20 Jul 2022

Electric scooter maker Ather says high costs are pushing back the profit timeline

Indian electric scooter maker Ather Energy said a sharp rise in raw material prices and supply chain disruptions are holding back the company's path to profitability despite strong demand for its vehicles.

"I was hoping it would break even later this year. Now I would add a couple of quarters to it," its CEO and co-founder Tarun Mehta told Reuters.

Electric vehicle makers around the world have seen a surge in demand as more people switch to cleaner transport, but a surge in commodity prices and severe supply chain disruptions have slowed their growth.

Ather has seen material costs increase by "several hundred dollars" due to firmer commodity prices, some of which has been passed on to customers, Mehta said.

The company's production volumes have also been limited by chip shortages and problems sourcing lithium-ion cells for batteries, compounded by China's COVID-19 lockdown and logistics disruptions, he added.

Backed by private equity fund Tiger Global and India's largest motorcycle maker Hero MotoCorp, Ather sold more than 3,200 electric scooters in June. It lags behind competitors Ola Electric, which is backed by Japan's Softbank Group and Hero Electric.

Ather 450X Gen 3 with improved dashboard and tire pressure monitoring system launched in India

The company, which launched the third generation of its 450X e-scooter on Tuesday, plans to increase production to 10,000 units a month by the end of the year and fully utilize its annual production capacity of 400,000 units by the end of 2023, Mehta said.

Sales of electric scooters grew more than fivefold in India last year as high fuel prices forced buyers to look for alternatives and government subsidies narrowed the price gap between electric and petrol models.

Yet electric models accounted for just 1% of India's total motorcycle and scooter sales of 14.5 million in 2021. The government aims to reach 40% by 2030.

Mehta expects the industry to grow rapidly despite the country's recent spate of e-scooter fires that have raised safety concerns, prompted a federal investigation and hurt demand for such vehicles.

"It's definitely shaken up the industry. I think we're still kind of coming out of it ... it's going to take another 3 to 4 months for the industry to really bounce back," he said, adding that Ather hasn't seen a drop in demand. after fires.

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