Now that Ather Energy has completed a successful IPO—raising close to Rs 3,000 crore—Autocar Professional examine the challenging path that lays ahead for e-2wheeler maker.
08 May 2025 | 5836 Views | By Prerna Lidhoo & Darshan Nakhwa
As the dust settles on Ather Energy, India’s first mainline IPO of FY26, investor sentiment has been one of caution. For many, the company remains a high-stakes bet in an increasingly competitive EV market.
They point out that despite being a pioneer, Ather Energy continues to operate in the ...
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As the dust settles on Ather Energy, India’s first mainline IPO of FY26, investor sentiment has been one of caution. For many, the company remains a high-stakes bet in an increasingly competitive EV market.
They point out that despite being a pioneer, Ather Energy continues to operate in the red, with slowing growth: Even as FY24 saw a modest increase in volumes to 1.1 lakh from 92,093 units, revenue dipped by 2% to Rs 1,753.8 crore, while net loss widened to Rs 1,059.7 crore from ₹864.5 crore. In the quarterly-earnings-obsessed equity markets, such numbers evoke skepticism.
“Ather Energy’s limited operating history makes evaluating its business and future prospects difficult and its historical performance may not be indicative of future performance,” pointed out HDFC Securities in a note to clients. “Its future growth is dependent on the demand for and adoption of electric two-wheelers. If the market does not develop as it expects, or develops at a speed that is slower than anticipated, its business, prospects, financial condition and operating results will be affected.”
Similarly, SBI Securities noted that Ather operates in a consumer-driven auto industry that remains vulnerable to macroeconomic headwinds such as tight monetary policy, inflation, and declining discretionary income. The electric two-wheeler segment is also becoming increasingly crowded, with intensified competition from both emerging startups and legacy OEMs expanding their presence, it added.
All this, however, has not dampened the spirits of the founders. CEO and co-founder Tarun Mehta pointed out that the company has been able to find backing among investors without having to compromise on the long-term vision. “People have come on board for the promise that the company has always made—the focus on quality, R&D, solid products, and a bet on the premiumisation wave. We haven’t gone public to change this story; we’ve gone public to double down on what’s already working,” he noted.
Profitability Agenda
CFO Sohil Parekh laid out five factors that, in his opinion, will improve the company’s profitability in coming years. “What we’ve done in the last 9 months, that has been the key,” he said. “We launched Rizta which got phenomenal reception. It’s a 7% lower BOM [bill of materials] product, ₹16,500 lower ASP [average selling price] product. Still we discovered a 19% gross margin.”
The first factor is the company’s lack of reliance on government subsidies like the PLI (Production-Linked Incentive) scheme. “If you do an apple-to-apple comparison, we’re 1-2x better,” he said.
The second will be the expansion of the company’s sales network. “If you see where Ather is present versus where they’re not…I need to pull up a store and our market share goes up,” Parekh said, citing Gujarat as an example where market share jumped from 5% to 25% with just one-third of the distribution footprint compared to competitors. “Whether the industry grows, we just have to open the stores and be done with it.”
Mehta too pointed out that some of Ather’s competitors have 3x-4x bigger sales networks. “There are hundreds of cities in India where Ather is not present today. But as we catch up with them, I think growth can look quite fantastic for a long while,” he noted.
The third factor is a move to high-value, high-growth segments. A case in point is the Rizta, aimed at family buyers and tapping into 80% of the total addressable market (TAM). It is also planning a motorcycle in the next two years. “The 125cc [motorcycle] market has gone from 20% to more than 60% share [of the overall motorcycle market]. That’s the belly of the market. That’s where we’ll play,” said Parekh.
The fourth element to the puzzle is even greater emphasis on innovation and technology. “46% of our workforce is R&D. We have 100–120 cost-saving projects going on at any given point. That culminates into a lower BoM [bill of materials], and with distribution and targeting the right TAM, even if the industry remains flat, we’ll grow faster,” Parekh added.
Finally, it’s also about Ather’s consistent pricing, and the focus on a disciplined approach. “We’ve not gotten sucked into the discounting game like our peers. We know how the margins are not sustainable below Rs 1 lakh [per unit].”
Ather, which has begun exploring international markets like Nepal and Sri Lanka, knows the path to profitability may be long—but has no doubt it is headed in the right direction.
Capacity Conundrum
One of the biggest red flags for investors looking at Ather Energy’s IPO is its aggressive manufacturing expansion despite underutilised capacity at its existing plant.
