Ola’s battery cell ambition has run into a bump

Ola Electric Mobility Ltd was betting on its gigafactory to shun dependence on Chinese cells for its batteries. But the company’s capacity expansion is already behind schedule, exposing it to risks of higher costs, loss of government incentives and even technology going obsolete.

Ola Cell Technologies Private Ltd (OCT), a wholly owned subsidiary of Ola Electric Ltd, began constructing its gigafactory in May 2023 in four phases to produce lithium-ion cells for electric vehicle batteries.

Of the ₹5,500 crore the company raised by issuing fresh shares in August 2024, it had set aside ₹1,227 crore to expand the capacity of its facility to 6.4 GWh in the second phase by April 2025.

However, it has not utilised any money from these funds, said Icra Ltd, the monitoring agency of its public issue, in its 15 May report that Ola Electric shared with exchanges.

That suggests OCT is far behind the previously disclosed timeline to investors.

Icra also downgraded Ola Cell Technologies’ BBB- (Negative) in May.

“The battery cell manufacturing segment is highly technologically complex and has significant dependence on imports for sourcing raw materials, which exposes the project to geopolitical and region-specific risks for raw materials,” the agency said in its downgrade note. “OCT, thus, remains exposed to risks of timely execution, demand/offtake, supply chain and technology obsolescence.”

Original road map

The company’s founder Bhavish Aggarwal had on 15 August 2024 laid down the vision to achieve 20GWh capacity by 2026 as lithium-ion cells are largely imported from China.

A cluster of cells makes a battery, and the capacity of a gigafactory is the total energy that can be produced from cells produced in a year.

In phase 1a, the company built 1.4 GWh capacity at ₹1,226 crore, which was completed before Ola Electric filed its red herring prospectus (RHP) for listing in August 2024. This capacity was expected to go up to 5 GWh by February 2025 under phase 1b and to 6.4 GWh in phase 2 by April 2025, according to a project cost vetting report submitted with the RHP. Ola targeted to raise the total capacity to 20GWh by 2026.

However, Aggarwal said during an earnings call on 7 February that capital expenditure to increase the capacity to 5 GWh under phase 1b will happen in the current financial year FY26. That indicates even phase 1b has been delayed, pushing under phase to further behind the schedule that was conveyed to investors.

Ola Electric had previously said it would begin commercial production of cells in April-June 2025. However, it is unclear if that has started.

“The testing process post completion of a phase can take time as cells are a complex and sensitive technology,” said a person aware of the developments, highlighting at a potential reason for the delay in production. “A ramp-up post each phase depends on the completion of all testing and other processes of the previous phase.”

Amit Tandon, founder and managing director at IiAS, said, “Ideally, when there is a substantial delay in a project, the delay should be flagged. If the project has an impact on profitability, it becomes even more important to reveal the reasons behind the delay.”

In response toMint’s emailed queries, Ola Electric said, “We have announced the commercial production of our cells beginning Q1 FY26, and are on track to meet the set timelines. Ola Electric will be the first to commercially manufacture lithium-ion cells in India under the government’s ACC (advanced chemistry cell) PLI scheme. We continue to have regular discussions with MHI (the ministry of heavy industries) regarding updates on our progress and timelines for each of our set milestones.”

Incentives at stake

In 2022, Ola Electric became the first company to be selected under the ₹18,100 crore production-linked incentive plan to indigenise the cell manufacturing ecosystem in India. Under the scheme, Ola had to invest ₹225 crore per GWh of the committed 20GwH capacity, along with 25% value-addition, within two years. The disbursal of the incentives is contingent upon achieving this milestone.

However, IFCI Ltd, the project management agency of PLI for cells, wrote a letter to the company in March stating that it had missed the deadline to complete the first milestone. While the company acknowledged the letter to the exchanges, it did not offer any clarity on the timeline.

 “The Company is actively engaged with the relevant authorities in this regard and in the process of filing an appropriate response,” Ola Electric said in an exchange filing on 4 March.

Under the PLI scheme, the company has to build 20GWh of capacity by 2027 to complete the second milestone and achieve 60% value-addition.

Any risk to the incentives can spell problems for the firm, according to analysts.

“One of the reasons for setting up its own gigafactory was to take advantage of the PLI for advanced chemistry cells, which would have resulted in a 50% reduction in capital employed for setting up 20 GWhr,” Rishi Vora of Kotak Institutional Equities wrote in an 18 March note.

The company may have to outsource the construction to a third party or else it would find it difficult to install 20GWh capacity in the next two to three years, Vora said. The delay in timelines will have a bearing on the financial health of the firm.

Bumpy road to profit

The company earlier anticipated that the integration of cell capacity will be crucial for its margins, which will aid the profitability of the company. “At a consolidated level, when our battery cell comes in, we will actually have an expansion of margin,” Aggarwal had said in Q3 FY25 earnings call on 7 February.

However, in the October-December quarter of FY25, the company’s loss widened to ₹564 crore from ₹364 crore a year earlier.

To be sure, in addition to expanding the cell factory, the company had also raised funds for investing in research and development, general corporate purposes, inorganic growth initiatives, and debt repayment. Of the total ₹5,500 crore, ₹2,829 crore remains unutilised. These funds, parked by the company in several fixed deposit accounts, have earned ₹54 crore so far in interest income, according to Icra’s monitoring report.

Ola Electric’s shares have tumbled nearly 40% in 2025 against a 3.48% rise in Nifty Auto.

“The slower-than-expected ramp-up of its gigafactory or lower-than-expected yield will result in higher cash outflow for the company in the coming quarters, which needs to be monitored,” Vora said.