HSBC reiterates bullish stance on Ola Electric, maintains ‘buy’ rating with target of Rs 110

HSBC Global Research has reiterated its bullish outlook for Ola Electric, maintaining a ‘buy’ rating on the electric two-wheeler maker’s bond with a target price of $110 each. HSBC views the stock as a high-risk, high-reward opportunity, and emphasizes that the company’s bullish future largely depends on the success of its electric vehicle (EV) bikes and internal battery development initiatives.

In a recent research note, the investment firm noted that Ola Electric’s EV bikes are at least 2-3 years ahead of the competition, giving it a significant advantage in the rapidly evolving electric vehicle market. The success of Ola’s battery businesses could give it a long-term competitive advantage, further strengthening its position in the market.

HSBC revisited Ola Electric service centers a month after an earlier inspection in September and found that the situation had improved substantially.

Acknowledging that full normalization will take time, the HSBC report highlighted key improvements. For example, service centers were described as less chaotic, with slightly more vehicle exit than entry. The backlog at these centers had decreased by 20% to 30% month on month and the number of technicians had increased. The report noted that hiring is proceeding more slowly than expected due to a shortage of skilled labor.

Staff from the big four firms, Ernst & Young (E&Y), have been on site for the past three weeks, helping Ola Electric optimize its service processes, the HSBC report added. Ola Electric is actively expanding its service network, with plans to establish larger service stations, he added.

Backstory: Bhavish Aggarwal vs. Kunal Kamra

Ola Electric and its founder, Bhavish Aggarwal, are in the middle of a social media reaction about the company’s service problems and poor customer relations response. The controversy began with a tweet by comedian Kunal Kamra criticizing Ola’s service, which quickly turned into a heated exchange between Kamra and Aggarwal. Since then, the situation has attracted dissatisfied customers and market participants, further amplifying public outcry.

The company has come under scrutiny after the Central Consumer Protection Authority (CCPA) issued show cause notice to Ola Electric following a wave of more than 10,000 complaints received on the National Consumer Helpline (NCH).

Consumer Affairs Secretary and CCPA Chairman Nidhi Khare told CNBCTV-18 that they had been receiving complaints against Ola Electric on NCH toll-free number 1915. The CCPA has classified the more than 10,000 complaints into 10 broad categories and has asked Ola Electric for urgent redress.

Ola Electric – Share price evolution after listing and market share

Ola Electric Mobility was listed in August this year at its issue price of ₹76. However, it quickly doubled its issue price to hit a post-listing high of ₹157.4. The stock is now down 50% from those levels. On Friday, the stock price closed at $77.29 per share on the NSE.

Ola Electric has seen a sharp drop in its market share since the beginning of the current financial year. According to VAHAN data, its market share, which was 52% in April, fell to 27% in September.

The company’s loss of ground is mainly due to increased competition from established automakers like Bajaj Auto and TVS Motor, which have been strengthening their presence in the electric vehicle market. Both Bajaj and TVS, each with around 12% market share in April, saw their shares rise to around 20% in September, according to the VAHAN report.