Ola Electric accelerates profitability drive axing regional warehouses, optimising costs

Ola Electric is expected to provide an official business update next week on February sales as it emerges from front-end distribution rejig

Ola Electric has eliminated its regional warehouses across India, and will now leverage its 4,000 retail stores nationwide for maintaining vehicle inventory, spare parts, accessories, and last-mile deliveries.

The strategic move is expected to boost EBITDA margins by almost 10 percentage points, besides improving inventory management and faster customer deliveries, sources directly familiar with the matter said.

Ola Electric is redesigning its distribution network and optimizing vehicle registration process as India's largest electric two-wheeler maker chalks out roughly Rs 30 crore monthly savings in an accelerated profitability drive.

The company has also renegotiated contracts with vehicle registration agency partners to streamline the process and further reduce costs. While this move temporarily affected the company’s registration numbers on the VAHAN portal in February, Ola Electric clarified in a stock exchange filing that actual sales remained unaffected during the month.

Internal sources indicated that the company is on track to sell over 25,000 units this month, maintaining its leadership in the EV two-wheeler segment.

"The front-end network redesign represents a fundamental rethinking of how we manage inventory and serve customers," shared a senior company executive requesting anonymity. "Our initial distribution model served its purpose during our early growth phase, and now the company's rapid expansion necessitated the front-end redesign." The restructured network allows Ola to maintain inventory directly at retail locations, eliminating an entire distribution layer while enabling stores to function as delivery points, reducing last-mile expenses and improving customer experience. The inventory pipeline has also been halved to 15 days from 30 days earlier and the delivery timelines have also been brought down to 4-5 days from an earlier timeframe of 10 days, sources added.

The company's focus on profitability comes at a crucial juncture for India's EV market, which has seen a double-digit growth amid rising fuel prices and increasing adoption in Tier 3 & 4 markets.

Industry observers suggest sustainable business models will ultimately determine long-term winners.

Ola Electric is expected to provide an official business update next week on February sales as it emerges from front-end distribution rejig and streamlining of vehicle registration processes — some of which is now automated — which might delay sales reflecting on the VAHAN portal for a few weeks.