Ather Energy to make net profit in 24 months, plans to raise more funds

The company is raising funds to help set up a new factory and strengthen R&D

Electric two-wheeler maker Ather Energy is aiming to make a net profit in the next 24 months, after which it might plan for an initial public offering (IPO).  

The company is also in the process of a fresh round of fundraise which will help it set up a new factory at an expected cost of Rs 1,000 crore and reach a capacity of 1 million units per annum. Its current annual capacity is 450,000 units. The funds will also go towards strengthening research and development (R&D). It could also go for another follow up round later on.  
 

Ather Energy has plans to enter the family scooter market, a segment where 2.3-2.4 million internal combustion engine (ICE) vehicles are sold annually. It could come up with both a 125cc and a 110cc equivalent electric scooter (e-scooter) offering for the market. As for electric motorcycles, the company will wait and watch at least for the next 18 months before making any decision in this regard.
 

Ola Electric recently announced its foray into the family scooter segment as well as into electric motorbikes, all of which will roll out by the end of next year.
 

Ather Energy founder and chief executive Tarun Mehta said, “Our main aim is to make net profit within the next two years. We do not burn cash in selling our e-scooters but make gross margins, which is a lesson we learnt during the pandemic. That is why we are going through the process of raising funds for growth and not burning cash.”
 

Mehta said the company will continue to ramp up R&D. It plans to spend Rs 400 crore on R&D this year. The company is also planning to double its headcount of 1,000 in the next three years.
 

Ather, which recently launched the 450S e-scooter, aims to grab part of the 125cc equivalent e-scooter market, where over 500,000-600,000 scooters (ICE and electric) are sold. It is here that it wants to take on TVS Motor, which reigns supreme in the ICE segment. Ather dominates the 150 cc performance segment (ICE and electric), 70 per cent of it through the Ather 450X.
 

Mehta points out that the electric scooter market is seeing a clear trend towards premiumisation, and most 90cc-110cc scooter users are now migrating to 125cc. According to industry estimates, the 125cc ICE market now accounts for 50 per cent of sales compared to 30-35 per cent a few years ago.  
 

Responding to the fact that its competition is offering e-scooters at prices below Rs 1 lakh, Mehta said, “We believe that our price would be Rs 1 lakh and above as we want to give a quality product and make reasonable margins, while others may undertake tactical pricing to get volumes.”  
 

Mehta adds that so far the electric two-wheeler industry in India has only scratched the surface. There are over 50 million scooters sold across the world annually, and its potential market is over $150 billion. And with the Chinese makers moving to electric cars or very cheap scooters, the quality and value-for-money market is open for Indian players to play a dominant role in, as they do in the ICE two-wheelers segment. “We have not even started exports, which we will now work on. So there is huge growth waiting ahead,” Mehta adds.

BIG Bets  

•  Nearly double the capacity to 1 mn units per annum
•  Increase investment in R&D, which includes doubling the headcount
•  Leverage premiumisation of the electric scooter market by not getting into the sub Rs 1 lakh segment
•  Tap the global scooter market of 500,000-600,000 mn units per annum