Ather Energy Ltd (NSE:ATHERENERG) (Q1 2027) Earnings Call Highlights: First-Ever Positive ...

Negative Points

• Commodity cost escalation continued, with a 5.6% drop in adjusted gross margin to 22.4% in Q1 FY27.

• Production constraints and supply chain challenges (labor crisis, West Asia war) limited volumes, with April production soft at 24,000 units.

• Unrealized retail potential of 13,000-15,000 units per month due to capacity constraints, leading to long waiting times (up to 2 months) and dealers pausing pre-orders.

• PME Drive subsidy uncertainty persists, with no clarity on extension, and 15-20% of Q1 sales were without subsidy.

• Further commodity inflation risk remains, with potential additional 100-200 bps hit in coming quarters.

• Auric Phase 1 ramp-up may spill into early FY28, and Phase 2 investment decisions are still pending, creating near-term supply uncertainty.

• EL scooter launch may depress ASPs, though margins are expected to remain stable.

• New store openings were slowed in Q1 due to supply constraints, potentially impacting long-term network expansion.

• Motorcycle segment entry is delayed, with Ather likely to be a follower rather than pioneer, potentially missing early market opportunities.

• Fixed costs are expected to rise as Auric goes live, though some may be capitalized, but could pressure margins in the medium term.

Q & A Highlights

Q: What is the outlook for commodity cost headwinds, and will the recent price hikes be sufficient to offset further increases? A: Tarun Sanjay Mehta, CEO, stated that while commodity costs are expected to inch up slightly, the worst is likely behind. He guided that there is probably another 100-200 basis points of risk left, but the price hikes already implementedwhich lifted the average selling price (ASP) to Rs. 1.61 lakh by Junewill be largely reflected in Q2 FY27 financials. This should mitigate further margin degradation, with structural gains from pricing and SKU management expected to outlast the commodity cycle.

Q: Can you provide details on the production capacity ramp-up, particularly for the new Aurangabad (Auric) plant and the upcoming EL scooter platform? A: CEO Tarun Sanjay Mehta explained that the current Hosur facility is at ~100% utilization (35,000 units/month). Auric Phase 1, which adds 5 lakh units annually, is on track to go live later this calendar year, bringing total capacity to 9.2 lakh units. The EL scooter platform is already in production at Hosur, with a planned scale-up to 60,000 units per month combined with Auric. He noted that Auric Phase 2, which could add another 5 lakh units, is being planned and could be fast-tracked given the strong demand trajectory.

Q: How is the company managing the surge in demand given current supply constraints, and what is the unrealized retail potential? A: CEO Tarun Sanjay Mehta highlighted that demand is significantly outpacing supply. While Ather retailed an average of 30,000 units per month in Q1 FY27, the company estimates it could have sold an additional 13,000-15,000 units per month. This is reflected in dealer channel inventory dropping from 14 days to just 3 days. The company is on a "war footing" to ramp up supply, with pre-orders hitting a record 1.5 lakh in Q1, up 158% year-on-year.

Q: What drove the first-ever positive EBITDA quarter, and is this level of cost control sustainable? A: CEO Tarun Sanjay Mehta confirmed that Ather delivered its first positive EBITDA of Rs. 9 crore (0.8% margin) in Q1 FY27. This was achieved through disciplined fixed-cost management, particularly in marketing and sales, despite the commodity crisis. He clarified that this was not a one-time exceptional effort but reflects the company's cautious DNA. While costs will rise as Auric goes live, much of it will be capitalized initially, and the increased volume output should offset the impact on overall numbers.

Q: What is the status of the PME Drive subsidy, and how are price increases and SKU management contributing to margins? A: CEO Tarun Sanjay Mehta noted that the company did not receive subsidies for the full quarter, with roughly 15-20% of vehicles sold without it. While there are strong signals of policy support for EV extension, clarity is awaited. On pricing, the ASP increase to Rs. 1.61 lakh was driven by a mix of price hikes (100% margin accretive) and improved SKU management (about 25% flows to gross margin). The AtherStack Pro attach rate also remained strong at 94%.

Q: How is the customer profile evolving given the higher ASP, and is the market shifting from motorcycles to scooters? A: CEO Tarun Sanjay Mehta stated that the underlying customer profile has not changed radically; it remains largely the same scooter buyer. The higher ASP is supported by the powerful total cost of ownership (TCO) advantage of EVs, rising petrol prices, and the success of retail finance, which helps customers absorb the cost. He noted that the market is not seeing a significant shift from motorcycle buyers to scooters, but rather a continued preference for electric scooters.

Q: What are the plans for the EL scooter launch, and how will it impact ASPs and AtherStack Pro attach rates? A: CEO Tarun Sanjay Mehta revealed that the EL scooter will be unveiled at the Ather Community Day on August 29th. The launch will initially focus on northern and middle India markets, following a geo-strategy similar to the Rista launch. While the EL platform will likely depress overall ASPs as it scales, the CEO cautiously guided for at least 75% AtherStack Pro attach rates on the new platform, hoping for even higher based on recent track records.

Q: What is the timeline for the Auric Phase 1 ramp-up, and how will production scale to meet demand? A: CEO Tarun Sanjay Mehta explained that equipment installation at Auric is ending in the next couple of months, with trial production starting during the festive period. The ramp-up from 0 to 42,000 units per month is expected to take 4-5 months, with reliable daily output throughout Q4 FY27. He acknowledged the large gap to fill but emphasized that this big step-up in capacity will hold the company steady for several quarters before potentially needing Phase 2.

Q: How is the company thinking about the electric motorcycle segment, and does Ather plan to participate? A: CEO Tarun Sanjay Mehta stated that while the motorcycle segment is starting to look interesting, Ather may not be the pioneer this time. The company is taking a "watch and see" approach to understand consumer response and segment willingness before making a maiden launch. He indicated that any entry into the motorcycle segment is more than a year away, likely two years plus, as the company remains razor-focused on the EL platform and getting at least two products out on it in the next year.

Q: What is the growth outlook for non-vehicle revenue streams like software, charging, and accessories? A: CEO Tarun Sanjay Mehta highlighted that non-vehicle revenue has grown to 14% of operating revenue, with AtherStack Pro being the largest piece. While accessory sales have been quietly compounding, the biggest long-term compounder will be service revenues, which are currently only 2-3% of revenue compared to 10-12% for established two-wheeler businesses. This presents tremendous growth potential over the next decade as the fleet size expands.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .