Ola’s shares rallied nearly 4 percent on Friday to $15.00 a share after the electric vehicle maker revealed the first wave of its dealer-owned stores had opened. This comes less than a month after it opened its sales and service network to partners in a major step to expand its physical retail and after-sales presence.
The introduction of dealer-led stores marks a significant shift in Ola Electric’s strategy for retail expansion. In working with partners, the company can reach more customers and not have to install, run and manage their own stores. A wider network could also allow for prospective customers to buy Ola Electric products and existing owners to get service support.
The news was welcomed by the stock market with Ola Electric shares gaining almost 4 percent (at the time of writing this) yesterday. Investors follow developments in the automobile company’s distribution and service infrastructure because retail availability and after-sales support have a significant impact on customer confidence, sales performance and long-term brand growth.
In the context of an electric vehicle manufacturer, the dealership and service network is critically important. People buying an electric scooter or other EV need to make sure that they have not only the service centre, spare parts, technical support, as well as the service centre with the best conditions and service to maintain it. So expanding the network may eliminate one of the most practical issues when purchasing an EV.
Ola Electric is working to expand its presence in the rapidly expanding electric mobility market in India. The company is expanding its dealer-led stores to reach customers in different regions. Instead of solely having company-operated locations, partnerships can allow the brand to develop a much larger presence in the local business community.
The timing is also important as India’s electric two-wheeler segment is still in the hands of a number of established automobile manufacturers and newer EV companies. The market is not only evolving and manufacturers are looking to launch products and batteries, the distribution, financing, customer experience and after-sales support are also the key to winning customers.
The first wave of dealer-led stores going live within a month of the partnership-based sales and service model being introduced indicates that the company is moving relatively quickly to operationalise the strategy. The growth could give customers in more locations an opportunity to experience Ola Electric products, understand available models and access support closer to where they live.
And a wider retail network could also help the customer experience in the overall customer journey. Before buying the vehicle, buyers will want to see and experience the car in person. For electric scooters customers might also ask about charging, range, battery management, warranty coverage and servicing. At an individual local outlet the company, its suppliers and customers can directly interact.
As investors, we believe the development will be watched for indications of whether the expanded network will translate to increased sales and higher customer satisfaction. Opening stores is certainly a big deal, but the longer term impact will be the outcome of store productivity, vehicle demand, service quality and the company's ability to have consistent customer service at partner-operated shops also depend on store productivity, and not just on how many vehicles to sell, but how good it is going to be for the company as a whole, in which case we can expect a more consistent customer experience.
The dealer-led model could also provide Ola Electric with more flexibility as it moves forward into further markets. Partner-operated facilities could help the companies scale faster than a fully company-owned network, but quality and consistency of service over a broader network is still a very important issue.
Ola Electric shares are up following the news which is indicative of the market's immediate response to the company's retail expansion plan. But stock movements can be influenced by a whole lot more and a single day for the company is not indicative of a long-term trend for the stock.
Overall, the launch of the first wave of dealer-led stores is a big step in Ola Electric's sales and service strategy. As competition in India's EV sector intensifies, having a strong and accessible retail and service network could become more important. The company needs to see how the new dealer-led outlets will impact customer reach and vehicle sales and after-sales support, while investors will be watching the company’s overall operational and financial performance.
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