Heat is rising for Ola Electric as ministry, consumer authority step in

The heavy industries ministry wrote to the Automotive Research Association of India (ARAI), which had approved Ola's eligibility for subsidies under two government schemes, to check whether the company is indeed honouring warranties and maintaining service centres as required. Mint has seen a copy of the letter.

Should the ministry's concerns be validated, Ola Electric could potentially risk losing subsidies under the Faster Adoption & Manufacturing of Electric Vehicles II (FAME-2) and the Production Linked Incentives (PLI) schemes. The two schemes mandate manufacturers of electric two-wheelers receiving subsidies to provide consumers a warranty of three years or 20,000 km, whichever is earlier.

Separately, the road transport ministry is likely to approach the Central Consumer Protection Authority (CCPA) for information about complaints regarding potential violation of central motor vehicle rules by selling second-hand scooters as new, charging more than promised, and for manufacturing defects that could impact battery safety, a person aware of the plan said.

Meanwhile, CCPA has decided to pursue class action against Ola Electric, following thousands of unresolved complaints lodged with the National Consumer Helpline (NCH), Nidhi Khare, secretary, department of consumer affairs told Mint. The CCPA’s suo motu action comes amid allegations of non-cooperation from Ola Electric, Khare added.

The CCPA’s show-cause notice is based on 9,948 complaints received between September 2023 and August 2024, predominantly focused on delayed deliveries, defective products, and misleading advertisements. Ola Electric now has 15 days to respond, with the notice warning of violations under the Consumer Protection Act, 2019, including unfair trade practices and deficiencies in service.

An email sent to Ola Electric seeking comments remained unanswered.

Khare highlighted the gravity of the situation, pointing out that complaints on the National Consumer Helpline (NCH) had surged due to unresolved customer grievances.

“With such a high volume of complaints—over 10,000 in a year, related to issues like delays in refunds, service delays, refusal of warranties and inconsistencies in performance —this case was a clear candidate for class action. When we encounter such cases, where repeated violations occur, we pursue class action after carefully examining the facts," Khare emphasized.

The CCPA has forwarded over 10,000 dockets, documenting complaints received by the National Consumer Helpline, to Ola Electric for resolution. “All complaints related to this company have been sent to them for investigation and resolution," Khare stated.

According to Ajay Sabharwal, a lawyer practising at the Supreme Court, the CCPA has sent a show cause notice under Section 18(2) of the Consumer Protection Act, 2019 to Ola Electric alleging deficiency of service, false and misleading advertisements and unfair trade practices, all of which amount to violations of consumer rights and provisions of the 2019 Act. “Ola has been called upon and is likely to file a response explaining why action shouldn’t be taken against them in relation to the said allegations," he said.

If Ola’s response is not found satisfactory, the CCPA can proceed to take action against them, which can include imposition of monetary penalties, issuance of directions to recall faulty products and directing that reimbursements be made to consumers. The Authority can also prohibit Ola from advertising its products for a year, Sabharwal added.

Khare further emphasized that with nearly 10,000 complaints in a single year, Ola Electric was an obvious candidate for class action.

“Companies should treat complaints as valuable feedback for improvement—complaints are their ears and eyes. Yet, one of the troubling findings was that Ola Electric had been charging customers even during the free service period, which is simply unacceptable," she told Mint.

Ola Electric’s unresolved complaints range from delayed refunds and service delays to refusal of warranties and performance inconsistencies. Khare noted that complaints about charging customers during the free service period were particularly concerning, calling such practices unacceptable.

“We can’t leave individual customers to fight the company alone," she asserted. “In many cases, we had to close complaints after 45 days without resolution, leading to dissatisfaction among consumers. If a company fails to address issues, we will ensure they are held accountable," she added.

Mint reported in September that the company was fielding more than 80,000 service-related complaints each month.

A pattern of consumer complaints

The CCPA’s investigation follows a surge in complaints, with Ola Electric emerging as one of the most-complained-about companies on the National Consumer Helpline (NCH). Key grievances include:

Delayed deliveries: 1,899 complaints about late scooter deliveries.

Service delays: 3,364 complaints regarding slow repairs and service.

Faulty vehicles: Reports of manufacturing defects, poor build quality, and recurring technical issues.

Misleading advertisements: Allegations that Ola exaggerated its products' performance and availability.

Poor customer service: Complaints about difficulty reaching support, delayed responses, and unsatisfactory problem resolutions.

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In response to the show-cause notice, Ola Electric acknowledged its receipt and reassured the stock exchanges of its commitment to addressing consumer concerns. The company stated it would provide a detailed response to the CCPA within the required timeframe and assured that the notice would not impact its financial, operational, or other activities. To address service-related complaints, Ola has revamped its service teams and expanded service touchpoints, including certified service partners, to accelerate improvements.

The CCPA has handled similar cases before, such as those involving misleading claims by coaching institutions. During the pandemic lockdown, many consumers struggled to get refunds from airlines, tour operators, and travel agencies. Despite a Supreme Court order mandating airlines to refund consumers, there was little effort from tour operators and travel agencies. The CCPA’s intervention resulted in ₹1,454 crore in refunds to consumers.

Established under Section 10 of the Consumer Protection Act, the CCPA has the authority, under Section 18(2)(a), to initiate class action lawsuits for violations of consumer rights, misleading advertisements, and unfair trade practices, including on a suo motu basis.

The show-cause notice highlights that the CCPA is empowered under the Consumer Protection Act to pursue class action on behalf of customers when repeated violations occur, ensuring that consumers don't have to fight large companies individually for their rights. It does this to safeguard collective consumer interests and hold corporations accountable for widespread misconduct.

Interestingly, the government's FAME-II scheme mandates a three-year or 20,000 km warranty on electric two-wheelers to qualify for subsidies. It remains unclear whether the probe into Ola’s warranty practices could put its eligibility for subsidies at risk. 

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However, sources close to the matter told Mint that "warranties have to be honoured, not just provided on paper," suggesting that the question of subsidies may be reviewed once Ola files its response, and possibly if an appeal is lodged.