Ola Electric Mobility Ltd (NSE: OLAELEC) Q3 2025 Earnings Call dated Feb. 07, 2025
Corporate Participants:
Abhishek Chauhan — Director, Corporate Communications and PR
Bhavish Aggarwal — Chairman and Managing Director
Harish Abichandani — Chief Financial Officer
Analysts:
Arun Kejriwal — Analyst
Gunjan Prithyani — Analyst
Chandramouli Muthiya — Analyst
Rishi Vora — Analyst
Jinesh Gandhi — Analyst
Unidentified Participant
Shirish Gupte — Analyst
Nikhil Kale — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Ola Electric Q3FY25 earnings conference call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Chauhan from Ola Electric Mobility Limited. Thank you. And over to you, Mr. Chauhan.
Abhishek Chauhan — Director, Corporate Communications and PR
Thank you. Good evening and thank you for joining the earnings conference call of Ola Electric Mobility Limited for Q3FY25. Before we begin, a few quick announcements for the attendees. Anything said on this call which reflects our outcome. Outlook for the future or which could be construed as a forward looking statement may involve risks and uncertainties. Such statements or comments are not guarantee of future performance and actual results may differ from those statements. To begin with, I would like to request Sri Bhavish Agrawal, Chairman and Managing Director of OLA, and Harish Abhichandani, CFO of the company, to take you through the results.
Bhavish Aggarwal — Chairman and Managing Director
Thank you Abhishek. This is Bhavish here. I think what we will do is we have anyways published a shareholder letter and I’m assuming all of you have gone through it this time. Unlike last time, we actually published it a few hours in advance.
So we will directly jump into the questions. Maybe I will give a very high level overview to begin with and then happy to just directly jump into questions. This quarter was an important quarter in terms of many transformation things happening. We faced a much more intense, tougher competitive environment and we saw through the quarter despite that competition we were number one. Obviously, as the quarter progressed our market share reduced.
Now in January and continuing into February we’ve actually been able to turn that around significantly and that’s because we’ve been focused a lot through last quarter and after ongoing on the network transformation which is expanding our network to about 4,000 touch points as well as transforming our service experience and service timelines, most of these initiatives are actually done and we are seeing good outcomes from both the sales network as well as the service transformation and that has resulted in this turnaround in terms of our market share as well as volumes in January.
Another important theme last quarter was product launches and product announcements. We announced a few products in the entry level segment, the gig, gigplus and Z as well. As we had mentioned that our Gen 3 products will be pulled ahead and you saw we actually launched and we are now delivering Gen3 products this month and they have been met with very strong response. In addition to that, our motorcycles are also on track. This month itself we launched them and next month deliveries start for the Roadster X product product range. So that’s another key takeaway that I want to share with everybody on last quarter and going into this quarter and ahead.
We have the financial numbers. Also a few key themes on the financial numbers is continued focus on gross margin improvement and you can see while revenue dipped in Q3, our gross margin as a percentage actually slightly grew. And looking ahead actually January our gross margin was significantly expanded and we expect the same expansion of gross margin to continue into the. The rest of this quarter four as well as beyond, thanks to our Gen 3 platform as well as other cost saving on the cost structure of the vehicle activities. On operational costs, I had mentioned to you that we will generally try and focus on keeping it flat or lower. So all operational cost except for the new network that we’ve added has actually trended downwards. We’ve optimized some headcount about I think 15% of overall company headcount has been 17% has been optimized and we continue to do some optimizations without losing the R and D technology muscle. But that cost has been replaced by the network expanded cost and the network expansion that we did. It’s in a way an investment into the future because our scooters are also selling into that. But that network is going to be very important as we scale up our motorcycle products across the country, given that motorcycles sell a lot in rural markets, subcountry markets and smaller towns. Thirdly, in the last quarter we had a negative impact of operating leverage because volumes came down. In our report we’ve also highlighted that given our gross margin expansion as well as operational cost control, we can expect auto segment EBITDA break even at about 50,000 monthly sales. Now when we get there depends on market conditions as well as EV penetration. But we do feel in the next few quarters we can get to about 50,000 monthly sales which takes us to an auto segment EBITDA positive. Finally, I want to just round up my opening remarks with just a reiteration of our strategy. There are three core pillars of our strategy and we remain committed to it and we are executing on that strategy. First is product expansion to increase EV penetration across different product segments of the two and three wheeler market scooters. Now entry level motorbikes, we’ll have mid segment motorbikes coming from us later this year as well as three wheelers and the entry level GIG products. So the product expansion is on or ahead of schedule and you can see a list of products that we are coming out with over the next 12 odd months. Second part of our strategy is to continue to strengthen our distribution network across the country which is both sales and service. We’ve now expanded touchpoints and the new stores that we opened end of December are already starting to deliver good results. Obviously it will take a few months of being in the market for those stores to get to their optimal store sales count levels and we expect that through this quarter and next quarter the sales from these stores will continue to increase. In