India is on the brink of a sustainable mobility revolution. Electric vehicles (EVs) offer a cleaner, quieter, and more eco-friendly transportation solution. However, challenges such as high costs and limited infrastructure persist. Investing in the right EV stocks can help overcome these obstacles and accelerate India’s transition to electric mobility. With the government’s support, the potential for well-positioned EV stocks is enormous.
This article explores EV stocks, their benefits, top stocks to watch, and critical factors to consider before investing.
With India working towards having 30% of all vehicles being electric by 2030, there is a lot of interest in electric cars and bikes from big car companies and new businesses. Here’s a look at some of the most popular electric vehicle companies in India:
1. Tata Motors: Part of the marquee Tata Group, Tata Motors is a leading Indian automaker focusing strongly on EVs. Its popular models include the Tigor EV sedan and Nexon EV SUV. It aims to launch 10 EV models by 2025 and has invested over $2 billion.
2. Mahindra: An automotive powerhouse in India, Mahindra also owns a controlling stake in Peugeot Motorcycles. Its e-Verito sedan helped spearhead EV adoption in Indian fleets, and it aims to launch five new electric SUVs soon.
3. Ola: Better known for its ridesharing service, Ola made headlines in 2022 with the launch of its first electric scooter, the S1. It aims to transition its vast ridesharing fleet to EVs by 2030 and is setting up its own ‘Battery Swapping’ infrastructure.
4. Ather Energy: Backed by Hero Motocorp, Ather is among India’s most promising EV startups. It focuses solely on developing electric scooters and setting up charging infrastructure. Its flagship 450X model offers a nearly 85 km range per charge.
5. Okinawa: Another promising EV startup, Okinawa, offers a wide range of electric 2-wheelers, including scooters, motorcycles, and even electric bicycles, at affordable prices. Its Ridge+ scooter offers a maximum 200km range per charge.
Electric vehicle (EV) stocks refer to shares of publicly listed companies that manufacture electric vehicles or the various components that enable electric mobility.
Some prime examples include:
● Automakers: Legacy automakers like Tata Motors and Mahindra are launching new EV models and emerging EV startups focusing solely on electric vehicles.
● Battery Manufacturers: Companies involved in making advanced lithium-ion batteries that power electric scooters, cars and buses.
● EV Charging Networks: Companies creating widespread public and private charging infrastructure essential for the adoption of EVs.
● Chipmakers: Semiconductor companies make battery management systems, sensors, and microcontrollers for EVs.
● Software Firms: Companies that provide operating systems, telematics platforms, and other software essential for connected and intelligent EVs.
Investing in a basket of well-selected stocks across these EV sub-themes per your risk appetite is key to benefiting from the expected boom in India over the coming decade.
Here are 6 key features to look for when identifying EV stocks in India for long-term investment:
See if the company develops proprietary technology, such as advanced lithium-ion cell chemistries for better battery density and cycle life and software for intelligent battery management systems. It is pivotal to bring such innovations to cost-sensitive Indian markets.
A diverse EV product portfolio that spans affordable two- and three-wheelers and higher-priced passenger vehicles indicates an ability for volume-driven growth and catering to a wide consumer base—key in price-conscious India.
Consistent revenue growth, return on equity, and operating cash flows are strong signs of an efficient business model—essential for capital-intensive auto manufacturing. Do past financial performance checks before investing in EV stocks.
Gaining market share against peers reflects strong EV demand and customer preference for the company’s products – a critical competitive strength as the fight for Indian market share intensifies.
Eligibility for EV subsidies under FAME and other state policies offsets costs and encourages consumer adoption. Also, assess the impact of government policies like emission norms and carbon tax incentives on ICE vehicles.
Exposure to charging infrastructure build-out, in addition to focusing on EV sales, also offers tangential revenue growth prospects from India’s emerging EV ecosystem.
There are 5 key segments within the EV sector that investors can gain exposure to:
The most direct play is companies involved in the manufacturing of EVs, including 4-wheelers like Tata, startups like Ather Energy and Ola producing e-scooters, and even mainstream automakers like Maruti Suzuki and Hyundai gradually transitioning to EVs.
With India allowing only EVs by 2030, these companies stand to gain directly from selling eco-friendly vehicles. Before investing, remember to assess production capacity, battery procurement contracts, and in-house R&D capabilities.
The mass adoption of EVs globally has led to surging demand for lithium-ion batteries. India, too, will need reliable, high-energy-density, and durable batteries to power its EV shift.
Stocks like Exide, Amara Raja, and HDFC Life are expanding into lithium cell manufacturing. You should also explore chemical companies that supply key raw materials for lithium batteries.
Along with EVs, a nationwide charging grid is pivotal for consumer confidence and inter-city travel. Central utilities like NTPC, state income, and private networks like Tata Power, ABB, and Shell are rapidly installing EV chargers in India.
With India targeting over 2 million public charging points by 2030, companies enabling this hold multi-bagger return potential.
EVs are driven by intelligent software coupled with engineering components like powertrains and microcontrollers for a smooth riding experience.
Stocks like Motherson Sumi, Sundram Fasteners (components), and KPIT Technologies (software) stand to gain from a focus on locally manufacturing specialised parts instead of imports.
