More Troubles For Ola Electric: Raids At Stores, Comes Under MHI’s Lens

SUMMARY

After facing heat from its customers for a large part of 2024, the EV maker now seems to be caught in regulatory troubles

Recent media reports allege that the company is operating its stores without necessary licences and is facing a threat of an MHI investigation over disparity in its monthly sales and registrations

The stock again came under pressure today and ended the trading session 4.01% lower at INR 51.66 on the BSE

There seems to be no end to Ola Electric’s troubles. After facing heat from its customers for a large part of 2024, the EV maker now seems to have hit a regulatory snag.

Citing inspection letters, a report by NDTV Profit said that at least six Ola Electric

stores in Madhya Pradesh and 26 stores in Maharashtra were raided by regional transport officials in mid-March.

The report added that 14 Ola Electric scooters were impounded by authorities in MP’s Jabalpur, while 36 escooters were seized in Maharashtra.

However, sources close to the company told Inc42 that these were not raids but “inspections” carried out by the state transport authorities based on a complaint filed by an anonymous person, alleging lack of proper documentation.

The NDTV Profit report, citing an inspection report, said that the raids were carried out on the basis of a complaint filed by Gurugram-based Pritpal Singh & Associates, alleging that Ola Electric has been setting up “showrooms, stores and service centres in Maharashtra by obtaining a single trade certificate”.

The raids (or inspections) by the transport departments in these states is just an extension of what the company is facing in Goa, Jammu and Kashmir, and Bihar.

About two weeks ago, Bloomberg reported that transport officials across India had increased scrutiny of Ola Electric due to the company lacking the required trade certificate for most of its stores.

It is pertinent to note that amid rising complaints about delays in delivery of escooters and after-sales service, the Bhavish Aggarwal-led EV company expanded its network to 4,000 stores in December last year from 800 earlier.

Selling Without A Licence?: The Bloomberg report alleged that the company has been operating its stores without obtaining the necessary certifications outlined under the Central Motor Vehicles Act, 1988.

Under the Act, vehicle distributors and manufacturers are required to obtain business certificates to showcase and sell unregistered vehicles from their stores.

As per the report, about 95% of the company’s 3,400 showrooms across India were selling or offering test rides to users without the required trade certificate.

However, a spokesperson of Ola Electric called Bloomberg’s investigation into the matter of non-compliance “misplaced” and “prejudiced”.

The spokesperson added that the company maintains an inventory of unregistered vehicles at its distribution centres and warehouses across Indian states “which are fully compliant with the guidelines of the Motor Vehicles Act, and have the necessary approvals”.

MHI Calls Out The Sales Bluff: As if the scrutiny of the transport departments of the states wasn’t enough, the company has been successful in attracting the attention of the Ministry of Heavy Industries (MHI) with regard to the number of vehicles sold.

According to a report by CNBC-TV18, the MHI is currently investigating discrepancies between the company’s reported sales figures and actual vehicle registrations.

While the Vahan portal records 8,600 new Ola Electric registrations in February, the company claims to have sold 25,000 scooters.

However, what’s worth noting is that the company informed the bourses in February that its registrations for the month would see a “temporary impact” as it was in the process of renegotiating terms of agreements with its agencies Rosmerta Digital Services Pvt Ltd and Shimnit India Pvt Ltd.

It further seems that even renegotiations are also not going well. Last week, Rosmerta filed a plea to initiate insolvency proceedings against Ola Electric’s subsidiary Ola Electric Technologies for allegedly defaulting on its payment obligations.

Shares Crash: While there has been no official communication from the EV maker about the reported raids, the company’s shares have been facing heavy selling pressure over the past few months.

After touching an all-time low of INR 46.32 on Monday (March 17), Ola Electric’s shares jumped about 12% on Tuesday (March 18) amid recovery in the broader market.

However, the stock again came under pressure today and ended the trading session 4.01% lower at INR 51.66 on the BSE. The company’s market capitalisation now stands at $2.64 Bn as against its IPO valuation of $4 Bn.