addition to sales service. Also, like I mentioned has been a big focus. We have used a lot of technology, we’ve scaled up our people numbers, processes have been tightened, and as a. Result, our average service time, the tat of service has come down from almost two and a half, three days in October, which is when our service issues were the highest, down to 1.1 days. And actually the trend is continuing downwards. So our Service experience and SLAs are now pretty much best in class in the OEM industry. The final part of our strategy is technology innovation and vertical integration. And you’ve seen us in the last quarter and in the last month, January and February, continue to move along on this journey. Our Gen 3 platform which was launched about 10 days back, delivers much higher performance at a much lower cost. And we’ve also showcased a few interesting technologies like break by wire which is a patented technology. Yours truly was also a little involved in that, as well as unique wiring harness. All of that reduces cost, weight, etc. And improves performance. So Gen 3 really denotes in a sense the future of two wheeler technology platforms for India. And we believe this really strengthens and enhances our lead in terms of technology as well as gross margin profile compared to our peers. Another key pillar of our technology and vertical integration is our cell. Our cell we’ve guided before is on track for commercialization into our products by Q1 of next year, which is about the April to June timeline and we are on track for that. We are seeing very good ramp up of the testing. The testing results are coming out very well. We’ve already started testing our own cells in our own vehicle battery packs and vehicles. And you saw that we also announced two vehicles in our Gen 3 and our Roadster X portfolio at the top end which work with the 4680 CEL. And the benefit of the cell obviously is lower cost, which is our own production. But also because it’s the next generation of cell, you can see that we’re able to pack more energy and battery capacity into the vehicle. For example, the S1 Pro plus takes the battery capacity to 5.3 kilowatt hours, unthinkable in scooters before this. And in Roadster X the top end actually goes to 9.1 kilowatt hours with the traditional 2170 cell. Both these two levels were not possible. So our 4680 cell gives us a functional advantage also in addition to a cost advantage. And we’ve got very strong feedback from customers about our range in both the Gen 3 products as well as the Roadster X products. And it further sets OLA Electric apart in terms of product performance and technology. So that’s pretty much it what the document covers. Happy to have questions.
Abhishek Chauhan — Director, Corporate Communications and PR
Thank you so much, Bhavish. With that, now we are ready to take the questions.
Questions and Answers:
Operator
Thank you very much. We will now begin. The question and answer session. Anyone who wishes to ask a question may press Star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press star and 1. Ladies and gentlemen, to ask a question, you may press star and 1. We wait for a moment while the question queue assembles.The first question is from the lineup. Arun from KE Chi Diwal Research. Please go ahead.
Arun Kejriwal
Good evening Bhavesh, thanks for the opportunity. So just wanted to understand we had a robust January in terms of vehicle sales. Looking at that, could you use a crystal ball and tell us how the quarter, the remaining two months of the quarter, and a sense of coming quarters could look like?
Bhavish Aggarwal
Sure sir. Thank you so much for your question. January was robust. We reclaimed our number one position immediately and momentum into February looks strong. Actually the two new products that have launched after January ended are Gen 3 and the Roadster X. So all of the January performance is actually on the Gen2 product. And now with the new products we are seeing a much more stronger demand across our network for both Gen 3 as well as Roadster X products.
In terms of ramp up, I do believe as we get into a little bit of the festive seasons towards the end of this quarter or early next quarter, we with our new products of motorbikes as well as Gen3, these numbers will continue to ramp up. Another vector which will take numbers higher is just the maturity of the new stores that we’ve opened. These stores are right now, typically it takes us about four to six months for a store to get to its ideal operating conditions in terms of sales per month per store.
So these new stores which were opened in end of December pretty much are still in the second month. So we are seeing good walk ins, we are seeing good interest in the new products also, especially the motorbike in these new stores. So I do expect over the next two, three months that vector to also amplify another point I want to highlight given this opportunity. Is actually our Gen 3 and Gen 2 coexistence strategy, which was new and we had not shared that before in the market before. So we have decided to keep the Gen 3 and Gen 2 products together in the market for the future. Gen 3 is a very aspirational product and we have priced it also slightly higher than our Gen 2, yet in the same range as market products, whereas its performance is much better than peer products. And we have a lot of brand pull, product pull for the Gen 3 products and it also delivers a very good margin for us. Gen 2 we have used to now focus on increasing penetration as well as gaining market share. And hence this kind of pincer strategy allows us to both increase volumes as well as increase margins. So all these things put together, sir, we do expect the market share for us to trend upwards towards 30 to 35% over the course of this quarter.
Arun Kejriwal
One other question, Bhavesh, you have given us a number that at around 50,000 vehicles a month, you would break even and move towards EBITDA positive. Sometime in Q1 of FY26 you would also be launching your battery cells. Would that change this number of 50,000 to something lower? Because contribution from the battery not in terms of revenue, because on a console basis it’s not going to make a big change. But total contribution to the company’s sale would become significantly higher if you could give us some thought?
