Ola Electric's Wild Ride: What's Behind the Stock's Volatility?

If you've been watching the stock market lately, you might have noticed the absolute rollercoaster that has been Ola Electric Mobility shares. One minute, they were the talk of the town, surging an incredible 29% over just two days. The next, they took a sharp 7.2% dive. It’s the kind of whiplash that leaves investors scratching their heads and asking, what on earth just happened?

Key Highlights

• ✓ Ola Electric's stock surged an impressive 29% in just two days, hitting a near three-month high.
• ✓ The rally was cut short by a 7.2% drop after new VAHAN registration data was released.
• ✓ The data showed Ola trailing rival Ather Energy in August registrations, with 9,522 units versus Ather's 10,248.
• ✓ Broader market uncertainty looms due to a potential GST cut on small cars, which could impact EV adoption.
• ✓ Despite a challenging quarter year-on-year, the company showed sequential improvement with expanding gross margins.

Well, it turns out the sudden reversal wasn't just random market noise. The rally came to a screeching halt thanks to some fresh data that cooled down investor excitement, and it has everything to do with sales numbers and a bit of government policy uncertainty. Let's peel back the layers and figure out what’s really driving the sentiment around one of India’s biggest EV players.

The Data That Hit the Brakes

So, what was the big news that stopped the rally in its tracks? It all comes down to the VAHAN registration data. For those unfamiliar, VAHAN is the government's portal that tracks vehicle registrations, giving us a real-time peek into how many vehicles are actually being sold and hitting the roads. It’s a pretty reliable indicator of a company’s sales performance.

The latest numbers for August, as of the 20th, showed something interesting. Ola Electric had recorded 9,522 registrations. While that’s a solid number, the problem was that its key competitor, Ather Energy, had pulled ahead with 10,248 registrations. This wasn't just a minor blip; it signaled a potential shift where Ola could see its market share slip behind its rival if the trend continues through the end of the month.

You can see why this spooked investors. After celebrating a massive 29% gain over Tuesday and Wednesday, this data was a dose of cold reality. The market quickly recalibrated its expectations, leading to that sharp 7.2% drop on Thursday. It’s a classic example of how quickly sentiment can turn based on fresh performance metrics.

The Looming Shadow of GST Uncertainty

As if the sales data wasn't enough, there's another cloud of uncertainty hanging over the entire auto sector, especially for EV manufacturers. There have been whispers and statements from the government, including Prime Minister Narendra Modi, about plans to lower GST rates on several goods by Diwali. One of the key proposals is a potential cut on small cars, dropping the rate from a hefty 28% down to 18%.

On the surface, cheaper cars sound great for everyone, right? But here’s the catch for the EV industry. According to analysis from HSBC Global Research, while this move could positively impact overall auto demand, it might come with a sting in the tail for electric vehicles. They cautioned that states could respond by raising road taxes on EVs to make up for any lost revenue, effectively neutralizing some of the benefits.

💡 What's Interesting: Financial firm Nomura put it even more bluntly, stating, "if the GST cut on ICE happens, it is likely to significantly impact EV adoption… as the price gap between EVs (taxed at 5%) and ICE (taxed at 28% plus cess) would increase sharply.”

This is the core of the issue. Electric vehicles currently enjoy a much lower GST rate of just 5%, a key incentive designed to encourage adoption. If traditional petrol and diesel, or Internal Combustion Engine (ICE) vehicles, suddenly get a massive tax cut, the price difference between an EV and an ICE car widens significantly. That could make potential buyers think twice about going electric, slowing down the very adoption the government has been trying to promote.

A Mixed Bag of Financials

Beyond the daily market drama and policy debates, a company’s health really comes down to its financials. Looking at Ola’s first-quarter results, the picture is quite mixed. It’s a story of two different comparisons: how they did compared to the last quarter, and how they did compared to the same time last year.

On a positive note, the company showed some strong sequential improvement. Compared to the previous quarter, losses narrowed and revenue grew. Even better, their gross margins expanded by a whopping 1,100 basis points quarter-on-quarter, reaching 26% by the end of June. Management seems optimistic, guiding for full-year gross margins of 35% to 40% and expecting the auto business to become EBITDA positive in the second quarter.

However, the year-on-year story isn't as rosy. For the June quarter, Ola Electric posted a consolidated net loss of Rs 428 crore, which is up 23% from the same period a year earlier. Revenues were halved to Rs 828 crore, and EBITDA losses widened to Rs 237 crore. This shows that while the company might be on a better track recently, it still faces significant challenges in turning its operations profitable over the long run.

The Long-Term View vs. Short-Term Noise

So, with all this volatility, what do the experts think? Some analysts argue that savvy investors are looking past the immediate hurdles. According to Anirudh Garg, a Partner and Fund Manager at INVasset PMS, the market's focus is more on Ola's "operational execution and the company’s expansion trajectory rather than short-term policy noise."

Garg acknowledges that a GST cut on small cars and two-wheelers could certainly pose a "near-term challenge" by making ICE vehicles more affordable. However, he points to Ola’s broader strategy as a reason for long-term optimism. The company’s work on its Gen-4 platform—which spans electric cars, rickshaws, and light commercial vehicles—shows a bigger vision that isn’t just about the current two-wheeler market.

From a technical standpoint, the charts reflect this tension. The stock is down significantly for the year (42%) and over the past year (64%). The Relative Strength Index (RSI) is currently at 79.8, which is above the 70 mark that traders consider "overbought." This suggests there could be more pullback on the horizon. On the other hand, the MACD, another key indicator, remains above its center and signal lines, pointing to an underlying bullish bias. It's a classic tug-of-war between short-term warnings and long-term potential.

Conclusion

The recent journey of Ola Electric's stock is a perfect case study in modern market dynamics. A fantastic two-day rally, fueled by positive sentiment, was quickly grounded by hard data from VAHAN and the lingering uncertainty of future government policy. The competition from players like Ather Energy is very real, and the potential impact of a GST cut on ICE vehicles can't be ignored.

At the same time, the company is showing signs of getting its house in order with improved sequential financials and a clear long-term vision for expansion beyond scooters. For investors, it boils down to a conflict between the immediate headwinds and the belief in the company's ability to execute its ambitious plans for the future of electric mobility in India. The road ahead is definitely charged with both challenges and opportunities.