Ather Energy expects to turn unit-level profitable in next 2 quarters

Phokela concluded that with an annual production capacity of 420,000 units, Ather does not foresee the need for additional manufacturing capacity for the next 18 months

India’s third-largest electric two-wheeler player, Ather Energy, expects to become profitable at the unit level within this financial year, according to a senior company executive.

Speaking to Business Standard on the sidelines of the Automotive Component Manufacturers

Association of India event in New Delhi, Ravneet Phokela, chief business officer of Ather, said, “We will be back to profitability very soon.”

When asked if it would be within this financial year, he replied, “Yes, at a unit level. The company’s profitability will naturally take a little longer because of ongoing research and development (R&D) investments, increasing platform costs, and the need to amortise R&D expenses.”

He said that the company was gross margin-profitable about six quarters ago but had to absorb some of the shocks due to the recalibration of the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India scheme.

Ather will now focus on achieving profitable growth. Phokela emphasised that Ather would not pursue volume growth by dropping prices. This strategy is also crucial for the company’s initial public offering plans.

He mentioned that the company must demonstrate profitability or a high capability to generate profits.

“Both are defensible. If I can conclusively demonstrate that we are one or two quarters away (from profitability), then there is no risk baked in, and it’s just a matter of time,” he added.

Ather’s net loss increased by 151.2 per cent year-on-year (Y-o-Y) to Rs 864.5 crore in 2022-23 (FY23). The company’s total revenue, according to Hero MotoCorp’s annual reports, surged by 336.6 per cent Y-o-Y to Rs 1,783.6 crore in FY23.

Hero, India’s largest two-wheeler maker, owns approximately 37 per cent in Ather.

Meanwhile, Ather recently raised Rs 900 crore from Hero, its largest shareholder, and the Singapore sovereign wealth fund GIC through a rights issue. Of this amount, Hero invested Rs 550 crore, and GIC invested approximately Rs 350 crore.

Phokela said that historically, a significant portion of investments has been allocated to R&D. To date, Ather has raised around $400 million, with approximately $150-175 million directed towards R&D, he said.

The company plans to invest the recently raised Rs 900 crore in a similar proportion, allocating 25-30 per cent to R&D and product development.

As the market matures, people are realising that they don’t need as much range as they once thought, he added.

Ather recently expanded its product portfolio with 2.9 kilowatt hour (kWh) and 3.7 kWh battery options for the flagship 450X, as well as an entry-level product, the 450S.

“Range comes at a cost. If one has more range than necessary, it’s a waste of money because the most crucial component of an electric scooter is the battery. The ideal battery size for a scooter is 2.9 kWh to 3 kWh,” Phokela said.

Ather’s annual production capacity is 420,000 units, and the company does not require additional manufacturing capacity for the next 18 months, he noted.