Bhavish Aggarwal
So you’re absolutely right. At a consolidated level, when our battery cell comes in, we will actually have a expansion of margin. The 50,000 is actually for auto EBITDA. We have two segments, auto and cell. So the auto segment EBITDA will achieve breakeven at that 50,000 unit level. The sell, you know, the cell margins are booked in the cell segment, but as at a consolid level, actually that will add to the overall benefit and that number might come in a little bit.
Arun Kejriwal
Right. Thanks a lot for that, Babish.
Bhavish Aggarwal
Thank you.
Operator
Thank you. The next question is from Gunjan Prithiani from Bank of America. Please go ahead.
Gunjan Prithyani
Yeah, team, thanks for taking my questions. I just wanted to follow up on this 50,000 breakeven number. I’m not sure, I mean, is it that we are expecting this to be breakeven when Gen 3 kicks in and battery localization benefit kicks in? Because as of now, certainly, you know, at a volume level which is higher than 50,000, we. The losses just seem very wide. So I’m just trying to make sense of this number please.
Bhavish Aggarwal
So Gunjan, this is not quarterly number. This is monthly number, 50,000 sales a month. The number you would have seen the shareholders. That is a quarterly number. So just for benchmarking in January I think we had about 25,000 sales in the month of January. So when we get to 50,000 the at a gross margin level at where we are today, about 25 odd percent that you saw in the. In January we will be auto segment EBITDA positive.
Gunjan Prithyani
And this factors in gen 3 not the battery localization to be. To be clear. Right.
Bhavish Aggarwal
The gross margin to achieve this is at that 25 odd percent. So you know, gross margin remains around the 25 odd percent. 50,000 is the break. Is the EBITDA break even number.
Gunjan Prithyani
Okay.
Bhavish Aggarwal
That doesn’t factor in the cell benefit. The cell benefit is on top of that.
Gunjan Prithyani
Okay, got it. That is clear now I think Bhavish. I just also wanted to understand when you, when you look at the PLI benefit or PLI accrual, if you can quantify how much was that this stock and you know just a little bit more direction on this gen 3 because if I read the press release it’s spoke about some 11% reduction in the cost. Are there more cost reductions to be expected? Because I thought the number was bigger than this, you know, when you’ve spoken about it last quarter. So you know more clarity on that.
Bhavish Aggarwal
Sure. So let me answer the gen 3 stuff first and then Harish can take the pli. See on gen 3 the press release, the 11% is a cost bom cost reduction that will happen over the course of this year. What we have launched with Gen 3 is the starting point of the Gen 3 platform. And there are many more cost reduction activities planned for over the course of this year. When all of those activities are complete, there will be about a 15 to 20 point gross margin benefit which is in that 11% bomb cost reduction.
Gunjan Prithyani
Okay. And on the PLI.
Harish Abichandani
Hi Gunjan. Harish sir. So on the PLI, this is the first quarter where all our products are covered under PLI. We had the X series getting PLI certified in the preceding quarter and this quarter we had all the entire range getting PLI approvals for this period. The total quantum of PLI approximately accrued in this quarter was around 120 crores for all the range, both Pro Air and the entire X series.
Gunjan Prithyani
Okay, got it. And last question from my side. Babish will be on the industry as a. If I look at last maybe few months, the adoption level has been at six and a half or you know, in that range of sub 6%. And it’s not that there is lack of products in the market now. There is, you know, fairly large set of products available from yourself as well as from the industry as a whole and at price points which are now very, very competitive. Then what is it that is the stumbling block on the adoption? You know, what is it that you pick up from? Is it still no confidence on the product performance or some thoughts around that?
Bhavish Aggarwal
See, like I always remark, Gunjan, the six and a half needs to be split into motorbikes and scooters. Motorbikes is two thirds of the market and there is no product there. Ours is the first product there, right? So let’s keep aside motorbikes. In scooters, the penetration has been growing steadily about right now the EV penetration scooters will be slightly higher than 20%. And if you see we put a chart in our market commentary in the shareholders letter that shows that actually quarter on quarter with a few blips here and there, the EV market is growing.
And if you take sometimes what happens is we see only this month versus two months ago. There are enough seasonalities, there are enough changes in amounts and all that keep moving it a few points up and down on a monthly level. But if you see, if you zoom out, you see year on year, calendar year 24 over calendar year 23, the scooter EV penetration has gone up from about 12 13% to about 17 to 20%.
And we are seeing continuous similar trends of penetration increase in scooters. So my feeling is in calendar year 25 we will go from about a 20% to about a 25 to 30% penetration. This number can be slightly higher, slightly lower, depending on how competitors also play. If competitors are more aggressive, it actually benefits penetration. And hence in a strategic sense it benefits us because we have the strongest play in electric. As we have expanded distribution for the first time. Actually these customers have a good product at a reasonable price. Before that they had our peer products which were maybe not priced well or not as good in terms of functionality.
