Ola Electric Delays Expanding Cell Capacity Beyond 5 Gwh; May Miss PLI Scheme Timeline

Ola Electric is delaying the expansion of its cell manufacturing plant capacity, citing lower-than-anticipated growth of the electric vehicle market. The company is now limiting its cell manufacturing capacity to 5 GWh till the financial year 2029, compared to the earlier plan of setting up 20 GWh capacity by mid-2026.

This adjustment is also expected to impact the company's commitments under government initiatives. The company’s planned 20 GWh capacity was approved under the government’s production-linked incentive (PLI) scheme for advanced chemistry cell manufacturing, and it would face a penalty of up to Rs 100 crore for missing the scheme’s timeline.

“Given that the EV market has evolved slower in recent quarters, we don't foresee the need to expand beyond 5 GWh till FY29,” Ola Electric founder, Chairman and MD Bhavish Aggarwal told the investors.

During the IPO in 2024, the company had said it expects to start operations of the Giga factory in Krishnagiri, Tamil Nadu, with a cumulative capacity of 1.4 GWh and expand it to 5 GWh by October 2024 in the first phase. In the second phase, the company was planning to further expand its cumulative capacity to 6.4 GWh by April 2025 and to 20 GWh by June 2026 in further phases. 

While the first phase of cell manufacturing was planned to be funded from internal accruals and long-term borrowings availed by OCT, the capital expenditure for the second phase was planned to be funded by Rs 1,228 crore from Rs 5,275 crore raised in the IPO.

The company’s profit and loss statement show that it has utilised Rs 2,681 crore from the proceeds of IPO till now for repayment of debt, R&D, organic growth opportunities and general corporate purposes.

“We do not foresee the need to expand beyond 5 GWh over the next three years at least. We had raised some money in anticipation of this expansion beyond 5 GWh in our IPO. As we go along, we might look to redeploy that capital into other productive uses,” Aggarwal said.

Ola Curtails Battery Targets, Risks PLI Fine

In 2022, Ola Electric was selected for the government’s Rs 18,100 crore PLI scheme to set up 20 GWh of cell manufacturing capacity. The scheme required companies to set up manufacturing facilities within two years. Other beneficiaries of the scheme include Reliance Industries and Rajesh Exports, both of which were selected to establish advanced cell manufacturing units under the PLI initiative.. 

In March, Ola Electric received a letter from the government for missing a key milestone in setting up its cell plant. The company has now started manufacturing cells. The company has said its cells are now ready and will be used in its vehicles from the festival season this year.

“The transition from the supplier cells we use currently to our own 4680 cells will be a phased transition through FY26, starting this quarter. We expect that by the end of FY26, we would be fully utilising the 1.4 GWh, installing the remaining capacity to get to 5GWh and scaling consumption to 5 GWh through FY27,” Aggarwal said.

However, he noted that limiting the cell capacity to 5Gwh till FY29 will mean an implication on the PLI scheme as it will not meet the timelines for the 20 GWh capacity. When asked about the penalty for missing the timelines, he said: "There is a maximum of about Rs 100 crores of penalty and we are actually accruing that every quarter in our P&L already.” 

Now that Ola Electric is limiting its cell manufacturing capacity to 5 GWh till FY29, the company might look to use the IPO capital raised for the second phase expansion to fund some other purpose. 

“We are the only company that has put up a cell plant and made it productive. So we will engage with the government to probably re-look at some of these timelines in the broader interest and encouragement to industry,” Aggarwal added.