Best Electric Vehicle Shares in India

The electric vehicle (EV) market in India is at an inflection point and poised for massive growth in the coming years.

Several factors are converging to drive rapid adoption of EVs in India – supportive government regulations, rising fuel prices, decreasing lithium-ion battery prices, environmental consciousness and new model launches from automakers.

India has set an ambitious target of achieving 30% electric mobility by 2030.

This presents a huge market opportunity as it would imply EV sales penetration rising from less than 1% currently to 30% by 2030.

According to industry estimates, the EV market in India is projected to grow at a CAGR of 49% between 2022-2030 and be worth $206 billion by 2030.

The government is also providing a major impetus through policies like FAME-II and PLI schemes for automotive and auto components.

The PLI scheme with outlay of ₹25,938 crore is aimed at boosting domestic manufacturing of electric vehicle and hydrogen fuel components.

Several state governments are also announcing additional incentives for EVs.

The rapidly expanding charging infrastructure network across the country acts as a catalyst for convincing buyers to switch to EVs.

There are over 1,800 public charging stations already installed across India as of January 2023.

With rising affordability, availability of new EV models and strengthening charging network, the Indian EV growth story is just getting started.

This presents a compelling investing opportunity for investors to ride the electric vehicle wave in India.

Stocks of OEMs, battery manufacturers, charging companies and auto component suppliers related to EVs are slated for strong growth.

EV Industry Segments

The electric vehicle industry comprises several complementary segments that make up the electric vehicle ecosystem.

Some of the key segments are:

OEMs (Manufacturers):

The OEM segment consists of automotive companies that manufacture electric vehicles.

This includes established automobile companies like Tata Motors, Mahindra & Mahindra, MG Motors, Hyundai as well as new entrants and startups like Ola Electric, Ather Energy etc.

The segment has seen rising participation from incumbent automakers launching new electric vehicle models.

Check out – Open Interest for Intraday Trading?

Battery Companies:

The battery is the most vital and expensive component of an EV.

Battery companies like Exide, Amara Raja, Tata Chemicals manufacture lithium-ion batteries catering specifically to the EV industry.

Setting up advanced cell manufacturing facilities and investing in new battery chemistries for improved performance are focus areas.

Charging Infrastructure:

Availability of charging infrastructure is crucial to instil range confidence among EV buyers.

Companies like Tata Power, NTPC, IOCL, HPCL and BPCL are involved in setting up charging stations across the country.

Building fast charging stations is important for inter-city travel.

Components/Software:

The components and software inside EVs such as motors, controllers, battery management system require specialised design and engineering focussed on EV applications.

Companies like Sandhar Technologies, Sona Comstar and Minda are developing electric vehicle components and integrated systems.

The ecosystem approach with participation across all segments is essential for the large-scale adoption of electric vehicles in India.

Top EV Stocks to Watch

OEM Stocks:

Tata Motors – 

The leader in the EV passenger vehicle space with over 70% market share. Popular electric vehicle models include Nexon EV, Tigor EV and Tiago EV. Recently launched updated Nexon EV Max with 437 km range.

Mahindra & Mahindra – 

An early mover in EVs, M&M offers models like eVerito and e20. Recently entered the SUV segment with the XUV400 launch. Investing Rs. 3000 crores in EVs by 2025.

Read more – Invest in Nasdaq From India in 2023

MG Motor – 

British automaker offering ZS electric vehicle model. Tied up with Tata Power to install superfast chargers across India. Planning a new affordable EV model.

Battery Stocks:

Exide Industries – 

Exide Industries is market leader in lead-acid batteries and investing in lithium-ion manufacturing. Tie-up with Leclanche for Li-ion battery plant.

Amara Raja Batteries – 

Second largest manufacturer collaborating with the government for advanced cell manufacturing facilities.

Tata Chemicals – 

Offers key materials for Li-ion batteries. Plans to diversify into battery cell manufacturing.

Charging Infrastructure Stocks:

Tata Power – 

Tata power has installed 500+ charging stations spanning over 120 cities under the EZ brand.

NTPC – 

Announced plans for setting up electric vehicle charging infra across India in multiple cities.

IOCL – 

Targeting to set up 10,000 electric vehicle charging stations across India in next 3 years.

Component Stocks:

Sandhar Technologies – 

Tie-up with Kwangsung for EV parts. Supplies to OEMs like Tata Motors, Mahindra.

Sona Comstar – 

Manufactures highly engineered electric vehicle drive train components and systems.

Minda Industries – 

Supplies controllers, converters and battery management systems for EVs.

The companies in each segment are well positioned to benefit from the expected surge in EV adoption in India.

Financial Analysis

Revenue Growth:

Tata Motors has shown a steady 13% revenue CAGR over FY18-22. Mahindra & Mahindra posted a 14% revenue CAGR during the same period. This indicates strong and consistent growth for the major OEMs.

Amara Raja Battery has also shown healthy revenue growth of 12% CAGR over the last 5 years, driven by its battery business.

Guide – Career In Stock Market

Profitability:

In terms of margins, M&M has maintained EBITDA margins of around 14%. Tata Motors’ EBITDA margins have been between 8-10%. Amara Raja has relatively higher EBITDA margins of 17-18% in recent years.

Tata Motors and M&M have posted negative net profit margins recently due to high costs and losses in overseas subsidiaries. Amara Raja has delivered a net profit margin of 10% in FY22.

Debt Levels:

Automakers have higher debt burdens. Tata Motors has a debt/equity ratio of 1.4 while M&M has a ratio of 0.9. Battery companies have relatively stronger balance sheets – Amara Raja has a D/E ratio of just 0.4.

