Whalesbook
Mixed Fortunes Amid Cost Pressures
The financial results from leading Indian EV manufacturers highlight the challenge of growing operations while facing volatile costs. Companies like Ather Energy and Euler Motors are seeing significant revenue growth and improving their financial metrics, but consistent profitability remains elusive, largely influenced by external economic factors.
Rising Costs for Key EV Parts
Recent price increases for crucial EV components—including rare earth magnets, lithium-ion batteries, and memory chips—are directly affecting Indian manufacturers' bottom lines. These global price hikes are amplified in India due to a heavy reliance on imports, with about 60% of EV components sourced from abroad. The rupee's ongoing depreciation, trading near ₹95 against the US dollar, significantly inflates these import costs. For example, memory chip prices, especially DRAM and NAND flash, have surged dramatically, with some segments up 80-90% year-on-year in early 2026, partly driven by AI infrastructure demand. While lithium-ion battery pack prices are expected to fall below $110/kWh by 2026, the cost of raw materials like lithium has been climbing, adding further price pressure.
Ather, Euler Report Growth, Still Face Losses
Ather Energy reported substantial revenue growth for FY26, reaching ₹3,671.76 crore, though it posted a net loss of ₹517.17 crore for the fiscal year. The company's market capitalization stood at ₹34,393 crore as of 9M FY25. Euler Motors also saw its top-line expand significantly, with FY26 revenue more than doubling to ₹402 crore, alongside a net loss of ₹308 crore. Despite the loss, Euler Motors has improved its operations, narrowing losses as a percentage of revenue and boosting its EBITDA margin to -62.9%. However, Euler anticipates needing revenues between ₹2,000-2,500 crore to achieve company-level profitability, a target projected to be two to three years away.
Engineers Seek Cost Relief
Manufacturers are pursuing engineering innovations to help offset these rising costs. Ather Energy is developing new platforms designed to reduce its dependence on costly materials like aluminum and copper. Euler Motors has managed to absorb a large portion of commodity cost increases, passing on only a small fraction to consumers. Efforts are also underway to integrate higher-margin software and accessories, and to explore alternative battery chemistries such as LFP, which is gaining traction due to its lower price. Nevertheless, these measures are unlikely to fully counteract the combined effects of global commodity inflation and currency devaluation.
Import Dependence Fuels Risk
The primary vulnerability for Indian EV manufacturers is their structural reliance on imports. This dependence makes the sector highly susceptible to currency fluctuations; the rupee's sharp depreciation from ₹36-40 in 2009 to around ₹95 today has substantially increased input costs. While the government has introduced measures like a concessional 15% import duty on electric cars over $35,000 (requiring significant investment commitments), most components still face substantial duties, including Basic Customs Duty (BCD) from 10% to 28%, plus other taxes. The expectation that commodity prices will eventually decrease is uncertain; demand for memory chips from AI applications is forecast to keep prices high past 2028, and lithium prices are rising again in 2026. Both Ather Energy and Euler Motors continue to report net losses, requiring ongoing investment to reach profitability, a timeline that remains uncertain given these persistent external pressures.
Long-Term Prospects and Policy Shifts
Despite current financial strains, the industry anticipates that commodity cycles may eventually normalize. The government's new policy offering lower import duties for EVs priced above $35,000, conditional on substantial local investment, aims to attract global players and promote domestic manufacturing. This could alter the competitive landscape by encouraging localized production and potentially lowering costs over time. Continued investment in R&D, operational efficiency, and strategic sourcing will be crucial for Indian EV makers to navigate current cost challenges and secure future market opportunities.