Ola Electric Increases Dependence On Chinese Parts Amid Import Cuts

Ola has successfully reduced its import percentage from 37% to 29%, although the proportion of imports from China has increased.

Ola Electric has decreased its import percentage to about 29% in the latest fiscal year from approximately 37% previously. The company, led by CEO Bhavish Aggarwal, is looking to boost its local production further as it develops its gigafactory and further integrates its manufacturing processes. Aggarwal shared these insights during a pre-IPO media conference in Mumbai, emphasizing the necessity for the entire EV industry to advance in this area. He noted that government initiatives like the Production Linked Incentive (PLI) schemes support these efforts.

According to its Red Herring Prospectus (RHP), in the fiscal years 2024, 2023, and 2022, Ola mainly sourced imports such as lithium-ion cells, magnets, amplifiers, and electronic integrated circuits from countries like China, Singapore, South Korea, Thailand, and Malaysia. The RHP detailed that the cost of materials from China as a percentage of the total material costs for EV scooters increased significantly from 7.90% in FY22 to 19.29% in FY23 and then to 36.86% in FY24. In contrast, imports from South Korea and Malaysia accounted for much smaller percentages, highlighting a shift in sourcing dynamics.

Aggarwal pointed out that although a significant portion of their imports is not from China, the overall price value of the components might have increased even if the number of components imported has decreased.

Furthermore, the RHP noted that Ola had previously imported small quantities of cathode active material (CAM) and anode active material (AAM) from Chinese suppliers for cell research and testing purposes. With the start of in-house cell manufacturing at Ola’s Gigafactory, the company plans to continue sourcing these materials from China.

The prospectus also warned of potential risks such as supply disruptions and increased costs due to changes in the policies, rules, and regulations of the Indian or Chinese governments. This could lead to trade tariffs, higher freight charges, or even a complete halt on imports from China, necessitating the search for alternative suppliers in other countries. There is no guarantee that alternative suppliers can be found promptly who can meet the required specifications and quality levels or offer competitive prices.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Captcha verification failed!
CAPTCHA user score failed. Please contact us!