Ather says Konarc could lift margins 6%-7% over Rizta

Ather Energy Limited says a like-for-like Konarc variant could deliver gross margins 6%-7% better than Rizta over the long term. Management said Konarc was already a few thousand rupees cheaper to make within its first one or two months of production, despite new products typically carrying elevated initial costs.

How much better could Ather's Konarc gross margin be than Rizta?

Ather's estimate is that a like-for-like Konarc version could generate gross margins 6%-7% better than Rizta in the long term. Tarun Mehta said the range is variant dependent and needs several quarters of production data, but described it as a believable long-term estimate after manufacturing stabilises. It is management's expectation rather than a reported Konarc margin outcome.

Konarc's sales history was limited at the time of the call. It had recorded only one month of sales in the second quarter, September, and fewer than 10,000 units had been sold by the end of Q2. Ather did not disclose realised Konarc gross margin, a bill-of-materials comparison or variant-level profitability against Rizta, so the 6%-7% range should not be read as a current reported result.

Management positioned Konarc as a way to improve unit economics while extending affordability. Ather said Konarc has better current unit economics than Rizta and could allow it to offer more affordable products without sacrificing absolute gross margin. Management said this could reduce the average ex-showroom price experienced by customers while maintaining, or potentially improving, margins even if commodity costs do not ease.

Why does Ather expect Konarc to cost less than Rizta?

Ather expects Konarc to cost less because it was already a few thousand rupees cheaper than Rizta on a like-for-like basis at launch. Management said this comparison came within the first one or two months of production, a period when costs for a new vehicle are usually elevated. It expects the difference to expand materially as output and production processes stabilise.

The company linked the expected improvement to the EL platform, but did not provide a formal platform cost-saving target. An analyst asked about structural savings independent of sales mix and noted that Rizta could eventually shift to the EL platform. Ather said it would need several quarters to see where the cost benefit settles, and gave neither a timetable for a Rizta transition nor a percentage reduction in manufacturing cost.

Ather's wider margin improvement also contains factors outside platform engineering. Management said total margin improvement versus Q4 FY26 was 5.3%, largely from price increases that held in the market and value analysis and value engineering, or VAVE, cost reductions. It separately identified 2.7% in Q2 versus Q4 FY26 as a more temporary lever from SKU management, reduced incentives and other support mechanisms.

Ather said the 2.7% lever was not a one-off item, but could be applied during supply-demand mismatches or unusually elevated commodity costs. Management also said it could reopen incentives or alter SKU choices if supply conditions or commodity prices normalise. That distinction means the expected Konarc advantage and the reported group-wide margin improvement do not measure the same thing.

How will Ather roll out Konarc without hurting margins?

Ather is sequencing Konarc variants and geographies to avoid displacing higher-margin demand while capacity remains constrained. The SR2 and SR3 mid variants are available first, SR1 is planned by Q4, and higher-end versions are due later. Management said it revised the original launch sequence after demand for the 450 and Rizta exceeded the production capacity available near Konarc's 29 August 2026 launch.

SR1 is the entry version that Ather expects to drive substantially larger volume. Management said it wants Aurangabad capacity in place before introducing SR1 because launching it earlier could cannibalise variants with higher margins and create a margin loss. The earlier plan had put entry versions ahead of higher-end variants, but the company instead prioritised mid variants as supply became tighter.

Ather is also expanding Konarc market by market. Northern markets were first, followed by the rest of India, Middle India, Western India and Southern India. Management said the phased approach gives it better control of constrained inventory and prevents products from being spread nationally without meaningful depth in any one region.

The initial response was encouraging but remains early. In Rajasthan and Uttar Pradesh, management said inquiries, pre-orders and showroom walk-ins rose several times after launch, without giving market-level totals or conversion rates. Konarc had fewer than 10,000 cumulative units sold at the end of Q2, so Ather said the early demand signals were not yet sufficient for firm conclusions on mix or sustained sales.

What could limit Ather's Konarc margin improvement?

Commodity costs, supply constraints and variant mix could affect the margin outcome that Ather expects from Konarc. Management said commodity prices appeared broadly flat in the weeks before the call and it had not observed a trend that would make Q3 worse than Q2. However, it called the environment volatile and said it would need to respond to changes as they occur.

Ather said it would not take further price increases in Q3 and intended to hold current pricing for a while. Its stated objective is to preserve the flexibility to grow without discounts as additional manufacturing capacity comes online over the next few months. In that plan, Konarc's lower initial production cost is relevant because management believes it can support affordability without necessarily reducing gross margin.

Capacity timing remains important to both the Konarc rollout and its economics. Trial production at AURIC Phase 1 in Chhatrapati Sambhaji Nagar was expected to begin within weeks, with the project on track for Q3 FY27 and capex and capacity installation expected to finish by Q4 FY27. Management said the base Phase 1 capacity of 42,000 units would take two quarters to ramp, while an additional 12,000 units due in Q2 could ramp faster.

Ather expects the AURIC Phase 1 installation to ramp within FY28, although management did not give an exact month. It also said Hosur capacity should ramp relatively quickly, with effects expected later in the quarter. The pace of these ramps will influence whether Ather can introduce SR1, expand its dealer network from Q4 and meet Konarc demand without sacrificing the product mix it is seeking to protect.

Conclusion

Ather's central product-economics case is that Konarc can add volume while improving the cost structure of its scooter range. The 6%-7% long-term gross-margin estimate against Rizta is based on management's view that Konarc began production a few thousand rupees cheaper and should become more economical as manufacturing stabilises. Reported margins, however, will still reflect commodity movements, incentives, SKU choices and the mix of variants sold.

The next points to watch are SR1's planned Q4 launch, the expansion beyond northern markets and the AURIC Phase 1 ramp through FY28. Ather also said it needs at least two quarters of broader Konarc sales before judging AtherStack Pro attachment rates, particularly because Konarc may have a more non-South-heavy customer base than its existing products.