India regulator issues notice to Ola Electric over consumer rights concerns

The Central Consumer Protection Authority, India’s consumer rights regulator, has sent a show-cause notice to Ola Electric over alleged violation of consumer rights, escalating troubles for the leading electric vehicle maker whose shares dropped 9% earlier on Monday,

The notice, issued on Monday, gives the Bengaluru-headquartered firm 15 days to respond to allegations that include questions about misleading advertisements and unfair trade practices, Ola Electric said in a regulatory filing.

“The Company will respond to the Central Consumer Protection Authority within the given timeframe with the supporting documents,” Ola Electric CFO Harish Abichandani wrote in the filing.

The regulatory scrutiny comes amid a backdrop of mounting customer complaints about Ola’s scooters and service quality. Indian daily Mint recently reported that Ola receives over 80,000 customer complaints monthly.

HSBC analysts last month visited some Ola Electric service centers and reported that “most service centers appeared overwhelmed by service requests and were struggling to provide adequate service quality (as expected from an Auto OEM in India).”

The analysts wrote that Ola Electric “did not invest” sufficiently in servicing capacity to match the volumes sold over the past two years.

“There is a clear lack of experience in the development and maintenance of service centers visible in many locations. Product issues were more than the company expected. Issues ranged from sensor and software problems in the hub motor to battery discharge during non-usage, while other regular service requirements also accumulated due to staff shortages,” the note added.

Ola’s shares fell 9.1% to 89.14 (about $1.06) rupees on Monday, sending its market capitalization below $4.75 billion for the first time since its August IPO. The stock has now dropped more than 40% from its peak of 157 rupees (about $1.87).