Ola Electric Shares Soar 75% from IPO Price: HSBC Bullish on Battery Venture, Lower Manufacturing Costs, and Robust Regulatory Support

Ola Electric Mobility’s shares have soared by 75%, reaching a record high of ₹133. This surge has caught the attention of both short-term traders and long-term investors. HSBC, a global brokerage firm, has become the first to start coverage on Ola Electric, setting a target price of ₹140.

HSBC’s Bullish View on Ola Electric

Despite being cautious about the growth of electric vehicles (EVs) in India and other uncertainties, HSBC believes Ola is a good investment. They cite the ongoing regulatory support, Ola’s efforts to cut costs, and a positive outlook on the company’s battery venture as key reasons for their optimism.

Ola’s Target Price and Valuation

HSBC’s target price for Ola is based on an expected price-to-sales ratio of 2.9x and an EV/EBITDA of 39x by the financial year 2028.

Three Reasons HSBC is Bullish on Ola Electric

Lower EV Manufacturing Costs

HSBC expects the cost of manufacturing electric vehicles (EVs) to drop significantly by FY27/28. Meanwhile, the cost of making traditional internal combustion engine (ICE) scooters may increase due to stricter emission standards. With regulatory support likely to continue for the next two to three years, the cost of producing an electric two-wheeler (e2W) could decrease by ₹30,000-40,000 to around ₹70,000-75,000. This would make EVs competitive with ICE scooters even without subsidies, which are expected to decrease from ₹40,000 to ₹10,000 during this period.

Easier Transition to EVs

HSBC predicts that over time, customers will become less concerned about issues like range anxiety, charging infrastructure, and resale value. As people focus more on the total cost of ownership, resale values for EVs should improve, making them a more attractive option compared to ICE scooters.

Success in Battery Production

Ola’s venture into battery manufacturing could be a game-changer. If successful, Ola might be able to produce batteries at the same cost as imported ones. In the best-case scenario, Ola could manufacture batteries that meet global standards at a cost $15-20 lower per kWh than current prices.