Ola Electric stock slips below ₹100, skids 20% in 8 sessions. What’s causing the slide?

Shares of Ola Electric Mobility, India's leading two-wheeler electric vehicle manufacturer, have been in a steady downtrend, showing no signs of a rebound. In Monday's trading session, this downward trend persisted, causing the stock to fall below the ₹100 mark for the first time since mid-August, to ₹97.85 per share.

With this decline, the stock has lost 20% in eight sessions and 38% from its recent high of ₹157. The ongoing fall in Ola Electric Mobility's stock stems from increasing investor worries about a potential drop in the company's market share in the electric two-wheeler segment.

Major players in the internal combustion engine (ICE) market are ramping up their production and introducing new EV models at competitive prices, which has heightened the competition for Ola Electric.

Additionally, the stock has witnessed substantial profit-taking, particularly following the lock-in expiry of anchor investors. After an impressive surge of 73% in just six sessions following its Dalal Street debut on August 9, many investors are now looking to capitalise on their gains, contributing to the stock's downward pressure.

Compounding these challenges, reports have surfaced indicating that Ola Electric customers are experiencing significant issues with malfunctioning hardware and glitching software in their vehicles. Spare parts are reportedly difficult to obtain, leading to substantial delays in servicing. Service centres across India are currently overwhelmed, with media reports indicating they receive nearly 80,000 complaints each month.

Slipping grip

Ola Electric's market share declined to 31% in August from 39% in July, raising concerns among analysts about the company's position amid intensifying competition. Domestic brokerage firm Ambit Capital highlighted that the electric vehicle (EV) market in India is still in its nascent stages, and the increasing competition could put pressure on Ola Electric’s market share.

Ambit predicts that Ola's market share will decrease from 35% in FY24 to 27.5% by FY29 and further down to 25% by FY31. Consequently, the firm initiated coverage of the stock with a ‘sell’ rating and a target price of ₹100, a level that the stock reached in today's session.

Global brokerage firm HSBC Securities has also expressed concerns about Ola Electric's recent market share loss. The brokerage foresees a downside risk of 15-20% to its FY25/26 volume estimates for Ola if the current trend continues.

According to Elara Capital, competitors such as Hero, Bajaj, TVS, and Ather Energy, initially viewed as the "tortoises" of the industry due to their slower growth, are now expected to expand their market share. They plan to achieve this by launching more affordable scooters and enhancing their distribution networks while maintaining a strong emphasis on quality.

Furthermore, the report notes that Honda Motorcycle and Scooters India (HMSI), the leader in internal combustion engine (ICE) vehicles, has yet to introduce an electric scooter. This delay could further undermine Ola Electric's market share, intensifying the competitive landscape.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.