Amid the oil shock triggered by the war in West Asia, one sector that stands to benefit is electric vehicles (EVs). Consumer preference for EVs could increase if the war drags on, reducing the availability of fuel for internal combustion engine (ICE) vehicles and forcing the government to allow oil marketing companies (OMCs) to raise fuel prices.
The running cost of EVs is relatively cheaper than ICE vehicles. The only two pure-play EV companies in India – Ola Electric Mobility Ltd and Ather Energy Ltd – present a contrast. While Ola has been grappling with issues regarding its products and customer service, Ather has steadily gained speed in terms of stock price and sales volume.
Even as the Nifty 500 index has declined after the war began on 27 February, Ather's share price continued to climb, hitting a new all-time high of ₹805 on 30 March. In fact, the stock has gained nearly 150% since its listing on 6 May.
Ather’s March sales volume of about 33,482 units, as per the Vahan website, indicates it is likely to report about 45% month-on-month growth after adjusting for the lower number of days in February. A part of the growth can also be attributed to consumer preferences tilting towards EVs, given the availability and pricing concerns with ICE fuels.
For the March quarter (Q4FY26), Ather is likely to report 16% quarter-on-quarter and 88% year-on-year growth in retail sales volume to about 77,000 units. Plus, Q4 earnings could get a boost from the price hike of ₹3,000 per vehicle undertaken when the quarter began.
Ather’s Ebitda loss per vehicle was at ₹10,611 in Q3, and this could drop substantially in Q4 given robust volumes and a higher average selling price, even if there may not be a full turnaround.
What’s more, the ministry of heavy industries has extended subsidies for electric two-wheelers worth maximum of ₹5,000 per vehicle till 31 July from the earlier expiry date of 31 March. This should help offset any short-term spike in commodity costs arising out of the West Asia conflict, without passing on the increased burden to consumers.
Emkay Global Financial Services and Nomura Research expect Ather’s FY27 sales volumes to grow 47% and 41%, respectively, from around 250,000 units in FY26. The success of its EL platform-based electric scooters in FY27 and start of the Aurangabad facility by FY27-end are likely to be the chief drivers in boosting future volume growth.
Despite robust volume growth projections, neither brokerage expects Ather to achieve breakeven at the Ebitda level in FY27, but the feat could be achieved in FY28.
Emkay’s target price of ₹1,000 for the Ather stock is far higher than Nomura’s ₹812. The implied EV/sales multiple at the respective target prices works out to 5.7x and 4.9x based on their respective sales estimate for FY27.
These multiples are at least 25% higher than those of incumbents such as Bajaj Auto Ltd, TVS Motor Co. Ltd and Hero MotoCorp Ltd at less than 4x. If the EV/sales multiple is still higher than other incumbents by a minimum 25% even after assuming over 40% sales volume growth in FY27, perhaps investors are already factoring in the brighter side adequately.
Investors can hope that Ather’s road to turnaround at the Ebitda level is not hampered by rivals turning more aggressive on pricing.