And our distribution expansion will further increase scooter EV penetration. So anywhere between 25 to 30 is where I think towards the end of this year we can be. But there’s another blip possible because fame is reducing in April from 10,000 to 5,000. There might be again a two, three months blip because of that. But generally on a year-on-year basis, you should assume EV penetration growth of about 5 to 10 bits. So 5 to 10 percentage points.
Gunjan Prithyani
Okay.
Bhavish Aggarwal
On the other hand, I’ll just complete my answer. That was scooter commentary. On motorcycles, we actually expect a faster uptake compared to the scooter journey. The scooter journey, if you see, started three and a half years ago with us, then penetration. Was sub 1% in scooters, now it is 20%. It’s taken three and a half years to get here. In motorbikes, we actually expect to traverse the same journey in about half or two-thirds the time. And that’s because there’s generally more awareness about EVs. The basic foundations of the sales service network have already been laid out. Products have already improved three generations. For us, our motorcycles start from our Gen 3 platform. So all of those benefits already are into the starting point of motorcycles. And motorcycles as we all know is about two times the scooter market. So we are actually very encouraged by the response and interest we are getting on our motorbikes. And we actually feel this is going to be the real inflection point for the EV two wheeler, three wheeler industry in India, which is motorbikes gaining EV penetration. And it’s all going to happen in the next couple of quarters.
Gunjan Prithyani
Okay, got it. That’s pretty useful. I think this last question, if I can squeeze in Harish, I just wanted to get your thoughts on this expenses which has been seeing a pretty big jump over the last two quarters. And last quarter you did speak about the warranty cost being higher and this quarter again that number has gone up. So if you can give us some sense on what’s really driving the increase there both in terms of, you know, where are we on warranty cost and secondly, what led to the step up in this quarter.
Bhavish Aggarwal
So Gunjan, I’ll set some context and then Harish can be more specific on it. See on warranty, the warranty and service related costs. So you see a one time exceptional cost in this. In Q3 there will also be another one in Q4. This is largely linked to the service backlogs we had. It is not all of all warranty. Part of it is also, no questions asked, goodwill that we did given that we had a bad issue on service. All of that is now behind us.
In terms of actual warranty cost in the product. We so far book about 3200, 3250. Now we might revise this number in the next financial year. As we just learned from our experience, the steady state actual warranty costs for us are not much higher than this 3200 number, slightly higher, but not much higher. It is the one offs which we had to solve for, which was linked to lower network scale and some goodwill that we had to do. So this should end in the next quarter or two in one offs and going forward we might revise our provisioning on warranty. To the new level from this data.
Harish Abichandani
Just to add Gunjan, I think if you look at an annualized level, last year we had a warranty cost of approximately 5 to 6% of our revenue. This year will be slightly higher going into the closure of this year, consequent to this one offs and the last two quarters and in Q4 some part of it. But going ahead into FY26 as we review our provisions and with Gen 3 and other. Technology improvements and with our investment in service side of it, these are expected to then start trending closer to the industry standards.
Bhavish Aggarwal
Actually on that, with our Gen 3 platform, our forecast actually is that the warranty as a percentage of revenue might be around 2%. That’s what we have tested for and planned for and that’s where Gen3 is coming out in the testing also. So we’ve done a lot of work on making sure Gen 3 is actually much lower on warranty costs. So 2% is where we are targeting with Gen 3. We might actually be slightly lower on that too. But we will still have a lot of this gen 2 gen 1 products which will continue to have some level of warranty higher than this 2.5%. So the blended might be slightly higher for another year or two.
Operator
Thank you. Next question is from Chandramoli Muttaya from Goldman Sachs. Please go ahead.
Chandramouli Muthiya
Hi, good evening and thank you for taking my question. I have two questions and I’ll ask them upfront. First one is just around the motorcycle launch. Congratulations on that. Just want to understand at what stage will you potentially start sharing bookings numbers to the Mesa community on the motorcycle products?
The second question is just around your battery strategy. What sort of yields are we at this stage as we approach the June in house battery usage in some of our products? And when do we expect the battery strategy to be accretive to our gross margin profile vs. Buying cells externally? Thank you.
Bhavish Aggarwal
So on motorcycles, Chandrus, we’ve had a very strong response to our launches. We are actually across all our stores now people are buying the motorcycles. We will not be sharing any numbers today. Many people are also saying they reserved it. Tens of thousands of people have reserved the bike, but they want to see the bike in the stores before they finally order, which will also happen in the month of March.
So motorcycles actually in terms of volumes will start reflecting in Q1 in a material way in our registrations as well as there will be some in this quarter which will be towards the end of March. But in terms of volumes and revenue and registrations, it will come in in Q1. But the interest is very, very strong. And the product proposition also is obviously as good as it gets in EVs for this category.
