Not chasing discount-driven growth, says Ather CEO, scaling up lithium-ion cell production

Ather Energy

IPO-bound Ather Energy will not chase 'discount-driven volumes' and plans to scale up domestic lithium-ion cell production in India to secure supply chains. CEO and co-founder Tarun Mehta told Moneycontrol during an exclusive interaction on April 29 that Ather's proposed capacity expansion is expected to ramp up production to 5 lakh units annually, as it aims to increase footprint beyond southern regions.

Mehta said the new manufacturing facility in Maharashtra is crucial for the company, as it targets non-south markets amid a surge in demand for electric scooters. "The new facility will not only support increased capacity but also allow us to introduce a new, cost-effective scooter platform, and help us develop our motorcycle platforms," said Mehta. The two-wheeler company's electric vehicle production capacity as of March 2024 was 4.2 lakh units per annum.

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Ather’s Tarun Mehta said the ongoing tariff tussle is primarily between the US and China, and India, not being directly involved, could benefit. He sees Indian EV OEMs benefiting from the global supply glut of lithium-ion cells. "Long-term, we aim to shift more production, including motors and cells, to India. Our motor production is already based in India, and we're moving towards rare earth magnet-free motors. Through partnerships, like with Amara Raja, we're scaling up lithium-ion cell production in India to ensure secure supply chains", he said.

Discounts Won’t Last

Avoiding price concessions will be central to Ather’s philosophy. "In a market chasing discount-driven volumes, Ather has always charted its own course with pricing discipline. Discounting-driven growth in auto cannot last", said Mehta. Discounting may boost immediate numbers, but it risks diluting brand equity and eroding customer confidence over time, he added.

Ather said it has chosen to demonstrate pricing discipline on the basis of its software capabilities, unique safety features and overall customer experience as it strives to create a loyal user base and strong brand recall.

Road to Profitability

On the issue of profitability, Mehta stressed on two key factors - unit economics and volume growth. Aether's engineering focus has driven a 31 percent reduction in prices over the last three years, said Tarun Mehta, leading to a doubling of gross margins from 9 percent to 19 percent. "The company's reliance on government subsidies has come down materially, from Rs 55,000 to as low as Rs 5,000 per unit. Besides, Aether plans to lower costs further through LFP batteries, a cheaper scooter platform, and a larger integrated facility in Maharashtra". With expansion into non-southern markets, sustainable margin growth and a strong volume performance, Mehta said he is confident of the profitability trajectory.

The electric two-wheeler maker is extremely optimistic about scooter electrification, and Ather said it is focused on building a strong range of products. "Scooters have about 16-18 percent penetration, with strong adoption in tier-III cities. We are optimistic about expanding our product lines with a new platform, as electric scooters offer a better total cost of ownership compared to petrol versions and have strong social proof. We believe the scooter market will continue to electrify, which is why we're focusing on building a diverse product range."

In the midst of an expansion drive, Ather is betting on a disciplined execution to power its next phase of growth.

Electric two-wheeler maker Ather Energy has the backing of marquee investors such as Abu Dhabi Investment Authority, Societe Generale, Franklin Templeton & Invesco among others, who participated in the Rs 2,981 crore public issue via the anchor book.

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