The IPO-bound Ola Electric saw a significant increase in its cost of imports from China in the financial year 2023-24, even as it bagged financial incentives from the Indian government aimed at promoting local manufacturing of electric vehicles and battery cells.
According to the company’s Red Herring Prospectus (RHP), imports from China rose to 37 percent of the company’s total cost of materials consumed in FY24, up from 19 percent in the previous year, highlighting the Bengaluru-based EV maker’s dependence on suppliers in the neighbouring country for key raw materials.
The company’s total cost of materials consumed was around Rs 4,390 crore, up 75 percent from FY23, of which, imports from China amounted to Rs 1,624 crore.
In FY24, Ola Electric’s imported supplies comprised 37.03 percent of the cost of materials consumed while domestic supplies comprised 62.97 percent.
The company, whose Rs 6,145.96-crore initial public offering (IPO) opens for subscription on August 2, attributed the surge to an increase in production capacity and the procurement of essential components such as lithium-ion cells, magnets, amplifiers, and electronic integrated circuits.
The supplies were sourced not only from China but also from Singapore, South Korea, Thailand, and Malaysia. However, the company has been bringing down its imports from South Korea, Malaysia and Thailand down, the RHP shows.
The firm’s cost of imports from South Korea was around 11.65 percent in FY23 but came down to 0.01 percent in FY24. Malaysian costs came down to 0.02 percent from around 0.08 percent in the previous year.
“We plan to increase our factory’s localisation especially for our new gigafactory…Overall we are bringing down our import dependence,” Ola Electric founder and chairman Bhavish Aggarwal said during a pre-IPO press meet on July 29.
The spike in imports and its cost underscores the critical reliance of the EV sector on China for key raw materials like lithium, which is vital for battery production.
In the past, Ola imported a small quantity of cathode active material (CAM) and anode active material (AAM) from suppliers in China for cell research, experimentation and testing on a purchase order basis. Upon commencement of in-house cell manufacturing at its Ola Gigafactory, the company plans to continue to source such raw materials from suppliers in China.
"As such, we may be exposed to the possibility of product supply disruption and increased costs in the event of changes in the policies, rules and regulations of the Indian or Chinese government, including as a result of any political tensions, which could result in trade tariffs, increased freight charges or prices of CAM and AAM, or a complete halt on imports from China," the company said.
Also Read:Ola Electric's revenue hits Rs 5,000 crore, losses widen by 8 percent in FY24
Ola Electric has been investing in and is starting making battery cells. Ola Electric’s Lithium Battery cell recently received a Bureau of Indian Standards (BIS) certification. However, this is expected to further increase its import of lithium.
The government's recent policy changes also play a role. In Budget 2024, Finance Minister Nirmala Sitharaman announced a complete customs duty exemption on 25 critical minerals, including cobalt, lithium, copper, germanium, and silicon.
The move is intended to support the burgeoning EV industry by reducing the cost of crucial imports, thereby potentially increasing the production capacity of companies like Ola Electric.
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