What happened
Ola Electric built its scooter business on selling direct to customers through its own stores. Its shareholder letter for July–September, published on 12 November, confirms it has now moved to dealers.
- The first dealers went live on 4 September. Ola's own stores stopped taking orders on 1 November, and most will close by December. All new production now goes to dealers.
- By 8 November it had 255 dealer partners running 319 stores. It plans about 450 stores by December and 700 by March 2027.
- Its reasons: dealers pay for scooters when they order and hold the stock in their own stores, which frees up cash. Running costs should fall by about another ₹50 crore as company stores shut.
- The trade-off it admits: gross margin will dip a little over the next two quarters because of the dealer rollout, while operating margin should improve meaningfully.
- Wholesale orders from dealers were 3,955 scooters in September and 13,505 in October. Stock built up in the channel and registrations slowed a little in October. Ola says dealers now hold about 15 days of stock.
- Revenue for the quarter fell 39% to ₹421 crore from ₹690 crore a year earlier, and the net loss narrowed to ₹362 crore from ₹418 crore, CNBC-TV18 reports.
The letter's headline is that “demand is no longer our constraint; supply is.” Meanwhile the market is growing fast: electric two-wheeler sales in the quarter were 5,99,317 units, up 82.7% from a year earlier.
Source: Ola Electric shareholder letter. November and December are the company's forecasts.
The case
You are the national sales head of an Indian electric scooter brand. You sell about 15,000 scooters a month, only through 300 stores you own. After Ola Electric's move, your CEO asks: should we switch to dealers too, and if so, how?
1Clarify
- What margin will dealers expect on each scooter? That is the new cost we take on.
- What does one of our stores cost a month, and how much of that is fixed? That is the cost we get rid of.
- How much stock do our stores hold, and who funds it? Dealers paying upfront could free a lot of cash.
- Who will handle service and repairs after the switch? A scooter buyer cares about the service visit as much as the sale.
2Structure
- Cost per scooter: dealer margin against what our own stores cost.
- Cash: money tied up in stock under each model.
- Reach: how quickly each model gets us into new towns.
- Control: pricing, customer experience and service quality.
- Transition: how to switch without a dip in sales.
3Analyse
We don't know any brand's real store costs or dealer terms, so here are clearly labelled assumptions.
| Item | Assumption |
|---|---|
| Scooters sold a month | 15,000 |
| Price of a scooter | ₹1.2 lakh |
| Running cost of one own store (rent, staff, utilities) | ₹6 lakh a month |
| Dealer margin | 6% of the price |
| Our cost to make a scooter | ₹85,000 |
| Stock held in our own stores today | One month of sales |
Cost to sell one scooter
- Own stores: 300 × ₹6 lakh = ₹18 crore a month. Spread over 15,000 scooters, that's ₹12,000 a scooter.
- Dealers: 6% × ₹1.2 lakh = ₹7,200 a scooter.
That saves ₹4,800 a scooter, or ₹4,800 × 15,000 = ₹7.2 crore a month (about ₹86 crore a year).
Illustrative assumptions from the table above.
Cash freed up
If our stores hold a month of stock, that's 15,000 scooters × ₹85,000 = ₹127.5 crore of our money sitting on shop floors. Under a dealer model, dealers pay when they order, so most of that comes back to us. This is the same working-capital benefit Ola Electric points to.
Where the answer flips
Store costs are mostly fixed. Dealer margin grows with every scooter. So the comparison depends on volume. Own stores cost the same as dealers when ₹18 crore ÷ volume = ₹7,200, which is at 25,000 scooters a month. Below that, dealers are cheaper. Above it, our own stores would be cheaper per scooter, as long as we didn't need to open more of them.
4Recommend
I recommend switching to dealers, city by city over six months, starting where our own stores sell the least.
First, at 15,000 scooters a month, dealers cost us about ₹4,800 less per scooter, which adds up to roughly ₹86 crore a year. Second, it frees around ₹128 crore of cash tied up in stock. Third, dealers already have local premises and staff, so we can reach smaller towns faster than by opening our own stores.
The risk is losing control of the customer experience, with dealers discounting or pushing stock they can't sell. So I'd write service standards into every dealer contract, track sales to customers rather than just orders from dealers, and keep dealer stock under about three weeks.