Ather Energy Bets on Indian Suppliers to Reduce Lithium Cell Imports from China, Says CEO Tarun Mehta | Exclusive

Yes, the fresh issue size has been cut by around 15% because we trimmed our scheduled debt repayment. All growth-related areas like capacity expansion, new product development, and marketing remain fully intact. It will not impact our plans. We took this decision because our recent financials, Q3 FY25, reported reduction in losses and margins nearly doubled. So, currently, we are in a growth phase.

Last year, we launched ‘Ather Rizta Family Electric Scooter’ which was very well received across the country. It has quickly become the bulk of our sales and helped us grow our market share from 10% to 15%. Most importantly, it opened up access to new cities and markets that Ather previously couldn’t tap into with only a premium performance scooter. With this family scooter, we now have access to hundreds of new cities.

This gave us confidence in relying more on internal accruals. Instead of using equity to repay debt, we have decided to cut down on debt repayment to about 12% of the total amount. Also, our distribution approach is highly capital efficient. We outsource most of it through dealers, which means we don’t need to invest heavily in store expansion. This allows us to focus our investments on high-return areas like design, technology, branding, and IP.

The market has become more mature and better equipped to evaluate companies like Ather Energy. Our business is different—we’ve focused deeply on quality. I’m confident that anyone doing due diligence will find great feedback on our product quality. This is the result of our decade-long investment in R&D (research and development), building platforms, creating IP, and maintaining a stable engineering team. 

Besides this, we have also established a strong premium brand. In electric two-wheelers, cracking the premium segment is key for value generation, and we have done that. We have also pioneered software sales in electric two-wheelers—a rare achievement. Due to our extensive software development, we have been able to separate it into an independent revenue stream with strong gross margins. As of nine months ended December 31, 2024, our software attachment rate is at 86% (i.e. 86% of our E2W owners purchased advanced Atherstack features), contributing a 53% EBITDA margin.

Unlike many peers, we have maintained strict pricing discipline—no excessive discounting. We have built strong brand equity, and I believe institutional and retail investors both will consider all these factors. In FY25, our volumes grew by nearly 45%, and we doubled our margins—those are solid indicators of performance.

Ather is already present in around 200 cities. And surprisingly, much of our recent expansion is happening in tier-3 cities. We already have a strong presence in tier-1 and tier-2 cities. In fact, I believe tier-3 cities will play a big role in EV adoption across the country because these areas have fewer charging infrastructure challenges, and word of mouth spreads fast. For instance, our margins doubled and software sales also increased after launching the more mass-market Ather Rizta last year, which targeted North Indian states like Gujarat, Maharashtra, Rajasthan, and Uttar Pradesh.

We now have three Rizta variants across different price points --- starting from Rs 1.05 lakh to Rs 1.45 lakh. We are also expanding our distribution network and charging infrastructure in non-South regions. All three the product, distribution, and infrastructure are part of the strategy.

Honestly, we are in the business of building great products and brand, so we are not timing the market. During our investor roadshows, we saw strong confidence in India’s growth story, consumer demand, and the EV two-wheeler space. There’s no doubt now that two-wheelers are going electric. We believe that 60–70% of scooters in India could go electric within five years. We’ve seen strong growth in margins and volumes recently, expanded distribution, and upcoming products that will further boost volumes. All of this supports our IPO timing.

According to me, profitability depends on two main levers: volume growth and gross margin. And our margins have improved significantly recently. Going forward, we are transitioning to cheaper batteries with LFP (Lithium Iron Phosphate) cell. In addition, we are also introducing a new, lower-cost scooter platform — EL platform — which will be launched from our Chhatrapati Sambhajinagar factory in Maharashtra’s Aurangabad.

The EL platform will allow Ather to develop a diverse range of scooter models tailored to various domestic and international markets needs, and reduce costs. It will incorporate a new powertrain, electronics and chassis platform, while utilising elements of the battery and Atherstack from the Ather 450 platform.

At present, we have two scooters built on a single platform, that is, Ather 450 platform which was designed in-house from 2013 to 2018. Now, Ather is developing a new scooter platform and a motorcycle platform to further address the demand in the E2W market.

The upcoming platform is designed for much lower cost and will further improve margins. The new factory setup will also drive better manufacturing efficiency. Together, these developments give us a strong trajectory toward better margins and reduced losses. In fact, losses are already decreasing in both percentage and absolute terms. 

EV penetration within scooter retails is already at 16%.  Initially, the industry was just getting its products and systems in place. Now we are tackling major adoption barriers, including battery life, charging time, and resale price. For instance, we now offer an eight-year battery warranty with 70% performance retention, which gives consumers long-term confidence. Our data shows that users still get about 90% battery life even after 5–6 years. 

And if we talk about charging infrastructure, our Ather Grid is the largest fast-charging network with over 2,500 chargers nationwide. This coverage gives users peace of mind, even on low-battery days. We have also explored battery swapping but found it expensive for Indian consumers --- about Rs 25,000 to Rs 30,000 per year. That’s not viable for the majority of EV buyers. So, we have stayed away from it.

So, we believe fast charging is the way forward, and we are investing in expanding and upgrading our fast-charging network to reduce range anxiety.

We are largely a ‘Make in India’ company. Around 80% of our hardware and 100% of our software are developed in-house.  And about 99% of components are sourced domestically. The few exceptions are lithium-ion cells, which we are working to source locally soon through suppliers like Amara Raja Energy & Mobility Limited, an Indian multinational conglomerate primarily known for its automotive battery business and other diverse ventures.

And we don’t have significant US trade exposure, so US-China tariffs shouldn’t impact us much. In fact, they might create an opportunity with more supply available to India. And from China, we only import some components like lithium-ion cells.

We are setting up a new plant in Aurangabad, Maharashtra, with higher vertical integration. That will significantly improve efficiency and unit economics. Apart from the Rs 5,000 per vehicle subsidy under FAME (Faster Adoption and Manufacturing of Electric Vehicles), we don’t take any direct central government incentives. We haven’t opted for the PLI scheme too. So our pricing and P&L are fully independent of PLI support.

We have already started selling in Nepal and Sri Lanka through strong partners. I believe India has huge export potential in EV two-wheelers. With ICE, Japan used to lead, but now India is emerging as the global leader. I’m very bullish on long-term export opportunities.