Ola Electric is under investigation for alleged regulatory violations as authorities crack down on its showroom expansion. Reports indicate that over 95% of its physical stores lack mandatory trade certificates, leading to raids, vehicle seizures, and closures by transport officials across multiple states.
The electric vehicle (EV) startup, led by Bhavish Aggarwal, has rapidly expanded its retail presence, reaching 4,000 stores since 2022. However, according to a Bloomberg report, only 100 of these outlets possess the required certification under the Motor Vehicles Act. This certification is essential for selling, displaying, and offering test rides of unregistered vehicles.
Raids, Seizures, and Show Cause Notices
In response to consumer complaints, transport authorities have taken strict action, including issuing show-cause notices and shutting down non-compliant showrooms. Some officials have confirmed ongoing investigations into Ola’s operations, citing violations that date back to 2023.
A retired transport commissioner, Hans Kumar, emphasized that every automobile showroom must display a valid trade certificate if it deals with unregistered vehicles. Ola, however, argues that it complies with all legal requirements, maintaining its inventory at distribution centers and warehouses rather than directly selling unregistered vehicles through its showrooms.
Company Response and Stock Market Impact
Ola Electric dismissed the allegations, calling Bloomberg’s report “misplaced and prejudiced.” The company refrained from addressing whether its showrooms were raided or whether stores were lacking certifications. Following these reports, Ola Electric’s stock took a hit, dropping over 4% on March 10.
Mounting Challenges
Beyond regulatory troubles, Ola Electric is facing multiple setbacks. Its stock has plunged over 60% from its peak since going public in August. Additionally, the company has been dealing with quality concerns, customer service complaints, and financial losses.
In recent months, Ola has also laid off over a thousand employees and contract workers as it restructures operations. Meanwhile, its much-anticipated e-motorcycle launch has been delayed, despite initial promises of a January release.
Unregistered Vehicle Sales Raise Red Flags
Further complicating matters, Ola’s reported sales figures are not aligning with government registration data. In February, the company claimed to have sold over 25,000 vehicles, but VAHAN, India’s official vehicle registration portal, recorded only 8,600 registrations. Indian regulations prohibit unregistered vehicle deliveries, raising concerns over the discrepancy.
Can Ola Overcome Its Challenges?
As Ola Electric battles regulatory scrutiny, declining market share, and operational hurdles, the company remains optimistic about a turnaround. CEO Bhavish Aggarwal has stated that profitability is within reach, projecting EBITDA breakeven at 50,000 monthly sales. However, with increasing competition from legacy brands like Bajaj Auto and TVS Motor, the road ahead remains challenging for Ola Electric.