So that’s on motorbikes. And what we’ve launched right now is the Roadster X which is the entry level motorbikes. We have a bunch of other motorcycle products lined up for the course of this year. We have the Roadster, then the Sportster and Arrowhead, which are Sporty mid segment bikes. And then later this year we will have our premium segment bikes also. So all of that is lined up so we feel fairly good and confident. About our motorcycle product lineup. On the battery. See we are right now scaling up the entire production. Our yields are already up to about 70 odd percent and we want to get to about 80 plus percent when we commence production next quarter. And each of these steps are being optimized for the right yield and as well as the right safety, quality, etc. And all the testing that we’re doing on the cells is to make sure whatever we are producing is at a certain safety standard. And also the yields and the cost is also trending towards a high yield number. We will start our commercialization at around 80% yield and through the course of this year get it to above 90 odd percent. The target eventually is a mid 90s percent where the best in class gigafactories run in the world which will be somewhere early to mid next year. In terms of margins at a bond cost level, the cell is going to be on day one cheaper than buying it from outside. So the bond cost of the cell as well as the cost of production for us, including yield losses from the first quarter of commercial production itself will be lesser than the cost of procuring cells from outside. And as we improve yields as we get to a higher scale, our BOM will and the cost of production of the cell will further reduce. At about a 5 GWh level, the cell business will be also segment EBITDA positive directionally about a 5 GWh scale which should happen by early next year. And so that’s where the cell business will be at a consolid level, EBITDA margin accretive at a contribution margin, etc. It might happen earlier.
Chandramouli Muthiya
Got it. Thank you very much and all the best.
Bhavish Aggarwal
Another point Chandhur I want to make here is, you know, I don’t know whether you all noticed that it was a small line in the in the end of our shareholders letter. What we are producing right now in the GigaFactory is the Gen1 OLA Gen1 NMC cell. We are already working on our Gen2 NMC cell which will be out early next year. So that will be a better energy density than what we have with this one. This one is about the 275 watt hour per kilogram mark. That one will be slightly higher which actually means every product of ours just gets 10% extra or 5 to 10% extra energy right out of the box without the vehicle changing anything.
Another big thing here, which was again a small point, maybe you guys missed it is we’ve also started commercializing LFP cells so we are making two LFP cells, one for our vehicles on the same 4680 format and one for battery storage applications. And we will be entering the battery storage industry also with a megapack kind of a product which will be a container size battery. And in India the battery storage market with all the government bids and all is just starting to ramp up. And we actually today all the players in India import from outside. So we will be building these container scale batteries within this calendar year through our own LFP cells, fully vertically integrated and selling it to all these EPC companies instead of procuring from China, they can buy from us.
Chandramouli Muthiya
Got it. That’s helpful. I’ll call back in the game.
Operator
Thank you. Next question is from Rishi Vora from Kotak Securities. Please go ahead.
Rishi Vora
Hi. Thank you for the opportunity. My first question is just a clarification, Pavish. You made a comment that by early next year you expect the gigafactory production to reach 5 gigawatt hours, right? Is that correct?
Bhavish Aggarwal
Yes.
Rishi Vora
So essentially what you are implying is that you know we’ll roughly produce around one and a half million vehicles and if you look at current run rate, you know we are let’s say roughly around 400, 500,000 vehicles. So what you’re implying is will thing XR volumes in one year and if yes, then what will?
Bhavish Aggarwal
Let me unpack this for you Rishi. There are two or three things here. Firstly, we will have installed capacity of 5 or above gigawatt hours in the gigafactory and the factory can produce that much. Second is how much automotive volumes will we have from our two-wheeler business. We do expect getting, you know, last year was 400k. Now this year we are seeing again a bump in volumes, turnaround of our volumes, motorcycle, etc. So maybe that 400 will through this year become 5, 6, 700 in that zone. I don’t want to give a concrete forecast on that, but I do expect strong 2 wheeler volume growth this year. And on top of that we have our three wheelers coming towards the second half of this year which will actually have much higher battery capacity.
So all in all let’s say we have about 700, 800 kind of volumes towards run rate basis towards the end of this year. That means if I use a factor of 4 to 5 kilowatt hours per product, so that’ll be about a 3 to 3.5 gigawatt hour requirement by end of this year or early next year how that gigafactory will be ready to produce all of that.
Then on top of this we will also like I mentioned, be making LFP cells for battery energy storage. So there will be a new segment that we will start working towards in the next, maybe in the next quarter or so. You’ll start hearing more about it from us which is this container scale batteries. So now that again is an early market in India. But we have, we will have the capacity in our gigafactory to supply for that as the market scales up.
Rishi Vora
And have we started discussion with the customers for these LFP batteries or maybe you’ll start from next quarter?
Bhavish Aggarwal
No, we’ve started some discussions. I don’t want to share specifics today, but there are many discussions and we are also really. From an engineering standpoint, the containerized battery is also being made and discussions are being had with all types of customers across the value chain.
