The business is at danger of increased expenses because its capacity expansion is behind schedule.
In May 2023, Ola Cell Technologies Private Ltd started building its gigafactory in four stages to manufacture lithium-ion cells for batteries used in electric vehicles. In order to avoid relying on Chinese cells, Ola Electric Mobility was placing a wager on its gigafactory. But Ola’s capacity expansion is behind schedule, exposing it to risks of higher costs, potential loss of government incentives and even technology going obsolete.
In order to manufacture lithium-ion cells for electric car batteries, Ola Cell Technologies Private Ltd (OCT), a fully owned subsidiary of Ola Electric Ltd, started building its gigafactory in May 2023 in four stages.
The business had set aside ₹1,227 crore of the ₹5,500 crore it raised by issuing new shares in August 2024 to increase the facility’s capacity to 6.4 GWh in the second phase by April 2025.
Icra Ltd, the public issue’s monitoring agency, stated in a report released by Ola Electric to exchanges on May 15 that it has not, however, used any of the cash. This implies that OCT is well behind the schedule that investors were previously informed of.
Additionally, in May, Icra lowered OCT to BBB- (Negative). ICRA stated in its downgrading note that the project is exposed to geopolitical and region-specific risks for raw materials because the battery cell manufacturing segment is extremely technologically complicated and heavily depends on imports for obtaining raw materials. OCT is therefore still vulnerable to supply chain, demand/offtake, timely execution, and technological obsolescence issues.
Bhavish Aggarwal, the company’s creator, established the goal of achieving 20 GWh capacity by 2026 on August 15, 2024, given that the majority of lithium-ion cells are imported from China.
A battery is made up of a group of cells, and a gigafactory’s capacity is the amount of energy that can be generated from cells over the course of a year.
Before filing its red herring prospectus (RHP) for listing in August 2024, Ola Electric had previously stated that it would start commercial production of cells in April–June 2025. In phase 1a, a 1.4 GWh capacity was built at a cost of ₹1,226 crore. This was part of the company’s strategy to avoid relying on Chinese cells. According to a project cost vetting assessment included with the RHP, this was anticipated to increase to 5 GWh by February 2025 under phase 1b and to 6.4 GWh in phase 2 by April 2025. By 2026, Ola aimed to increase the whole capacity to 20 GWh.
Nonetheless, Aggarwal stated in a February 7th earnings call that the current fiscal year will see the capital investment necessary to raise the capacity to 5 GWh under phase 1b. This shows that even phase 1b has been delayed. The company had planned to construct 20 GWh of total EV cell manufacturing capacity by 2026, and the delays will impact the company’s financial stability, causing later phases to lag further behind the timescale that investors were given.
Prior to this, Ola Electric had stated that it will start producing cells commercially in April–June 2025. It’s unclear, though, if that has begun.
According to someone with knowledge of the developments, “The testing process after completion of a phase can take time as cells are a complex and sensitive technology,” suggesting a possible cause for the manufacturing hold-up. “The completion of all testing and other procedures from the previous phase is a prerequisite for a ramp-up after each phase.”
Amit Tandon, founder and MD of proxy advisory firm 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.”
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 (production-linked incentive) 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.”
Ola Electric was the first company chosen in 2022 as part of the ₹18,100-crore PLI strategy to indigenise India’s cell manufacturing ecosystem. Ola has two years to invest ₹225 crore per GWh of the pledged 20GwH capacity under the program, with 25% value-addition. Reaching this milestone is a requirement for the incentives to be paid out.
However, in March, the company received a letter from IFCI Ltd, PLI’s project management agency for cells, informing it that it had failed to meet the first milestone deadline. The corporation could not provide any clarification regarding the timeline, although it did acknowledge receipt of the letter from the exchanges.
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