A clash of strategies in India’s EV race

“Assembly, manufacturing, ultimately, after a certain point, is only so much valuable. It’s a very last step optimization,” Tarun Mehta, also the chief executive at Ather, told Mint in an interview. “The much richer optimization is in IP (intellectual property) and brand today. So we will always put our money there.”

Mehta, also the chief executive of the Bengaluru-based electric scooter maker, said, “We are big believers, contrary to some of our peers in the industry, that the real money will be made or lost on your fundamental product architecture. And that’s down to how much engineering you do, how much money you put in there, how much attention you put in there.”

The question of building everything in-house has raged in the automobile industry after China curbed the supply of rare-earth magnets, a key component in motors. Makers of both fossil fuel-powered engines and EVs flagged concerns and have drawn up plans to build alternatives or their own supply chains. However, tensions between India and China have started easing, offering hope to India’s automotive sector that, according to government estimates, was valued at $240 billion in 2024. The country’s EV market, Grand View Research estimates, is worth $8.4 billion.

“Given what has happened in the real-world situation, vertical integration wouldn’t have solved it (rare-earth problem),” Mehta said. “If you had to produce rare earth motors in-house, you would still have needed rare earth from China. And if you want to produce ferrite motors, there are suppliers who build ferrite motors. You don’t need to be vertically integrated to use ferrite motors.”

Cost conundrum

Mehta’s view contrasts with that of Bhavish Aggarwal, chairperson at Ather’s cross-town peer Ola Electric. Aggarwal wants to make everything in-house, from ferrite motors to lithium-ion cells. While a supplier ecosystem exists for many of the components, India has not made progress on lithium-ion cells, with only Ola Electric’s gigafactory producing such cells.

Mehta, however, doubts whether investing in cells would be good for the company’s financial health, as the business is known to have poor margins.

“Companies at the scale of 3 to 4 lakh electric scooters in a year, at that scale of cell production have rarely ever been profitable,” he said. “A lot of cell production is a tricky piece. You see gross margin improvement. But your cost of production is so high that your Ebitda impact comes out much worse.”

Ebitda–earnings before interest, tax, depreciation and amortization–is a measure of the operating profitability of a company.

However, during Ola Electric’s annual event on 15 August, Aggarwal said that indigenously produced cells will help the company reduce the cost of procuring the key component and also offer lower prices for consumers.

“At a consolidated level, it is cheaper for us to manufacture our own cells than procure from outside at the 5 GWh level,” Aggarwal said during the company’s earnings call on 14 July.

Aggarwal also stressed that his strategy of vertical integration is different from how traditional auto businesses work.

“Our strategy in this business has been to build more manufacturing vertical integration, do more in-house technology development and build a direct-to-customer channel for customer engagement with the brand directly,” Aggarwal said. “And on all these three, we believe we keep compounding our competitive advantage as incumbents only continue building traditional auto business models. And that competitive advantage can be seen in the balance of volumes and profitability that are now able to deliver.”

Seeking multiple suppliers

Instead of investing in factories, Ather believes it has the right partners in China. However, it continues to look outside to diversify its supply chain and hedge its bets on multiple partners.

“You want to de-risk your cells. You want to hedge by using multiple technologies in parallel, which can only happen if you work with multiple partners of those technologies in parallel,” Ather’s CEO said. “In-housing cells lock you onto a technology. And that technology has raw materials which will anyway have external dependence on.”

Both companies’ approaches have their own risks and advantages, and the choice will depend on factors including capital and market position, said experts.

“Players with very deep pockets and a long investment horizon may justify vertical integration, while others may benefit from leveraging global ecosystems,” said Harshvardhan Sharma, group head at Nomura Research Institute. “Companies competing on price and scale may need integration. Those competing on experience and agility may prioritise partnerships.”

According to Sharma, EV players globally adopt hybrid models like Tesla integrating cells selectively, while still working closely with Panasonic, CATL or LG. Chinese original equipment makers like BYD develop components in-house and also source from outside suppliers.

Profit pressure

Both Ather and Ola Electric face investor scrutiny on how soon they can turn in profits. While Ather has boasted of improving margins, Ola Electric recently suggested it will shift focus towards profitability instead of pursuing aggressive growth.

In the financial year 2025, Ather’s loss narrowed to ₹812 crore from ₹1,060 crore, while Ola Electric’s loss widened from ₹1,584 crore to ₹2,276 crore. Ather’s operating profit margin improved from -39% to -26%, while Ola’s margin deteriorated to -38% from -25%. Which means that while Ather loses ₹26 on every ₹100 generated in revenue, Ola Electric loses ₹38.

However, Ola Electric’s auto segment was Ebitda positive for the month of June, a first for any electric scooter maker in India.

Both companies are competing for leadership in India’s electric two-wheeler market. While Ola Electric’s sales nearly halved to around 58,000 units in the quarter ended June, Ather Energy’s sales doubled to nearly 40,000, according to data on the government’s Vahan portal.

Ather, at its annual community day event in Bengaluru this week, unveiled many features to be introduced as part of the Atherstack 7 update. From voice-activated AI features to alerts about potholes on roads, Ather has put its bet on technology to attract new customers.

It also unveiled a new EL vehicle platform on which its future products will be built.

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