Valuations:

Tata Motors is trading at P/E of 29 based on FY22 earnings. M&M has a lower P/E of 15 reflecting subdued growth recently. Amara Raja is trading at P/E of 16, signifying potential upside.

Growth Outlook:

Tata Motors and M&M have strong new model launch pipelines catering to different electric vehicle segments which can drive volume growth ahead. Their early mover advantage in EVs also positions them strongly to capitalize on market opportunities.

Parameters for Evaluating EV Stocks

When analysing EV companies to invest in, some of the important parameters to assess are:

Revenue Growth – 

Companies with strong revenue growth trajectories signal good adoption of their electric vehicle models. A 5-year CAGR of over 10% is positive.

Profitability Ratios – 

Gross and net margins indicate profitability. EBITDA margins over 10% are decent for OEMs. High margins indicate efficiency.

Debt Ratios –

 Debt/Equity ratio important to check over-leveraging. Ratio below 1 is preferable. Low Debt/EBITDA ratio is also positive.

Valuation Ratios – 

P/E, P/B ratios compared to historical averages and industry peers. Reasonable valuations suggest upside potential.

Growth Projections – 

Future revenue and earnings projections based on the company’s expansion plans, new model launches, market share gains etc. Higher growth outlook preferred.

Don’t miss out – Stock Valuation Methods

Market Share – 

OEMs with higher market share have an edge due to scale advantages. Rising market share indicates a strong brand and products.

Competitive Position – 

Product portfolio depth, brand equity, vertical integration and cost structure compared to peers. Robust competitive position essential.

Technology Capability – 

R&D spend, patents, vertical integration of technology critical for product differentiation.

Management Quality – 

Experienced management teams with proven execution track records give confidence. Their vision for the company’s EV roadmap is key.

Assessing these parameters holistically is important for identifying EV stocks with strong growth potential and financial health.

Government Initiatives and Policies

The government has introduced several policy measures and initiatives to accelerate EV adoption:

FAME II Scheme: 

Faster Adoption and Manufacturing of Electric Vehicles scheme aims to incentivize electric vehicle sales by providing upfront subsidies. Outlay of ₹10,000 crore for 3 years till 2022.

PLI Scheme: 

Production Linked Incentive scheme for automotive sector (₹25,938 crore) aims to build domestic capacity for EV and hydrogen fuel components.

State EV Policies: 

Many states have their own EV policies providing additional incentives like Delhi’s electric vehicle policy offering purchase incentives, lower road tax, waiver of registration fees etc.

Know more – How to use Stock Screener

Charging Infrastructure Push: 

Government is targeting installation of 10,000 public electric vehicle charging stations across India. 26,000 charging points to be installed in private spaces.

Other efforts include allowing sale of EVs without battery to lower cost, increasing registration validity of EVs to 15 years and making charger standards mandatory.

These initiatives are working in tandem to drive higher EV adoption by lowering costs, enhancing affordability and improving infrastructure availability for buyers.

Growth Drivers and Opportunities

Supportive Regulations: 

Government policies like FAME-II, PLI scheme, state EV policies are incentivizing buyers and manufacturers. Import duties on EVs reduced. Mandates for government/fleet vehicles to go electric are also helping.

Falling Battery Prices: 

Lithium-ion battery pack prices have fallen by around 60% in the last 5 years due to technology improvements. Expected to decline further with scale, aiding affordability.

New Model Launches: 

Incumbent automakers launching new EV models across two wheelers, cars and buses. Startups are also expanding into new segments. Wider range of EVs available.

Environmental Benefits: 

Rising pollution in cities increasing awareness about the environmental impact of traditional vehicles. EVs do not emit any pollutants.

Expanding Charging Network: 

Availability of public charging stations alleviating range anxiety. Rapid charging technology enables fast charging. Making EVs more practical.

The confluence of these factors is generating strong tailwinds for EV adoption. It presents a compelling investment opportunity in the high-growth EV space.

Risks and Challenges

High Upfront Cost: 

Despite falling battery prices, EVs still cost higher than conventional ICE vehicles. Remains a deterrent for mass adoption.

Lack of Charging Infrastructure: 

Charging stations remain inadequate leading to range anxiety. Slow buildout of fast charging networks especially outside major cities.

Competition from ICE Vehicles: 

Established ICE vehicles benefit from factors like lower cost, familiar technology and readily available fueling infrastructure.

Check out – How does stock market work

Execution Challenges: 

OEMs face difficulties in ramping up production capacities, securing reliable supplies of components especially batteries and scaling up operations.

Other challenges include lack of public awareness about EVs, unstable policy environment, technology gaps in drivetrains and software capabilities compared to global peers.

While the opportunities seem abundant, these challenges highlight risk factors that investors should be cognizant of when assessing EV stocks in India. The companies best equipped to overcome these hurdles are better positioned to succeed.

Conclusion

The electric vehicle industry in India holds tremendous growth potential in the coming decade, supported by favourable government regulations, environmental awareness and launch of new EV models.

EV stocks are poised for strong returns owing to high growth projections, rising electric vehicle adoption and huge addressable market.

Leading automobile manufacturers along with battery, charging and component suppliers make good investment bets.

However, prudent investing requires thoroughly evaluating each EV stock based on financial health, growth outlook, market position, technology capability and management credibility.

Multiple parameters around revenues, profitability, valuations, debt levels, market share and competitive positioning should be analysed to identify companies best placed to capitalise on India’s EV transformation.

Investing in a basket of high quality electric vehicle stocks with an eye on the long term growth trajectory can allow investors to benefit from the secular EV megatrend that is still in early stages in India.

As the EV ecosystem matures, companies playing their strategic roles have the potential to deliver multi-bagger returns.