As legacy automakers increase competition, India’s electric scooter startups find themselves under the gun as regulatory uncertainties and hefty losses worry investors despite large market shares.

Despite ranking third in shares, Ather Energy resorted to a right issue after potential investors hesitated at it’s ask of over $200 million at a valuation of nearly $1 billion, said the sources. In September, the EV startup announced that it had raised $108 million by issuing compulsory convertible preference shares to existing investors, GIC and Hero MotoCorp.

According to Tracxn, Ather was valued at $732 million after it financed $162 million in three tranches between January and October 2022. Through August 2023, Ather has sold 72,436 vehicles, significantly more than the 51,394 sold in all of 2022, according to the Federation of Automobile Dealers Association (FADA).

SoftBank-backed following a $140 million investment round led by Temasek, an existing investor, Ola Electric's valuation increased by just 10% to $5.5 billion. A month after introducing its first scooter, in September 2021, Ola was valued at $3 billion. By January 2022, when it sold 1,102 scooters, Ola was valued at $5 billion, according to FADA. Since then, it has grown to become India's leading manufacturer of electric two-wheeled vehicles, claiming nearly one-third of the market in August with sales of 18,628 scooters.

Despite the startups' rapid growth, industry officials saw the lackluster reaction to Ola and Ather's funding as a warning sign, particularly since green mobility is regarded as a so-called sunshine sector in line with the government's objective of reaching net-zero greenhouse gas emissions by 2030. In the largest market for scooters and motorbikes in the world, two-wheelers are anticipated to lead the transition to battery-powered vehicles.