Ola Electric Q1 FY26: Margins Improve, Cash Burn Narrows as Gen 3 Scooters Take Over

After a difficult FY25 and a sharp drop in its stock price, Ola Electric’s Q1 FY26 results offer a potential turning point. The company is showing early signs of operational discipline at a time when EV industry growth is slowing and competition is intensifying.

Strategic Shift: From Hypergrowth to Margin-Focused Growth

Ola Electric's strategy has evolved. The company is no longer chasing volume growth at any cost. Instead, it is now prioritising margin-focused execution and sustainable operations. This shift is starting to reflect in the Q1 FY26 numbers:

• Vehicle deliveries: Ola delivered 68,192 electric 2-wheelers, up from 51,375 in Q4 FY25, showing strong sequential growth.
• Revenue: ₹828 crore in revenue from operations, marking a 32.7% quarter-on-quarter increase.
• Auto gross margin: Expanded to 25.6%, compared to 13.8% in the previous quarter, driven by improved unit economics.
• Auto EBITDA losses: Narrowed significantly to -₹96 crore, from -₹554 crore in Q4 FY25, showing early signs of cost control.
• Operating cash flow: Nearly breakeven in the auto segment, pointing to improved financial discipline.
• Free cash flow: Improved to -₹107 crore, from -₹455 crore, supported by better margin performance and capex control.

The main reason behind this turnaround has been the successful ramp-up of Ola’s Gen 3 scooters, which now account for around 80% of total deliveries. These models have higher margins and far lower warranty issues, contributing meaningfully to the improvement.

Warranty Costs: Structural Improvements

Warranty claims, which were a concern in earlier quarters, have seen a notable decline:

• Gen 2 scooters have 30% fewer claims compared to Gen 1
• Gen 3 scooters are seeing 60% lower claims than Gen 2
• Ola had taken a ₹250 crore one-time provision in Q4 FY25 for Gen 1 and Gen 2 scooters but did not make any large provision in Q1 FY26.

With over 70% of Gen 1 vehicles now out of warranty, the company expects warranty-related expenses to continue declining. This has also been supported by an increase in in-house manufacturing of components such as motors and controllers, which were earlier outsourced and prone to higher failure rates.

Software Monetisation and New Product Traction

Ola is also building new recurring revenue streams. Its software upgrade MoveOS+, which offers paid features, saw a sharp jump in adoption. In Q1, 50% of buyers opted for MoveOS+, up from just 2% in Q4 FY25.

The newly launched Roadster bike gained early traction, with deliveries scaling across 200 stores. The launch received strong engagement, 1.74 billion social media impressions and 15 million user interactions.

While Ola’s product roadmap remains broad, the current focus is on scaling Gen 3 scooters and the Roadster, while maintaining cost and margin discipline.

Battery Cell Manufacturing Begins

Q1 FY26 also marks the beginning of Ola’s transition to in-house cell manufacturing. The company has started producing 4680-format cells and expects to start shipping vehicles equipped with them from Navratri 2025.

Key numbers:

• 1.4 GWh capacity going live this year, enough for ~3 lakh vehicles
• Ramp-up to 5 GWh by FY27
• Total planned capex: ₹2,800 crore; ₹1,500 crore already invested

Cells are expected to be cheaper than external procurement at scale. The cell business is expected to become free cash flow positive at 5 GWh scale by end of FY27.

Strengthening Technology and Supply Chain Resilience

Ola has taken steps to reduce its exposure to supply chain risks and regulatory changes:

In response to the rare-earth cuts in April, the company is now commencing production of rare-earth-free motors, with product integration expected from Q2 FY26.

It is also developing an in-house ABS (anti-lock braking system) to meet the January 2026 deadline. As of now, Ola is the only major EV 2W company with an ABS-equipped product in the market.

FY26 Guidance: Focus on Execution

Ola has outlined a set of focused targets for the rest of FY26, reflecting its shift toward operational discipline and profitability:

• Vehicle deliveries: Expected to reach 3.25 to 3.75 lakh units, indicating steady scale-up through the year.
• Revenue: Projected at ₹4,200–4,700 crore, driven by new product adoption and improved realisations.
• Exit auto gross margin: Targeted at 35–40%, supported by cost efficiencies and PLI benefits.
• Auto EBITDA margin: Aiming for 5%+, reflecting a sharper focus on cost control and operating leverage.
• Free cash flow: The auto business is expected to turn free cash flow positive by Q4 FY26, marking a key milestone in its turnaround plan.

Liquidity Position Remains Strong

As of June 30, 2025, Ola had ₹3,197 crore in cash. The company has stated that no new capital will be needed for operations this year. Refinancing of some non-term debt is already in progress.

Bottom Line

Ola Electric’s Q1 FY26 results show clear signs of improvement in profitability, cost control, and strategic execution. While challenges such as EV demand uncertainty and competitive intensity remain, the company is now in a stronger position than it was just a few quarters ago. The next two quarters, with the festive season and cell ramp-up, will be crucial in determining how sustainable this turnaround is.

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