As of the nine months ending FY25, Ather’s factory in Hosur—with an annual capacity of 4.2 lakh electric two-wheelers and 3.8 lakh battery packs—was operating at just 41% utilisation.
Yet, the company is now committing significant post-IPO capital expenditure to build a third manufacturing facility in Chhatrapati Sambhajinagar, which will take total capacity to 14.2 lakh units annually—a 3.5x jump.
HDFC Securities flagged this move as risky, warning that “such a capex can lead to huge negative operating leverage,” especially when utilisation is so low: “The capex doesn’t make any sense plus the looming danger of negative operating leverage,” the broker noted.
But Ather’s leadership offers a different perspective. CEO Tarun Mehta argues that demand is accelerating fast and existing capacity could soon become a bottleneck. “The capacity is 35,000 per month. Oct 2023 festive we did 10,000 units per month, which is 29% utilisation. Oct 2024 we did 21,000 units, out of the capacity of 35,000,” he said. “At this point, I’m more scared about hitting our capacity this year than anything else. Our numbers are trending up really fast, distribution is coming really fast. Chhatrapati Sambhajinagar is coming at the exact time we need it.”
The new factory isn’t just about volume—it’s also about diversification and future-readiness. According to Mehta, the new plant will support the upcoming EL and Zenith platforms, which require different manufacturing processes.
Parekh emphasized the importance of planning for peak demand seasons. “We have to build for the festive season, that’s how the industry works. [Last] festive season…we already hit 60-70% capacity utilisation,” he said.
He adds that the expansion as a strategic move to get closer to northern markets and optimise logistics. “This brings us closer to the northern markets, where we’re targeting the next level of growth. Closer to the ecosystem, you’ll have a phenomenal advantage on conversion cost and everything put together,” Parekh said.
The strategy seems clear: build now for a surge that’s coming. But the risk remains that unless sales and distribution scale in tandem, this capacity expansion could weigh heavily on its balance sheet.
“We’re investing in a new plant, we’re investing in R&D, branded marketing—all the growth levers,” Parekh said.
Geographic Risk
One of the challenges in front of the company, as hinted above, is achieving geographic diversification. As pointed out by SBI Securities, Ather generated 61% in sales in April-December 2024 from southern India, making it susceptible to region-specific economic or regulatory disruptions.
However, points out the company, it is now rapidly expanding into northern and western markets. “South used to be 69% of our sales, now it’s 60% or lower. Non-south sales have been going up, and I’m more bullish about non-south sales now,” said Mehta. The mass-market Rizta scooter has been boosting adoption across states like Maharashtra and Gujarat, Mehta added. “North-south market share has almost doubled—5% to 20%. Maharashtra, 5% to 12%.” The company plans to deepen its retail footprint as newer platforms support broader portfolio expansion across India.
Besides giving it a strong foothold in new markets, Rizta has also catapulted the company’s entry into the mass-market volumes last year. The company has recorded 45% growth in the first three quarters while doubling its margins.
“That’s a very tough thing to crack. 100% growth in gross margins. That balance is very delicate. Margins are down due to some amazing value engineering work that the team has put in. and because of our sustained and growing software margins,” Mehta explained.
The cofounder is bullish on the ongoing financial year, thanks to expanded distribution, new product platforms, and deeper market penetration. “This 45% growth that happened last year was on the back of a fairly small distribution base,” he added.
He sees different growth engines kicking off at different stages in the future: “In the near term, there will be more stores. Mid term, there is the EL platform. Long term, there is the Zenith platform. We will build a solid pan-India distribution with a portfolio running across motorcycles and scooters.”
Despite intensifying competition, Mehta believes the e-two-wheeler market is already consolidated and the real differentiation lies in tech. “The entry barrier to building in auto is just very high,” he said. “I think our strength comes from our product and tech. Even if you copy [our strategy], you’re obviously moving a few years behind... You need a product development engine that can keep moving rapidly. That’s a unique Ather strength.”
The focus now is sharply on scaling volumes. “New products are rolling out, capacity scaled up well, quality is at a great place, and finally with Rizta now we can start adding distribution,” Mehta said. However, he is also aware of industry-wide challenges. “The next wave of growth towards 60-70% in the next 5 years will come from removing category barriers—battery life concerns, range anxiety, and charging infrastructure. We now offer an 8-year battery warranty with a 70% range guarantee. We’ve built a 3,000-strong charger network. The next growth will come as these concerns go away.”