Ola Electric Mobility Ltd., the leading name in India’s electric two-wheeler market, has reportedly been laying off about 100 employees every week for the past two months. This steady reduction in workforce comes as part of a larger restructuring effort aimed at improving profitability and addressing ongoing service-related issues. The layoffs have caused the company’s headcount to decline by nearly 1,000 since its public listing in August 2024, according to sources familiar with the matter.
Mass Layoffs to Shore Up Profitability
The company’s ongoing restructuring is expected to impact 450-500 employees over the next month, according to an insider. This initiative, reportedly aimed at improving margins, comes in the wake of significant financial challenges. Ola Electric reported a sharp increase in net losses for the second quarter of the fiscal year, with losses widening to ₹495 crore from ₹324 crore in the previous quarter.
The decision to cut jobs is seen as a measure to control operational expenses and streamline processes. A source stated that these layoffs are intended to help the company stabilize its financial position and move closer to profitability. However, the layoffs coincide with declining sales and growing regulatory scrutiny, which may complicate the company’s recovery.
Sales Drop and Market Share Erosion
Ola Electric’s dominance in the electric two-wheeler market is under pressure. The company saw its market share shrink to 33% during the July-September quarter, a significant drop from the 49% it held in the previous quarter. Compounding the issue, September 2024 marked the lowest sales month for the company this year, with its market share dipping below 30% for the first time in 2024.
The decline in sales has been attributed to several factors, including service capacity issues. In its second-quarter shareholder letter, Ola Electric acknowledged that its service capacity growth had not kept pace with the surge in sales volumes. The company claimed to have addressed much of the backlog, with approximately 80% of service requests now being processed within T+1 days. However, persistent customer complaints suggest that significant challenges remain.
Mounting Customer Complaints and Regulatory Scrutiny
Ola Electric has faced a surge in customer complaints regarding the performance and reliability of its two-wheelers. These issues have drawn the attention of the Central Consumer Protection Authority (CCPA), which is currently investigating the company. Reports suggest that Ola Electric’s claims of addressing 99.1% of customer complaints were overstated, further denting the company’s reputation.
The regulatory scrutiny and rising dissatisfaction among customers have created a ripple effect, impacting the company’s stock performance. Ola Electric’s shares, which debuted at ₹76, have been trading below their listing price. As of Thursday afternoon, shares were priced at ₹68.82 on the Bombay Stock Exchange (BSE), reflecting a modest 2.5% intraday increase but still lagging behind investor expectations.
Challenges for India’s EV Leader
Despite its position as the market leader in the electric two-wheeler segment, Ola Electric faces a myriad of challenges. The company’s quarterly shareholder communication has emphasized its commitment to resolving operational issues and improving service capacity. However, the combination of declining sales, regulatory scrutiny, and workforce layoffs paints a grim picture of its current state.
The layoffs, which have become a recurring Friday feature, underscore the company’s urgent need to manage costs and improve efficiency. Yet, critics argue that such large-scale reductions may affect employee morale and hinder the company’s ability to recover fully.
Future Prospects and Market Implications
The ongoing turbulence at Ola Electric highlights the volatility of India’s electric vehicle (EV) market. As the company works to address its operational inefficiencies and regain customer trust, its challenges serve as a cautionary tale for other players in the industry. The combination of financial losses, regulatory pressure, and declining market share suggests that Ola Electric must take decisive action to stabilize its operations and restore investor confidence.
For now, Ola Electric’s journey to profitability remains fraught with obstacles. Whether the company can turn its fortunes around will depend on its ability to resolve service-related issues, rebuild its market share, and deliver consistent financial performance.