More Troubles For Ola Electric: Raids At Stores, Comes Under MHI’s Lens

There seems to be no end to the troubles of Ola Electric. After facing heat from its customers for a large part of 2024, the EV maker now seems to be caught in regulatory troubles. 

Citing inspection letters, a report by NDTV Profit said that at least six Ola Electric stores in Madhya Pradesh and 26 stores in Maharashtra were raided by regional transport officials in mid-March. 

The report added that 14 Ola Electric scooters were impounded by authorities in MP’s Jabalpur, while 36 escooters were confiscated in Maharashtra. 

However, sources close to the company told Inc42 that these were not raids but “inspections” carried out by the state transport authorities based on a complaint filed by an anonymous person alleging lack of proper documentation. 

The NDTV Profit report, citing an inspection report, said that the raids were carried out on the basis of a complaint filed by Gurugram-based Pritpal Singh & Associates alleging that Ola Electric has been setting up “showrooms, stores and service centres in Maharashtra by obtaining a single trade certificate”.

The raids (or inspections) by the transport departments in these states adds to similar troubles faced by Ola Electric in Goa, Jammu and Kashmir, and Bihar. 

About two weeks ago, a report by Bloomberg said that transport officials across India have stepped up scrutiny of Ola Electric as the company doesn’t have the required trade certificate for most of its stores. 

It is pertinent to note that amid rising complaints about delays in delivery of escooters and after-sales service, the Bhavish Aggarwal-led EV company expanded its network to 4,000 stores in December last year from 800 earlier.

Selling Without Licence?: The Bloomberg report alleged that the company has been operating its stores without obtaining the necessary certifications outlined under the Central Motor Vehicles Act, 1988.

Under the Act, vehicle distributors and manufacturers are required to obtain business certificates to showcase and sell unregistered vehicles from their stores. 

As per the report, about 95% of the company’s 3,400 showrooms across India were selling or offering test rides to users without the required trade certificate. 

However, a spokesperson of Ola Electric called Bloomberg’s investigation into the matter of non-compliance “misplaced” and “prejudiced”. 

The spokesperson added that the company maintains an inventory of unregistered vehicles at its distribution centres and warehouses across Indian states “which are fully compliant with the guidelines of the Motor Vehicles Act, and have the necessary approvals”.

Numbers Not Adding Up: As if the scrutiny of the transport departments of the states wasn’t enough, the company is also under the lens of the heavy industries ministry. 

According to a report by CNBC-TV18, the MHI is currently investigating discrepancies between the company’s reported sales figures and actual vehicle registrations. 

While the registration number on Vahan reflects 8,600 new registrations for Ola Electric in the month of February, the company claims that it has sold 25,000 scooters. 

In its defence, Ola Electric intimated the exchanges last month that its registrations for February will be “temporarily impacted” as it was renegotiating terms of agreements with its agencies Rosmerta Digital Services Pvt Ltd and Shimnit India Pvt Ltd. 

It seems these renegotiations are also not going well. Last week, Rosmerta filed a plea to initiate insolvency proceedings against Ola Electric’s subsidiary Ola Electric Technologies for allegedly defaulting on its payment obligations.

Shares Crash: While there has been no official communication from the EV maker about the reported raids, the company’s shares have been facing heavy selling pressure over the past few months. 

After touching an all-time low of INR 46.32 on Monday (March 17), Ola Electric’s shares jumped about 12% on Tuesday (March 18) amid recovery in the broader market.

However, the stock again came under pressure today and ended the trading session 4.01% lower at INR 51.66 on the BSE. The company’s market capitalisation now stands at $2.64 Bn as against its IPO valuation of $4 Bn.

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