Ola Electric’s losses widened but the stock rallied. What’s going on?

Indian electric two‑wheeler maker Ola Electric reported a sizable consolidated net loss of ₹428 crore in Q1 FY26 (quarter ended June 30), up from ₹347 crore a year earlier . Despite halving revenue to ₹828 crore from last year and grappling with regulatory and market pressures, its stock jumped nearly 20%—stirring questions about what’s driving investor enthusiasm.

🔻 Headline Numbers: Losses Up, Revenue Down

• Net Loss (YoY): ₹428 crore vs ₹347 crore

• Sequential Trend: Improved from ₹870 crore loss in Q4 FY25 

• Revenue: ₹828 crore (down ~50% YoY, up 35% QoQ from ₹611 crore) 

• Sales Volume: 68,192 units delivered, down from 125,198 units YoY 

🌱 Operational Green Shoots Trigger Rally

1. Auto‑segment Achieves EBITDA Breakthrough
   The electric scooter division turned EBITDA‑positive in June—a major milestone 

2. Record Gross Margin at 25.6%
   Best-ever quarter margin, driven by cost-efficient Gen‑3 models, vertical integration, and the “Lakshya” cost‑cutting initiative 

3. Sequential Improvement in Revenue & Losses
   Revenue rebounded 35% QoQ; loss narrowed from ₹870 crore, signaling positive operational leverage 

🛠️ Strategic Moves & Cost Discipline

• Ola slashed investments in new capex, allocating only ₹1,000 crore this fiscal (vs ₹4,500 crore MOU) to match demand and preserve cash 

• Executive commentary emphasized no major capex outside R&D in FY26, embracing a profitable‑first mindset 

• Developed rare‑earth‑free motors, reducing supply‑chain vulnerability and excluding dependency on Chinese magnets 

📊 Analyst Reactions: Cautious Optimism

• Harshal Dasani (INVasset PMS):

  “What sparked investor interest was the sequential improvement... the auto business turned EBITDA‑positive in June and delivered a record gross margin of 25.6%.” 
  He added that guidance (35–40% margin in FY26) and rare‑earth‑free motor innovation “renewed interest in the stock”.

• Jahol Prajapati (Samco Securities):

  “Losses narrowed from ₹870 crore to ₹428 crore, gross margins hit 25.6%, and the auto segment turned EBITDA‑positive.” Sagar Shetty (StoxBox):

• “Bullish forecast of 35–40% margins and ramp‑up of new products further renewed interest.” 

• Yet Kotak Institutional Equities retained a “Sell” rating, with ₹30 target: they cited industry headwinds, competitive intensity, and underwhelming sales off‑take 

🌐 Market Context & Regulatory Headwinds

• Ola’s share price had tumbled ~69% from its IPO high, hitting a 52‑week low near ₹39.6 earlier this month 

• Regulatory challenges: Maharashtra closed dozens of unlicensed showrooms; central ministries issued inquiries on trade‑certificate practices 

• Market share erosion: Drop from 33.4% to ~19.6% amid tougher competition from TVS, Bajaj, Ather .

🧭 Investor Outlook: High‑Risk, High‑Reward

Short to medium term

• Operational metrics—EBITDA bounce, margin expansion, better cash flow—are encouraging and supportive of the stock.

• Q2 delivery momentum and FY26 guidance will be pivotal; investors should track monthly volume and margin trends.

Strategic positioning

• Vertical integration, supply‑chain resilience (rare‑earth‑free motors), and disciplined capex signal a shift from growth‑at‑all‑costs to sustainable growth.

Risks to monitor

1. Regulatory/legal disruption: Maharashtra showroom closures threaten earnings and reputation.

2. Competitive pressure: Legacy players and EV startups are encroaching aggressively.

3. Execution risk: Maintaining margin gains while scaling remains challenging.

📝 Bottom Line

Ola Electric’s Q1 results presented a mixed bag: headline losses and slumping sales overshadowed by operational gains and improved metrics. The nearly 20% stock surge reflects investor optimism that the company may be entering a profitability curve. However, regulatory risks, competitive strength, and execution remain key watchpoints.

Investor take‑away

• For risk‑tolerant investors, Ola represents a bold EV bet with real evidence of operational progress.

• For conservative investors, it remains a speculative story—worth monitoring but not necessarily buying now.