Ather Energy’s Electric Scooter Demand and Capacity Expansion

Ather Energy has reported impressive demand for its electric scooters, with pre-orders exceeding 50,000 per month. However, this surge has highlighted a significant gap in production capacity. Currently, the company has room for growth, as its existing manufacturing capabilities remain insufficient to meet this level of demand. Ather is now focused on expanding its capacity, launching a new budget-friendly scooter, and attracting fresh investment to support future growth.

Demand vs Supply for Ather Energy

Recent figures indicate that Ather receives more than 50,000 pre-orders monthly, a notable increase from around 30,000 scooters sold per month during the first quarter. Management estimates that they could potentially sell an additional 13,000 to 15,000 units each month if supply capabilities were increased.

Retail Supply Challenges

The limitations in production are also evident at the retail level, where dealer inventory has plummeted from approximately 14 days to just three days worth of stock. Existing stores are managing to satisfy only 50-60% of the current demand. Some dealers have had to halt new bookings as waiting times extend to two months or longer.

Ather’s Production Capacity and Future Plans

The current production capacity stands at about 420,000 units annually, with the Hosur facility capable of manufacturing around 35,000 scooters each month. Plans are underway to enhance capacity significantly this year, with the first phase of the AURIC facility set to increase total annual production to 920,000 units.

Future Capacity Expansion

Ather is also exploring the second phase of the AURIC project, which could contribute another 500,000 units to its annual capacity, ultimately increasing the total to 1.42 million units. However, investments in Phase 2 have yet to begin, with further details expected over the next one or two quarters.

Funding Expansion at Ather Energy

To facilitate these expansions, Ather has recently secured Rs 1,300 crore through a Qualified Institutional Placement (QIP) and is seeking shareholder consent for an additional Rs 1,200 crore in preference shares. This planned funding of Rs 2,500 crore will bolster production capacity at Ather and its suppliers, aid in launching new products, and fortify its financial position amidst challenges in commodity supply.

Introduction of the Lower-Priced EL Scooter

Ather is set to introduce a more affordable electric scooter, targeting a capacity of around 60,000 units monthly across both the Hosur facility and AURIC. The initial marketing strategy will concentrate on northern and central regions of India, where there is a growing demand for budget options.

Market Expectations for Ather’s EL Scooter

Interestingly, Ather anticipates that at least 75% of buyers for the EL model will opt for AtherStack Pro, despite its lower price. Management believes that this model will more directly compete with Rizta rather than the 450 model, although there are plans to potentially develop Rizta on the EL platform if market demand indicates such a need.

Diversifying Revenue Streams

Ather is also working on establishing an additional stream of revenue. Currently, non-vehicle income constitutes 14% of total operating revenue, with AtherStack Pro being the prime contributor. Management indicated that service offerings could become a larger long-term revenue source, as traditional two-wheeler manufacturers generate approximately 10-12% of their revenue from services, which contrasts with Ather’s current 2-3% share.

As demand continues to outpace production capabilities, Ather Energy’s immediate focus must shift towards not only creating demand but also ensuring timely deliveries. The company’s next chapter of growth will hinge on how effectively it can increase production capacity and launch the EL scooter while enhancing its non-vehicle income streams.