Q2 FY27 marked a major milestone for Ather Energy as the listed electric vehicle (EV) major turned profitable for the first time.
The Tarun Mehta-led company reported a consolidated net profit of ₹1.3 Cr during the quarter under review compared to a net loss of ₹154.1 Cr in q2 FY26 and a net loss of ₹51.1 Cr in the preceding quarter.
This was also the first EBITDA-positive quarter for Ather as margins improved to 4.9% from -9.6% in Q2 FY26. Excluding other income, the EV maker’s EBITDA margins stood at roughly 0.8-1%, while adjusted gross margins further improved to 24%.
With this, the EV maker has achieved a milestone that most of its new-age rivals, including listed Ola Electric, is yet to crack. Such is the contrast that Goldman Sachs recently downgraded its outlook on Ola Electric to “sell”, citing the Bhavish Aggarwal-led company’s challenging path towards turning positive cash flow.
However, Ather is not yet “out of the woods,” insisted CEO Mehta during the company’s earnings call. Rather than prioritising profit after tax (PAT), he said that the company is focused on capacity addition to ramp up its sales volumes and bolster its top line.
Hence, it is planning to invest ₹122 Cr to expand the combined capacity of its existing factory in Karnataka’s Hosur and its upcoming unit at Maharashtra’s AURIC by another 2.25 Lakh units per year. This would bolster its total installed capacity to 11.4 Lakh units by Q2 FY28 – a core part of its medium-term strategy.
With its maiden profitability quarter out of the way, how is Ather planning to continue the momentum going forward?
Fixing The Capacity Gap
Ather believes that capacity addition is its crucial bottleneck as supply, and not demand, is the overhang on its performance.
“Pre-orders are up 108%, registrations are up 60% and production is up 45%, all year on year,” noted Mehta. He added that while the company sold 33,000 units a month in the previous quarter, their internal estimates indicated unrealised sales of 20,000 units a month.
Hence, the Hosur capacity addition could have an immediate impact. Given the factory is already up and running, Ather plans to scale the installed capacity of 35,000 units per month at the unit by another 6,000 in Q3 FY27 itself. That said, the expansion at its AURIC plant could take longer as it will only go live by Q4 FY27.
On the margin front, Mehta explained that elevated commodity prices of raw materials like aluminium, copper, and plastics hurt gross margins by 9.4% during the quarter. He, however, added that temporary interventions like price hikes temporarily managed to counter these elevated costs.
“We believe roughly 5.3% of the (overall) margin improvement we have driven over the last two quarters is broadly structural in nature. This is largely because price hikes seem to have landed well in the market… More temporary levers include SKU management and pulling back incentives or other support mechanisms,” added Mehta.
However, he noted that the company will only be able to utilise the aforementioned internal ‘temporary levers’ (which brought 2.7% in margin improvement between Q4 FY26 and Q2 FY27) for a finite period if supply constraints and commodity prices remain elevated.
“If either situation eases, we may open up these levers (incentives and more SKUs) again,” added Ather CEO.
Why Konarc Is The Key To Ather’s Future
Ather’s recently launched mass-market model Konarc appears to be one of the critical pieces that has unlocked its profitability. The company plans to focus on this segment to foster growth going forward.
“Konarc focuses on the fundamentals, targeting more petrol-scooter buyers to buy electric,” Mehta said. He cited features that cater to the mainstream audience’s practical needs, such as 14-inch front wheels, longer rear suspension, a metal body, a centre stand and a 10-year battery warranty.
Konarc also offers a potential margin advantage compared to other products like Ather’s Rizta. The model is already a few thousand Rupees lower than Rizta on a like-for-like basis, and the management expects Konarc’s margins to further improve by around 6-7 percentage points against Rizta going forward.
“We could reduce the average ex-showroom price customers experience without affecting gross margins … Konarc is a useful lever that could allow us to improve margins without pushing prices up further, or perhaps reduce the average ex-showroom price a little while maintaining margins, assuming commodities do not ease,” noted Mehta.
That said, the company is not planning to hike prices barring further cost pressure from commodity inflation.
The CEO also shed light on how Ather had strategically rolled out Konarc to thread the needle between increasing sales and protecting margins. While the company had initially planned to launch Konarc’s entry-level variants first, the management saw that the demand for their existing 450 and Rizta scooters was outstripping the supply.
This led to a decision to introduce the mid-level Konarc variants into the market to avoid lower-margin products from cannibalising their demand. Ather now plans to launch Konarc’s entry-level SR1 variant only once their additional capacity in AURIC is online, enabling them to drive volumes without bringing down margins.
It seems Ather might finally have figured out the key to profitability lies in pricing, cost management, and product mix. Expanding the market through Konarc is another win for the company as well.
But it still has to overcome the hurdles of commodity costs, effective capacity expansion, and converting demand into deliveries.
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