If someone told you that a company’s revenue just halved, its unit sales fell by nearly 50%, and it posted a quarterly loss of Rs 428 crore, you’d expect its stock to tank. But Ola Electric did exactly that – and its stock soared.
Earlier this week, Ola’s shares surged by over 18% in a single trading session, following its Q1 FY26 results announcement. While they later closed down by 6%, the initial rally revealed something deeper: investors see Ola’s results not as a sign of distress, but of discipline.
For the quarter ending June 2025, Ola Electric reported a 49.6% year-on-year decline in revenue, down to ₹828 crore from ₹1,644 crore last year. Unit sales nearly halved too, from 1.25 lakh scooters to just over 68,000. Losses widened on a year-on-year basis – from ₹347 crore last year to ₹428 crore this year – although quarter-on-quarter losses narrowed by half, from ₹870 crore to ₹428 crore.
Why then did investors react positively?
The answer lies in what Ola is becoming, rather than what it was. Internally, the company has been working on Project Lakshya, an initiative launched to cut operational costs and tighten fundamentals. It appears to be bearing fruit. Monthly auto segment expenses fell from ₹178 crore in Q3 FY25 to ₹105 crore in Q1 FY26. Material costs saw a steep decline, driven by Ola’s decision to internalise more components through vertical integration. Employee costs fell too, from ₹123 crore last year to ₹89 crore now.
These changes are translating into healthier margins. Ola’s Gen 3 scooters, which account for 80% of its sales today, are proving to be far more efficient. Warranty claims are down 60%, and gross margins jumped from 13.7% in Q4 FY25 to 25.8% this quarter – a significant leap in an industry where margins are typically thin.
CEO Bhavish Aggarwal captured this shift succinctly when he said: “We’ve moved from aggressive growth to a balanced, profitable strategy.” In effect, Ola is pivoting from the hypergrowth mindset that defined much of India’s startup ecosystem to a more operationally disciplined model focused on sustainable profitability.
Another factor bolstering investor confidence is Ola’s battery ambitions. The company is investing heavily in its gigafactory to produce next-generation 4680 cylindrical battery cells in-house – the same technology Tesla uses. With batteries making up 40–50% of an EV’s cost, in-house cell production could substantially improve margins. Ola has already invested ₹1,500 crore in this ₹2,800 crore gigafactory project, with additional debt funding lined up from an SBI-led consortium.
By Navratri this year, the company plans to launch electric vehicles powered by these new battery cells. If successful, this vertical integration could transform Ola from being merely a scooter manufacturer into a full-stack EV and battery tech company – a shift that investors are keenly eyeing.
However, challenges remain. Sales have sharply declined year-on-year, while competitors like TVS and Bajaj are gaining ground with stronger dealer networks and brand loyalty. Ola is also relying on Production Linked Incentives (PLI) to achieve its projected 35–40% margins for Gen 3 scooters by the end of FY26. These incentives won’t last forever, and Ola will need to prove its cost structure can stand independently in the long run.
Further, executing the gigafactory rollout, ensuring battery technology reliability, and scaling production without delays carry inherent risks. Any slip-ups here could quickly undo recent gains and erode investor confidence.
Ultimately, Ola’s stock didn’t rally because the company became profitable overnight. It rallied because for the first time, investors saw concrete signs of financial discipline, operational focus, and a clear roadmap to profitability. After years of chasing scale at the cost of sustainability, Ola is starting to behave like a business – a shift markets are rewarding.
That said, the road ahead is long. Ola still needs to demonstrate consistent profitability, prove its battery technology at scale, and defend its market share in an increasingly crowded EV space. The coming quarters will be crucial to determine if this is truly Ola’s turning point – or just a temporary reprieve in a challenging market.