Rishi Vora
Understood. And if you look at keeping aside the market share trends which has been volatile, our absolute volumes in 3Q were down almost 3% roughly. And even in January the absolute volumes are around 25,000. So despite us having in the scooter segment all the offerings across majority of the price points, now what is it that is not resulting in the sharp uptick in volumes? Because now tcos is favorable, everything is there. You know why we are still for the industry and for us the volumes are not significantly scaling up despite, you know, all the positives in terms of pricing, product availability, distribution.
Bhavish Aggarwal
See, you’ll have to give it some time, Rishi. We just expanded our distribution till then we were only at about 750 stores. We’ve just expanded to be able to address almost every part of India and it’ll take four, five months for that distribution to mature. And as that matures, you will see our volumes rise in those intel end markets or new markets.
Secondly, there is definitely higher competition. So while the market has grown, the top three players are kind of fighting aggressively for it. The other two are losing money in their fight. We are actually growing our gross margin, expanding our gross margin. So part of that competitive intensity also reflects in our market share. Market share in January was about 25, 26%. And like I’ve guided before in this call, we will aim to have a scooter EV market share of about 35%. And we believe we can get there with our Gen 3 product as well as Gen 2 coexisting, the network expansion that we’ve done as well as the service issues that we have now solved and the brand image that had been that the issue that was there actually customer expectation, customer anecdotal feedback is all very positive now.
So that also we expect a positive tailwind to increase our market share. So expect our Scooter EV market share to be around 30, 35%. And the rate of growth of EV in Scooter, like I said, right now penetration is 20. It might get to 30 by the end of this year. And that means if we have 1/3 of that market, we’ll have 10% of the overall scooter market. And that’s how we are looking to play. The gross margin. Headroom that we have allows us to be more aggressive if competition is throwing money. And that’s how we’ve been able to expand margins as well as expand market share.
Rishi Vora
Understood. Just one last question for Harish. What would be the cash outflow during this quarter? And what would be the net cash on our balance sheet at the end of December?
Harish Abichandani
So in the course of this quarter you’ve seen the EBITDA numbers in that the overall cash balance at the end of the quarter would be around 5000 crore plus on the balance sheet at our end. That will be the cash in hand at the end of the quarter.
Rishi Vora
As in what would be net cash number?
Harish Abichandani
Net cash number would be around 8 to 10% lower because of certain cash which are blocked in terms of bank guarantees, etc. That would be the net cash.
Rishi Vora
Understood. Okay.
Operator
Thank you. Next question is from Jinesh Gandhi from Ambit Capital. Please go ahead.
Jinesh Gandhi
Yeah hi, my question pertains to our product. So we have addressed our service quality quite considerably in last few months. However, given we have several new product launches lined up between current month and 2Q and beyond, what are we doing to ensure that there are no teething troubles with our upcoming product launches and strengthen our brand Equity?
Bhavish Aggarwal
See, the Gen3 platform like I mentioned already improves product quality by a very large degree. And there are a bunch of things we have done on the engineering side like moving away from hub motors. Hub motors was a major challenge in product quality before in the Gen 2 platform. Now with Gen 3 it’s all our in house made mid mount motors which are much more almost a logarithmic scale better in terms of product quality.
We’ve also re engineered the electronics, reduced the number of components in gen 3. So if you see the number of ECUs are all down to largely two. One in the head unit and one in the motor controller and one in the battery. So three much much more well integrated, lesser number of parts that improves quality in Gen 2. Again one of the major areas of quality issues was the motor controller where water used to leak in. And this was not our manufacture or design parts, this was procured from suppliers.
So now we have engineered these things ourselves, integrated them better into the vehicle. So Gen 3 actually our own estimate, like I said, is warranty as a percentage of revenue will be below 2%. And in addition to this engineering, we’ve also thoroughly tested this with lacks of kilometers of riding these Gen 3 prototypes and early products. And after that is only when these are coming into market.
Jinesh Gandhi
Okay, got it. So the testing side has also been far higher than the Gentoon Gen 1 or.
Bhavish Aggarwal
Yes, absolutely. At both a vehicle level and a component level.
Jinesh Gandhi
Got it, got it. And secondly, the staff cost has seen reduction because of moderation in the count. But should we expect it to increase the. Going forward given the expansion of network or that won’t be reflecting in our on our roles as such.
Bhavish Aggarwal
No, the network people will reflect in our P and L In a sense they’re not on roles for us, they’re off role but they do reflect in our P and L. So but in terms of people cost, if you think of on role people that will actually I don’t know the specific number but it would have reduced in Q3 over Q2 as well as Q4 over Q3 will be trending downwards. But if I even add the network people cost as a broader people umbrella cost we will still generally hold steady because in network we are adding but in other places we found a lot of efficiencies to commonalize roles or use AI in our business processes and really reduce.
Jinesh Gandhi
Got it. And lastly, with respect to our CapEx, our guidance for this year, FY25 and FY26 how much do we plan to invest in both capacity and sell? Hello. Hello. Hello.
