Ather Energy has been sluggish in its market share trajectory, even as its product feedback and technological transition have been impressive, Elara Securities said in its Pre-IPO note, while citing a market share of 8-12 per cent for Ather since FY20. Peers such as Ola Electric Mobility Ltd, Bajaj Auto Ltd and TVS Motor have seen sharp upward movement in market share, the brokerage said.
Elara said Ather Energy's DRHP projected a 7-8 per cent growth compounded annually (CAGR) for two-wheeler industry domestic volumes over FY24-31, translating to volumes of 29-31 million units by FY31. EV penetration could reach 35-40 per cent, it suggested. OLA on other hand, projected an overall two-wheeler domestic sales of 27-28 million units by FY28 itself in in its red herring prospect, reflecting a 11 per cent CAGR with EV penetration at 41-56 per cent by FY28.
"Ather has presented capacity expansion plans till 1.42 million units upon completion of Factory 3.0," Elara noted.
Elara said Ather has a strong market presence in urban-heavy states such as Karnataka, Kerala, Tamil Nadu, Gujarat and Andhra Pradesh. These states account for 68 per cent of FY24 sales, as per its DRHP. That said, Ather’s low single-digit share in states such as Bihar, Uttar Pradesh, West Bengal and Odisha indicates the need to expand presence in such states, Elara said.
Elara said in the pre-scaling stage, EV companies are typically focused on developing products, building capabilities, and establishing brands and may also need to invest heavily in infrastructure such as manufacturing equipment as well as hiring employees.
"Ather has developed its product platform in-house through 2013 till launch in 2019. Ola Electric has incurred a cumulative cash burn of $538 million, while Ather Energy's cash burn stands at $240 million. Ather's cash burn rate is -0.8, significantly lower than Ola Electric," it said.
During FY22-24, Ather incurred R&D investments of Rs 520 crore, mainly towards enhancing product features. Ola incurred total R&D expenses of Rs 1,070 crore through FY22-24, predominantly towards cell and motor manufacturing and new platforms.
Going ahead, Ather has an earmarked investment of Rs 750 crore in FY26-28 (ARR of Rs 250 crore). OLA, on other hand, has earmarked an investment of Rs 1,600 crore in FY25-27 (ARR of Rs 550 crore). OLA’s higher investment in R&D versus Ather is likely due to development costs of the upcoming cell plant, Elara said.
"Per Ather, creating gigafactories for cell production is a technologically complicated and capital-intensive process. However, the value addition due to cell production only contributes to 17-27 per cent of the overall battery cost. The most value is captured in cathode and anode material manufacturing. In this stage, raw material contribute significantly to the overall manufacturing process. This makes the extraction and processing of battery minerals a highly strategic sector," Elara said.
While cell manufacturing is still at nascent stages in India, with the establishment of gigafactories under PLI ACC, this is expected to pick up. During that time, when cell manufacturing may be ramped up to a higher capacity and higher local content percentages would be required, access to raw material (cathode and anode minerals) could become a major potential obstacle, Elara said.
"Thus, ensuring access to raw material will become increasingly important and de-risking strategies should be in place to mitigate any potential supply chain disruption. Raw material contribute significantly to cell production cost at >60%. As India is import-dependent
Elara said it concurs with Ather’s decision of not getting involved in the battery manufacturing business, as the quantum and nature of benefits are not firmly established currently. The landscape is continuously evolving globally, with new technologies taking spotlight frequently.
Key positives & negatives Elara said the key positives from Ather IPO papers were its strong product quality, premium positioning, market leadership in some states of South India, lower cash burn rate than Ola Electric, and better capital allocation due to not venturing into cell manufacturing.
Key negatives included the absence of PLI benefits, which will result in disadvantage as regards pricing/ margins versus peers. Also a slower ramp-up despite early entry in the EV 2W space and sluggish product acceptance in North and East India are other negatives for Ather.