Ather Energy delayed the launch of the entry-level Konarc electric scooter to protect margins amid production constraints, while also holding back dealer network expansion due to limited vehicle supplies, the company's CEO Tarun Mehta said.
The Bengaluru-based electric two-wheeler manufacturer changed its original launch sequence, prioritising the mid-range SR2 and SR3 variants of Konarc ahead of the entry-level SR1, which is now scheduled to be introduced in Q4 FY27. The decision comes as the company struggles to meet demand for its existing scooters.
During an analyst call, Mehta said Ather had originally planned to introduce entry-level Konarc variants first to boost volumes and market share. However, the company changed its strategy to avoid cannibalising sales of higher-margin models while production capacity remained limited.
"Otherwise, it's honestly a margin loss for us, which is not very healthy," Mehta said, explaining why the company decided against introducing the entry-level variant before additional production capacity became available.
The company expects the SR1 variant to drive substantially higher volumes once its upcoming AURIC manufacturing facility in Chhatrapati Sambhajinagar, Maharashtra, begins operations. Higher-end Konarc variants will be introduced subsequently.
The revised strategy comes as Ather is unable to tap around 18,000-20,000 units of potential retail demand every month due to production constraints. Its customer pre-orders more than doubled year-on-year to approximately 1.80 lakh units in Q2 FY27, while average monthly production stood at around 33,000 units.
To address supply constraints, Ather plans to invest an additional Rs 122 crore to expand annual production capacity by 2.25 lakh units across its Hosur and AURIC facilities.
The supply shortage has also influenced Ather's pricing strategy. Despite continued pressure from aluminium, copper, plastics and electronic component costs, the company does not plan further price increases during the December quarter.
"We are not taking any more price hikes in Q3. As I guided the quarter before, we will stay put with these prices for a while," Mehta said.
Ather's average ex-showroom price, including AtherStack Pro, increased by approximately Rs 14,000 between Q4 FY26 and Q2 FY27, from around Rs 1.50 lakh to Rs 1.64 lakh. The improvement came from price increases, a higher share of premium variants and better product mix.
Mehta said the company's new EL platform, which underpins Konarc, could help protect margins without further price increases. He noted that comparable Konarc variants were already a few thousand rupees cheaper to manufacture than Rizta, despite being in the early stages of production.
He expects the cost advantage to improve as production stabilises and suggested that Konarc could eventually deliver gross margins around 6-7% better than comparable Rizta variants, depending on the variant.
The company is also relying on cost reductions and product-mix management to offset commodity inflation. According to its investor presentation, structural improvements from pricing and cost reductions contributed 5.3 percentage points to adjusted gross margin between Q4 FY26 and Q2 FY27, while commodity inflation reduced margins by 9.4 percentage points. Product-mix and incentive management contributed another 2.7 percentage points, bringing adjusted gross margin to 24%.
Mehta cautioned that some benefits from product-mix and incentive management were more temporary and could change as supply constraints ease.
The production shortage has also delayed Ather's retail network expansion. The company has held back hundreds of dealer letters of intent over the past few months because it could not guarantee adequate vehicle supplies to new outlets.
"We took a conscious call to slow down network expansion because we do not want dealers to sit on without inventory," Mehta said.
Ather added fewer than 50 experience centres over the past two quarters. The company now plans to restart network expansion towards the end of Q3 FY27, with more noticeable outlet additions expected from Q4 as manufacturing capacity improves.
Hosur's annual capacity will increase from 4.2 lakh to 4.95 lakh units by December 2026. The AURIC facility is scheduled to begin commercial production in phases from December 2026, with an initial annual capacity of 5 lakh units. A further expansion will take AURIC's capacity to 6.5 lakh units by Q2 FY28, bringing the company's combined installed capacity to approximately 11.4 lakh units annually.
Konarc's rollout is also being carried out in phases across different markets. Ather initially focused on Uttar Pradesh and Rajasthan before expanding to other northern, central and western states. The company plans to introduce the scooter in southern markets as additional production capacity becomes available.
The strategy comes as Ather seeks to improve profitability while expanding its presence in India's growing electric two-wheeler market. The company reported a consolidated net profit of Rs 1.26 crore in Q2 FY27 against a loss of Rs 154.07 crore a year earlier. Revenue from operations increased 63% year on year to Rs 1,464.24 crore, while its EBITDA margin improved to 4.9% from a negative 9.6%.
Ather's wholesale volumes rose 42% to 93,211 units during the quarter, although its domestic electric two-wheeler market share declined to 15.1% from 17.2% a year earlier, according to VAHAN data. The decline came as overall electric two-wheeler registrations grew approximately 82% year on year during the quarter, compared with 60% growth in Ather's registrations and international dispatches.
The company is now betting on its expanded production capacity, lower-cost EL platform and wider product portfolio to support volume growth without compromising margins.