Operator
Participants, please stay connected. We seem to have lost the line for the management. Please stay connected while we reconnect. Yes, please go ahead.
Bhavish Aggarwal
Are we audible to you?
Operator
Yes sir, we can hear you. Participants, please stay connected. Next question is from the line of Ajax Frederick, please go ahead. Ajax.
Unidentified Participant
Hi sir. Both I’m audible.
Unidentified Participant
Yeah, I have a couple of questions. One is on the distribution. So how many active distribution centers we have right now after the new, new expansion? Hello? Hello? Am I audible?
Operator
One moment.
Unidentified Participant
Yeah. Hello?
Operator
One moment please. Disconnect it.
Unidentified Participant
Hello? Yeah.
Bhavish Aggarwal
Yeah, we can hear you.
Unidentified Participant
Can I go ahead?
Operator
Yes. Hey jocks. Please go ahead. Sorry for the inconvenience.
Unidentified Participant
No problem sir. I was asking about the distribution stores. So how many are active right now? And yeah, this is a job mutual so I wanted to understand the distribution. So what is the current status of store open right now and where are we focusing on? Is it Tire 2, Tier 3 and incrementally what is the per store count? We are targeting more from a distribution strategy and it is.
Bhavish Aggarwal
See we are focused on the whole, the whole breadth of the country. Tier 1, Tier 2, Tier 3, rural, all of those. Because as a, let’s call it a multi category general purpose oem we want to be across all kind of customer segments. So that’s why we initially till we announced and did this store expansion we were only 750 stores which was largely tier one, tier two markets.
Now we are across pretty much every district and taluk of India. We don’t expect us to have another store expansion in the near term. Maybe towards the end of this year or early next year there is still another scope of adding another couple of thousand stores to get to an equal level where ice industry is. But for now we feel this is enough to scale up the products that we have and in terms of customer base also our focus is across the segment and many of our products find resonance with different levels of customers.
With our motorbikes, especially upcountry markets we feel will be very relevant. With our premium scooters, urban cities and. Slightly more upwardly mobile customers find it relevant and with our mass market scooters it’s more a broader horizontal cut across peers.
Unidentified Participant
Okay, sir, and we saw your expenses go up. So can you help me understand how much was spent in this network expansion costs? I’m assuming that’s sitting in other expenses, right?
Bhavish Aggarwal
Network expansion is not in other expenses.
Harish Abichandani
The network expansion which has happened over say December and the significant cost actually will start coming in this quarter. It will be normal rentals, etc. Lease properties, etc. They will given the accounting standard, some of it actually goes below the EBITDA line because of the way the lease of these premises are accounted. That’s the normal cost. Otherwise costs incremental costs are fairly minimal on these network expansion.
Unidentified Participant
Okay, I was just looking at the other expenses spiking up so I wanted some clarity on that on a Q basis?
Harish Abichandani
On the other expenses which as we discussed earlier also on the call some of these one offs which have been taken in this quarter towards.
Unidentified Participant
Okay, understood rationalization.
Harish Abichandani
Which what we have taken and that’s why the spike you see in the quarter on quarter.
Unidentified Participant
Okay, okay, that’s a final question. You mentioned that Jan’s gross margins are 25% and for the last few quarters we were hovering around 18 odd percent or 19%. So what changed in Jan to deliver a 25% gross margins?
Bhavish Aggarwal
See on Jan gross margins there are two things. Firstly, our BOM cost has been reducing continuously. If you see even in Q3 over Q2 we had in our shareholders let us said that one point BOM cost reduction is contributing to gross margin. Same in Jan. Another one point of gross margin improvement happened through bomb cost reductions. Then on top of that there was about a 3.5% point improvement from no discounting because last quarter was the festive quarter. So January was less in terms of. But despite that we actually gained market share back. So in that sense we were able to gain by discounting lesser. Now going ahead we will see an expansion from further BOM cost reduction thanks to the Gen 3 platform as well as margin expansion thanks to the Gen 3 and Gen 2 products coexisting.
Unidentified Participant
Okay, okay, that’s very clear. Congrats on all the best. Thank you. Thank you.
Operator
Thank you. Next question is from Shirish Gute from Nippon India Mutual Fund. Please go ahead.
Shirish Gupte
Is it possible to share what capex we did in Q3 on tangibles and intangible.
Harish Abichandani
The total capex what we did. On in Q3 was around 300 odd crores. This is across both sell and auto and the intangibles was R and D etc would be around 60 to 70 crores in that number. Hello?
Shirish Gupte
Am I audible?
Harish Abichandani
Yeah.
Bhavish Aggarwal
Yeah we can hear you.
Shirish Gupte
Okay, so capex is answered. So the next question I’m trying to understand the PLI we mentioned is now applicable on all models. So is it 12, 13% of revenue? Is that the right number to work with? Am I audible?
Bhavish Aggarwal
Hello?
