Ather Energy: How the EV startup defied market norms to script its own growth story

A DECADE AGO, when India’s electric two-wheeler market was flooded with cheap Chinese imports and no legacy auto manufacturer was ready to take the EV plunge, Tarun Mehta saw an opportunity to make electric scooters from the ground up. Mehta, the co-founder and CEO of Ather Energy — who, along with fellow co-founder Swapnil Jain — was already working on a mock vehicle at the incubation centre of IIT Madras, their alma mater, to test out battery packs they were hoping to sell to automakers. But they soon realised that it would be easier to sell EVs to customers than batteries to OEMs. The transition to EVs had opened up a level-playing field for India’s new-age startups as legacy auto players were not keen on investing in a new technology then.

While Ather was the first Indian startup to get an electric scooter off the ground (in 2018), in terms of sales numbers it has fallen behind rivals who entered the space later. In 2024, Ather sold 126,000 electric scooters, coming in after Ola Electric, TVS Motor Company, and Bajaj Auto.

“Competition in the electric two-wheeler segment remains high despite the fact that many fringe players are out of the market,” says Shamsher Dewan, Senior Vice President and Group Head-Corporate Ratings, ICRA. “Now the competition is among the Top 5 players and at the same time you don’t have the volumes where you will have the operating leverage benefits,” he says.

Despite the difficulties, Ather has never followed the conventional playbook. Until April 2024, it focussed only on performance scooters (the 450 series), limiting any scope of dealership expansion in the hinterland. Subsequently, its distribution network of 208 touch points pales in comparison to the thousands its peers have. But Mehta is upbeat. “Legacy competitors play on their strength of an existing network. We will play on the product… With an expanding portfolio, we will keep going deeper with our network,” he says.

The company is steadily ramping up its distribution network after the launch of the Rizta, its first scooter targeted at the family, in April 2024. “Rizta has opened up hundreds of cities where it is now viable for Ather to open an exclusive dealership… It was difficult to have a standalone Ather dealership in Tier II or III towns with the Ather 450,” says Mehta, adding that it started expanding its distribution network after October last year.

More than half of Ather’s demand now comes from the Rizta. “We have gone from 6-7% market share to about 15% market share on the back of the Rizta,” says Mehta. While Ather gets a bulk of its volumes from the southern states, it is eyeing other markets with the Rizta. “In Gujarat, we went from 5% to 25% market share in six months,” he says.

Ather currently has a common platform for both scooters, but it is developing a new platform for more mass-market products. “A lot of learnings from the first platform were taken to the second platform which can allow us to build different kinds of products which are more mass-market,” says Mehta.

It’s not just the retail footprint that Ather is looking to expand. It is doubling down on manufacturing capacity from 420,000 units a year to 1.4 million units. That’s a big bet for a company that currently utilises less than half its monthly capacity of 35,000 units. “We are setting up new capacity in Chhatrapati Sambhajinagar,” says Mehta, adding that it will have a total capacity of 1 million units. Ather’s existing factory is in Hosur, Tamil Nadu.

While rival Ola has been under fire for customer complaints, Ather has been largely able to shield itself. Mehta credits this to the company’s focus on quality “which is not what startups are typically known for”. And to build a good product, OEMs need to invest in R&D, says Mehta. He adds that Ather’s R&D team makes up almost half of its workforce.

Software is a big chunk of its R&D efforts. “We have invested disproportionately on software and technology. We call it the AtherStack where a customer pays for the OS and connectivity,” he says, adding that 89% of his customers buy AtherStack as a separate accessory. Mehta says that it is Ather’s most profitable product.

However, Ather’s net loss widened to ₹1,059 crore in FY24 from ₹864 crore in FY23, while revenue from operations declined 1.5% to ₹1,753 crore. It doesn’t help that Ather doesn’t get the benefits of PLI as it wasn’t eligible when the scheme was launched.

India’s electric two-wheeler players need to sell 50,000 units each month to reach Ebitda profitability, according to industry experts. The Ather CEO is optimistic, saying the industry should see a new high every month.

Dewan of ICRA says that while falling battery prices helped OEMs absorb the extent of the losses last year, the number varies: while the EV business is loss-making across the board, those firms that also have a strong base of ICE vehicles — read legacy automakers — turn in a profit, thanks to the high costs of manufacturing an EV. In September 2024, TVS Motor MD Sudarshan Venu told Fortune India that “there is going to be a period of time where we have to wait for growth of volumes till there is parity in profitability in EVs as compared to ICE [vehicles]”.

Agrees Dinesh Thapar, chief financial officer of Bajaj Auto, which too doesn’t have a profitable EV business. “We have a full-fledged programme in place on value engineering and rationalising cost lines, but eventual profitability will be a function of where consumer pricing settles,” he says.

Mehta, however, is unperturbed. Ather, while continuing its focus on scooters, is developing a new platform called Zenith for electric motorcycles. “From an ROE perspective, we see better returns on scooters in the short term,” he says.

Mehta predicts that with more players, an expanding portfolio, and distribution, almost 40% of the two-wheeler industry could be electric by the end of this decade, with a potential market size of 10 million. “We think scooters will lead this,” he says.

Ather is also betting on fast charging. It has set up India’s largest fast-charging network for electric two-wheelers, with more than 2,500 chargers. Mehta says lack of standardisation is one of the largest bottlenecks for the industry. “A fast charging standard will simplify this problem,” he says. As electric motorcycles come up, the expectation is that they will be used for inter-city rides. “Then you need a lot of fast chargers to come up on highways. If these chargers have to come up, then the industry needs a common charging standard,” he says.

To fully localise its EVs, Ather has partnered with battery cell maker Amara Raja. “We have a lot of data and insights on battery pack performance. We are going to use that in a partnership to have a cell manufacturing partner produce and build more custom cells for our applications. We believe we will need to localise supply of cells in the long term,” says Mehta.

When asked what is Ather’s plan to take on legacy players in the electric two-wheeler space, Mehta has thought out a clear path. Tech is not something the legacy players are good at, he says, adding that their strengths have been distribution, marketing, and scale. “India’s auto market is not where new technologies were developed first,” Mehta says. “Things used to come to India after they were already cost-optimised and then India played to its volumes to get a good price.” Ather plans to change that. As other EV players focus on the fundamentals, Ather is already thinking out of the box.