Ola Electric's S1 Pro Receives Second Product Certification Under PLI Scheme

Key Highlights

• Ola Electric has been certified with DVA certificate under PLI-Auto Scheme
• The certification is being given to Ola S1 Pro 
• it marks the second electric scooter from Ola’s lineup to garner approval under the PLI scheme after Ola S1 Air

Ola Electric, a prominent player in the electric vehicle (EV) manufacturing sector, has achieved yet another milestone by securing certification for its second product under the Production-Linked Incentive (PLI) scheme for the automobile and auto component industry. 

Certification Achievement

The certification, awarded to Ola Electric's S1 Pro (Gen-2), signifies a significant accomplishment for the company, as it marks the second electric scooter from Ola’s lineup to garner approval under the PLI scheme. Earlier in January, Ola Electric received the Domestic Value Addition (DVA) certification for its S1 Air scooter, making it the pioneer two-wheeler EV manufacturer to qualify under the Ministry of Heavy Industries' scheme.

Overview of PLI Scheme for Automobile and Auto Components

The Production Linked Incentive (PLI) Scheme for Automobile and Auto Components, approved by the Union Cabinet on 15th September 2021, with a budgetary outlay of Rs 25,938 crore for a period of five years (FY2022-23 to FY2026-27), aims to bolster the manufacturing of Advanced Automotive Technology (AAT) Products.

This scheme is instrumental in promoting deep localization for AAT products and facilitating the creation of domestic as well as global supply chains. Focused primarily on Zero Emission Vehicles (ZEVs) such as Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles, the scheme offers incentives from FY 2022-23 to FY 2026-27, with disbursement applicable in the subsequent financial year, i.e., from FY 2023-24 to FY 2027-28

Benefits Under PLI Scheme

Under the PLI scheme, Ola Electric stands to reap substantial benefits, including incentives for up to five consecutive financial years, commencing from fiscal year 2023-24. These incentives are anticipated to range between 13 percent and 18 percent of the determined sales value (DSV) of the products.

What is a DVA certificate?

A domestic value addition (DVA) certificate is a certification given by the Automotive Research Association of India (ARAI). The certificate is given to companies that have met the local value-add criteria of 50%.

The DVA certificate is a key condition for companies to qualify for subsidies under the production-linked incentive (PLI) scheme. The intention is to promote local manufacture of new technology products such as electric vehicles (EV) rather than subsidizing imports.

The DVA certificate is granted after testing of the product and checks on the localisation standards of the components.

Application Process and Timeline

Ola Electric initiated the application process for PLI certification for the S1 Pro in the latter half of October at ICAT, Manesar. Subsequently, on February 9, 2024, the company received the coveted certification, positioning both the S1 Pro and S1 Air as eligible candidates for subsidies under the government’s Auto PLI scheme for a period of five years from the date of certification.

Response and Pending Clarifications

Despite efforts to obtain clarification, responses to emailed queries directed to spokespeople at the Ministry of Heavy Industries and Ola Electric were still pending at the time of publishing.

Financial Strategy and DRHP Submission

In December, Ola Electric submitted its Draft Red Herring Prospectus (DRHP) to the Securities and Exchange Board of India (SEBI), outlining its ambitious plans to raise Rs 7,250 crore through a fresh issue of shares and an offer-for-sale (OFS) of shares. A portion of the funds, specifically Rs 1,226 crore, is earmarked for capital expenditure, with an additional Rs 800 crore allocated for debt repayment.

Company Background and Expansion Plans

Founded in 2015 by Bhavish Aggarwal, Ola Electric has made significant strides in the EV industry, including the establishment of a factory in Krishnagiri, Tamil Nadu. Moreover, the company is poised to further expand its EV business by establishing India's inaugural lithium-ion cell manufacturing facility, also located in Tamil Nadu.

Financial Performance

Despite market challenges, Ola Electric has exhibited robust financial performance, with consolidated revenue soaring to Rs 2,782 crore in FY23, reflecting an impressive surge of nearly 510 percent compared to the preceding year. However, the company also reported a widened net loss of Rs 1,472 crore, doubling from the Rs 784 crore loss recorded in FY22.

Verdict

Ola Electric's attainment of certification for its S1 Pro (Gen-2) under the Production-Linked Incentive (PLI) scheme marks a significant achievement, further solidifying its position in the electric vehicle (EV) manufacturing sector. Despite pending clarifications, the company's successful application process and timeline showcase its commitment to leveraging government schemes for growth. With the potential benefits offered by the PLI scheme and its strategic financial plans, Ola Electric is poised for continued expansion and innovation in the EV industry, building upon its robust financial performance and ambitious growth plans.
 

Also Read: Upcoming Two-Wheeler Launches in February 2024 in India