Ola Electric Mobility Ltd.’s rapid expansion into brick-and-mortar showrooms has run into regulatory troubles.
The Bengaluru-based e-scooter maker, once a champion of digital-only sales models, recently expanded its brick-and-mortar stores to 4,000 since 2022. A Bloomberg News investigation found that more than 100 locations out of about 3,400 showrooms for which data were available had trade certificates required by India’s Motor Vehicles Act.
That means more than 95% of stores lack the basic certification needed to display, sell, offer test rides or transport unregistered two-wheelers, according to data seen by Bloomberg News.
In response to customer complaints, state transport authorities across India conducted raids, closed showrooms, seized vehicles and issued show-cause notices to the company led by Bhavesh Agarwal, according to internal documents and government warning letters seen by Bloomberg.
Hans Kumar, a retired assistant transport commissioner who works in the western Indian state of Rajasthan, said India’s Motor Vehicles Act stipulates that every car showroom, including two-wheelers, that keeps unregistered vehicles should display a trade certificate in a conspicuous place.
At least six local transportation officials told Bloomberg News they were investigating Ola for possible violations, reflecting the dark side of Ola’s aggressive expansion.
“Your ‘investigation’ finding that there were irregularities is wrong and biased,” an Ola spokesperson said in an emailed response. He added that Ola maintains a stock of unregistered vehicles at its distribution centers and warehouses in various states in India, “which is fully compliant with the guidelines of the Motor Vehicles Act and has obtained the necessary approvals.”
Ola’s response did not directly answer whether their public-facing stores have trading certificates or whether the company has seen raids and seizures by local traffic regulators.
respond to crisis
The startup, once India’s largest scooter maker, is facing a crisis on multiple fronts. Since listing in August, the stock price has fallen more than 60% from its peak.
The company has also faced buyer complaints over quality and service issues, social media backlash and widening losses in recent months. Aggarwal said in an X post in October that Ola was expanding its network to address customer complaints.
Regulatory challenges came as the company laid off more than 1,000 employees and contractors, Bloomberg reported this month. Ola acknowledged that some positions are becoming redundant as parts of the business are restructured and automated.
The company is also racing to launch an electric motorcycle, but the launch has been delayed since Agarwal said at an event last year that it would launch in January. An Ola spokesperson did not respond to queries regarding the postponement of the launch of the motorcycle.
Transportation officials across India have stepped up scrutiny and often found Ola not meeting store-level trade certificate requirements, according to notices from nearly two dozen state-level transportation officials seen by Bloomberg News.
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Ola applied for and received trade certificates sporadically at some locations in response to notifications or surprise inspections from the transportation department, according to documents seen by Bloomberg.
Ola was first warned about these breaches dating back to at least 2023, with the most recent warning being in early March. Transport officials from several states confirmed that investigations into Ola’s showroom operations are ongoing.
Amid all the regulatory action, Ola announced a store blitz in December, adding over 3,200 new stores overnight. Most of the new stores do not have the necessary business certificates, according to documents seen by Bloomberg.
Ola’s email reply did not comment on the investigation by traffic officials or the lack of certification of these new stores.
Ola has told transportation authorities since at least late 2023 that its experience centers were only for “customer engagement” and not direct sales, according to documents seen by Bloomberg News, but regulatory investigations by states continue.
Ola told exchanges on February 19 that it was renegotiating terms with two agencies engaged in vehicle registration at government regional transport offices. This will affect the number of vehicle registrations in the government database for February, it added.
red flag
The scooter maker said in an exchange filing on February 28 that it had sold “more than 25,000 vehicles” last month, while government portal VAHAN showed registrations of just over 8,600 units. This huge gap could be a red flag as customers cannot take delivery of unregistered vehicles in India.
Indian automakers typically count only registered vehicles in their sales. Even a week after Ola announced its sales numbers to the exchanges, all invoiced vehicles have not been registered (local rules provide for a window of up to seven days), which may run afoul of state government laws.
“Registration data for February 2025 sales will be updated on the VAHAN portal in the coming weeks,” an Ola spokesperson said in an email, adding that the delay had been flagged in the exchange filing last month.
Irregularities were widespread at store level as pressure mounted to boost scooter sales and stock prices plummeted.
Ola has also lost market share, as well as its top spot in the two-wheeler market, to legacy manufacturers Bajaj Auto Ltd. and TVS Motor Co., according to data compiled from the government’s VAHAN database.
Despite the growing challenges, Ola’s Agarwal said the company would soon turn a profit.
“We expect the Ebitda breakeven point for the automotive segment to be around 50,000 units sold per month,” Agarwal told analysts during an earnings call on Feb. 7. “We do feel that in the next few quarters, we can get to around 50,000.”
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(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
