensure a smooth buying experience for the customers. Unfortunately, what was going on behind the scenes was significantly more dire. At the time of booking, Ola Electric had promised to start delivering these electric scooters between October 25 and November 25 but this month-long period came and went — no scooters were delivered.
Half a million pre-bookings have already been made and paid for, this is five lakh electric scooters! Ola Electric now had a massive unpaid debt on its hands and its lenders have started growing impatient. People are taking to Twitter to express their frustration and Ola was forced to apologise — citing the lack of chipsets and electronic parts! Customers find this hard to believe. Ola could have factored these shortages into their plans as every automotive company has been facing similar issues since the beginning of the pandemic.
MULTIPLE DELAYS
ON DECEMBER 15, 2021 after multiple delays, Ola finally started delivering their electric scooter. That’s when things went from bad to worse. For one thing the promised range of 181kms on the S1 pro was completely off base. In reality, the scooter’s true range is 135 km. Also, customers are now waiting for an additional six months to use software features like hill hold, cruise control, etc. There were also multiple reports of battery overheating and complaints by customers about receiving damaged scooters as well. Then the worst news came through. Ola announced that they would stop production of the standard Ola S1 scooter until late 2022 and would only be selling the S1 pro variant!
The point in all this is where do we stop and ask a very important question: What happened? To start with the time frame was unrealistic. Expecting Ola Electric to reinvent Ertego app scooter, build the future factory and get scooters out the door in a year just wasn’t feasible. This resulted in corner-cutting and a product that looked great on paper and photographs but didn’t perform anywhere near as well at the ground level. Things took a turn for the worse with many of Ola’s top executives leaving in the middle of production. Just a few months after Ola electric had acquired Ertego in August 2020, Ola’s co-founder Ankit Jain left the company. Incidentally, two people who had been heading battery engineering had also walked away and then Sanjay Bhan, an auto industry veteran and the company’s chief business officer, left in July 2020.
MESSY SUPPLY CHAIN
THEN there is Ola Electric’s messy supply chain. Parts were not engineered from the testing state. Supply chains were forced to deliver these parts. The Quality team was forced to accept substandard parts to continue with scheduled deliveries. A three-way tug of war created chaos. The software on the bike was also undercooked!
In short, Ola Electric suffered from a very common yet very simple problem to fix — “Crunch.” Crunch is something that can be easily eliminated by extending the timeline. Many key people probably would have stuck around feeling the company wasn’t about to crash and burn thanks to an extended comfortable runway. Ultimately, Ola’s customers are paying the price and a revolution that was meant to sweep the country has failed. Rising fuel prices presented an opportunity for Ola to monopolise the EV market alongside Ather Energy the Bangalore based company that has produced the 450x electric scooter- the best electric bike in the market currently. While the on paper specifications of Ola Electric’s scooters outdoes Ather by a country mile, it has failed to deliver on its promises. Bhavish Agarwal’s overambitious strategy has failed miserably and while it pulled in public money before product delivery it will now have to utilise the profits incurred to rectify faults in the 1400 + bikes that they have been recalled.