Shirish Gupte
Yeah.
Bhavish Aggarwal
Yeah we can hear.
Shirish Gupte
I’m trying to understand how much PLI we have recognized in this quarter as a percentage of revenue.
Bhavish Aggarwal
So in this quarter we recognize around 120 crores of PLI for across all our products product lineup.
Shirish Gupte
Okay, okay. And just want to get a clarification on the other income. The QOQ cash has fallen but other income is up. Is there any exceptional gains or anything in the other income or is it a normal run rate that we should expect?
Harish Abichandani
This is fairly normalized. There is no exception item as part of the othering.
Shirish Gupte
Understood, thank you very much. I’ll. I’ll follow that. Thank you so much.
Operator
Thank you. Next question is from Nikhil Kale from Invesco. Please go ahead.
Nikhil Kale
Yeah, so I think. Thanks for the opportunity. One question was on the staff side I think you made a comment about 17% kind of an optimization. So just wanted to understand is that kind of the workforce percentage that you kind of reduced or what is that number exactly?
Bhavish Aggarwal
That is the cost of the workforce number of people. Yeah, that’s the number of people we have reduced.
Nikhil Kale
Okay. Possible to highlight in what board. Work areas have kind of the major reductions being done. Is it like marketing, sales?
Bhavish Aggarwal
Sure, I’ll take that up. So a lot of these are actually broad based, some in corporate functions also we were fairly, you know, because this company grew so fast in the last three years there were many pockets of the company that were overstaffed because you know, we were in growth mode only. So think of this as a one time consolidation we are doing on our costs, removing inefficiencies in terms of structures of roles as well as unfortunately some people who might not be measuring up.
So this is mostly on that. So across corporate functions, even in field, some in the factory, but largely all the technology muscle, engineering muscle, manufacturing muscle is all fully intact. In fact I would say the lean mass has gone up.
Nikhil Kale
Understood. And just, just wanted to get more clarity on the distribution model now. So when we had like 750 stores, those were all our stores. Right. So now with this 4000, I mean where does that number stand? And now are we kind of looking closer to a dealer model? How is the distribution model now different versus when we, when we were at 750?
Bhavish Aggarwal
Sure. See our model still has the two things. First is our own stores. We now have about 3,000 plus our own stores and partner stores which are not dealers but think of them as agents, partners, multi brand outlets. So we have about a thousand touch points through them. So that’s the 4,000 total.
Nikhil Kale
Understood? Understood. Understood. Thank you. That’s it.
Operator
Thank you. Next question is from Jinesh Gandhi from Ambit Capital. Please go ahead.
Jinesh Gandhi
Yeah, hi, sorry, my question was on the capex side. So what kind of capex do we expect to invest including R and D in both autos and sell for FY25 and FY26.
Bhavish Aggarwal
So I’ll give you a directional commentary on that. Dinesh. I’ll start with the cell. So the cell capex we for the one and a half gigawatt hours which is phase 1A, that’s all largely invested, maybe some tail end. Part of that is continuing. In terms of cash flows we will expand to 5 gigawatt hours and that capex investment will come in into FY26. Now that would mean about let’s say maybe 500 to 1000 crores. Thereabouts the final negotiations are still happening, but thereabouts in terms of capex closer to 1000 for the cell expansion.
On the auto side we will expand our factory as all these new products come in. As our factory production currently is about 1 million units a year. But as we are bringing the 4680 cell. We will expand towards the 4680 battery pack investment. As well as take that 1 million upwards to 2 to 3 million especially as we bring our three wheeler products online. So that will have some Capex again in the 500 odd crore number, maybe slightly higher through the year. Some of these will be actually backloaded in FY26, not in the beginning. On top of this the final intangible Capex is the R and D. R and D continues at the same rate at which we are doing right now. No major changes there. Maybe incrementally it will keep growing as our revenue grows.
Jinesh Gandhi
Got it, got it. And with respect to you mentioned about Warranty cost as 3250, what was that you’re referring to? Just a clarification that.
Bhavish Aggarwal
See 3250 is the warranty provision we take right now on every product that we sell. But the actual was higher because of these one time warranty and goodwill actions that we had to do last quarter. Going ahead we are forecasting that with Gen3 product we might actually end up being lower than the 3,250 closer to around 2% of product value as provision. And maybe for the current product we might revise the current provisions upwards once we finish the financial year.
Jinesh Gandhi
Got it, Got it. That’s all from my side. Thanks.
Operator
Thank you very much. We’ll take that as the last question. I would now like to hand the conference back to Mr. Johan for closing comments.
Abhishek Chauhan
Thank you. We appreciate your time and all of your questions during the call today. Thank you so much for joining us and we look forward to meeting you all during our next earnings conference. Thank you. Have a good day.
Operator
Thank you very much on behalf of Ola Electric. That concludes the conference. Thank you for joining us ladies and gentlemen. You may now disconnect your lines.