“There is a lot of dry powder waiting on the sidelines among domestic investors” prepared to invest a lot of money in IPOs in India, he said, adding that investors’ enthusiasm for tech-based firms had picked up in recent months after seeing a dip in 2021 amid worsening global conditions and a tech slowdown.

Despite investors’ optimism, analysts say Ola Electric has a long way to go before realising its ambition of becoming the world’s largest electric two-wheeler maker.

Bhavish Aggarwal, who founded India’s leading ride-sharing platform Ola, the sister company to Ola Electric, plans to sell electric two-wheelers in Europe, Southeast Asia and elsewhere by building the world’s largest electric two-wheeler factory in southern India.

“Clearly, there is huge potential for electrification of two-wheelers. When you have an IPO in India, a lot of your suppliers and consumers consider you a serious player that is building an ecosystem in the country,” said Puneet Gupta, director of mobility at S&P Global.

Unlike other markets where electric mobility has slowed, India’s appears poised to take off, led by low-priced two-wheelers that are easy to recharge.

Since launching its electric two-wheeler vehicles two years ago, Ola has risen to the rank of India’s largest electric two-wheeler maker by offering feature-laden vehicles that are priced competitively to regular fuel-powered ones.

The entry-level Ola S1 X 2kWh variant is priced at 74,999 Indian rupees (US$893) in New Delhi compared to the Honda Activa 6G STD Petrol, which costs 76,684 rupees.

But electric vehicles have carved out no more than 7 per cent of India’s two-wheeler market, which is the world’s largest, according to Gupta.

Ola Electric’s IPO money should help shore up its local supply chain network within the country and focus on research and development for the EV project, which started as an acquisition of Dutch start-up Etergo, analysts say.

India has expanded a production-linked incentive programme to the manufacturing of EVs that includes tax breaks, cheaper rentals and discounted electricity charges linked to production volume and greater localisation.

The lure of incentives and the potential for growth have attracted a slew of new firms who are hugely import-dependent for their parts. Many of them have been bedevilled by supply-chain problems.

Ola is aiming to revolutionise EV manufacturing by localising most of its supply chain, but it has to contend with emerging players such as Bengaluru-based Ather Energy, as well as looming competition from legacy firms like Bajaj Auto and Hero Motocorp, analysts say.

“The automotive industry is very labour intensive and capital intensive. There will be ups and also downs. Ola too has a long way to go because it is probably a decadal story before they establish themselves,” he said, noting that the company wanted to diversify into other products including three-wheelers.

The Indian electric two-wheeler market is projected to grow at a compounded annual growth rate of 11 per cent, reaching a market size of 3.6 trillion Indian rupees (US$42.8 billion) by financial year 2028, according to Saji John, a research analyst at Geojit Financial Services.

With a current market share of 38 per cent year-to-date, “Ola is likely to act as a catalyst for boosting investors’ confidence and could help accelerate the growth and adoption of electric two-wheelers,” he said.

Roadblocks ahead

While Ola had created a buzz with its aggressive pricing and sleek vehicles, it had also suffered hiccups over product quality following customer complaints, said one industry source who declined to be named.

During its initial phase, Ola relied heavily on selling its scooters using an online-centric strategy, enabling customers to book a test-drive via their smartphone or computer.

“They thought they could sell scooters like mobiles but that strategy has not worked as well as they thought. There is also a lot of dissatisfaction with existing users,” the source said.

Some customers have complained online about their Ola vehicles, citing issues ranging from reliability and repair times to difficulties finding service slots.

With the successful IPO, the funds raised could help address many of the niggling concerns about Ola Electric’s supply chain, product quality and servicing of customers, analysts said.

“I think Ola Electric’s … biggest bottleneck is around the sustainable supply of batteries for their scooters. And that is highly capital intensive, so money collected from the public will probably go towards establishing a robust battery supply chain,” said Suraj Ghosh, an independent automobiles analyst.

“Moreover, some key elements of battery manufacturing may be localised,” he said, adding that typically batteries accounted for the biggest cost of a two-wheeler EV.

Despite their affordability, the market for even electric two-wheelers in India is nascent and mainly driven by customers who like new gizmos. “For many, it is not the only option and they like to keep a [petrol] version with them along with an electric,” Ghosh said.

Electric vehicle affordability is dependent on heavy government support, Ghosh added, highlighting that a general sales tax on EVs is 5 per cent compared to 28 per cent on petrol-powered ones in the country.

Government policies for supporting electric vehicles have been changing to adjust to market conditions, which is one reason why legacy players have deferred their entry for the time being, he added.

“Unless there is a breakthrough in battery technology or supply chain that slashes costs, EVs will continue to be expensive and would require government support,” he said.

However, analysts said stringent emission norms looming worldwide could nullify the competitive edge of conventional vehicles.

Legacy players with large and established factories that loom as Ola’s competition could suffer if they time their entry too late, according to Gupta. “Maybe you are making money today but four years later, you may not be able to survive,” he added.