A little-known fact is that producing battery cells requires importing rare-earth metals, from lithium, cobalt, and nickel to copper and aluminium. So, keeping supply chains robust is pivotal as global EV growth escalates.
Stocks like NMDC, HCL, and Vedanta, which are focused on metal and mineral mining/refining, offer a proxy play on the EV boom from a raw material supply perspective without direct exposure to auto manufacturing risks like sales fluctuations. Their shares generally see an upward trend when EV sales grow, indicating higher mineral demand over the long term.
Constructing a well-balanced portfolio of electric vehicle stocks offers compelling benefits:
1. Exposure to Disruptive Growth – BNEF research shows over 30% of vehicles sold globally will be electric by 2030. EV stocks allow tapping into this high growth.
2. Leverage Government Policy- Favorable policies like the FAME scheme, state EV policies, and carbon taxes accelerate India’s transition to electric transport, aiding EV stocks.
3. Hedge Against Oil Price Risks- EVs do not need gasoline, so they help cushion overall vehicle operating costs from global oil/fuel price volatility.
4. Participate in India’s Growth Story- Making EV components locally fosters job creation, is aligned with the Make in India vision, and provides environmental benefits.
5. Balanced Risk-Return Profile- EV stocks exhibit higher growth potential than mainstream auto stocks, and their eco-focus appeals to ESG-centric investors.
6. Gain From Emerging Tech- EVs represent the confluence of mechanical, chemical, and software engineering, making transport cleaner, brighter, and more efficient.
A diversified EV stock portfolio thus allows for participation in this world-changing mobility transformation with excellent risk-adjusted returns potential.
With India’s promising EV growth roadmap, how can investors identify stocks poised to outperform amidst stiff competition? Here’s a 6-step approach:
Analyze the market share of the EV manufacturers on parameters like annual EV sales growth, customer satisfaction and product range diversity in two/four-wheeler segments. Opt for stocks with a 3-5 year track record of increase in market share over peers.
Battery manufacturers should gauge investments in proprietary Lithium/Sodium cell technologies. Software firms should benchmark telematics platforms and AI capabilities against global peers. Such tech innovations ensure competitive advantage, as products/brands can be copied by rivals alone.
Positive operating cash flows to fund growth and higher return on capital invested indicate pricing power and lean operations, which are critical in the cost-focused auto sector. Analyse ratios like Debt/Equity, Current Ratio, and ROCE while stock picking.
Evaluate state-level policy eligibility criteria for demand incentives, special electricity tariffs for EV manufacturing, and the availability of land banks/provincial subsidies for setting up new facilities while selecting stocks.
Assess ground-level efforts to strengthen domestic supply chains in making cells, battery packs, microchips, and motors instead of importing wholly built SKUs. This indicates proactive alignment with India’s ‘Atmanirbhar Bharat’ vision.
Positive investment announcements in new assembly plants and R&D facilities, along with timelines for model launches, signal conviction of growth potential. When stock shortlisting, consider the leadership team’s strategic vision.
Therefore, combining all these aspects – competitive positioning, technological readiness, financial health, policy incentives, local manufacturing, and demonstrated commitment to the Indian market – is the key to identifying EV stocks that are most likely to emerge as long-term winners.
Here are the 3 simple steps to investing in EV stocks:
Like regular Indian stocks, a Demat account is mandatory for investing in publicly listed EV companies. Choose an account with low maintenance charges and seamless online transaction capabilities from reputed brokers.
Research EV manufacturers, battery companies, and charging network players based on parameters discussed earlier, such as financial health, technological strengths, leadership position, and growth outlook.
Place buy orders of your chosen EV stocks just like regular stocks, using net banking or integrated UPI on your stock investing account. Depending on your risk appetite and investment duration, maintain a portfolio allocation between 15% and 40% towards EV stocks.
To maximise returns:
Adopt a staggered buying approach instead of lump-sum investing.
Reinvest gains from high fliers after portfolio rebalancing every 6-12 months based on updated fundamental holdings analysis.
Stay informed on government EV scheme timelines, which serve as market catalysts.
Here are 4 key investor profiles who can gain substantially by betting on the high-growth EV sector:
Attracted by the 30% year-on-year growth projected for India’s EV market over this decade, growth investors should allocate significant equity portfolio exposure towards EV stocks through’ a balanced betting approach.
Environmentally conscious investors who want to promote climate action in daily life should explore EV stocks that align ethics with potential double-digit returns.
EVs represent the confluence of mechanical engineering, material sciences, and IoT. This disruptive innovation appeals to tech investors who want exposure to promising emerging technology trends.
Domestic manufacturing, job creation, and reduced imports are strong investment themes for India’s macro bulls. The EV sector is a good bet for long-term wealth creation.
So beyond just auto sector stakeholders, EV stocks hold strong appeal for various investors against a supportive policy backdrop – making India’s EV growth story a mass investment opportunity.
Electric vehicles (EVs) hold immense promise in fueling a sustainable future. However, jumping to grab high-flying EV stocks without due diligence carries risks. Here are 7 critical aspects for retail investors to assess before betting big on EV stocks:
Peer benchmarking of the core EV technology, like battery cell durability, charging speeds, and onboard software against global competitors, is done during diligence. Mature and road-tested technology has lower execution risks. Analyzed productivity indicators like patent filings growth before buying shares.
Study segment-level demand forecasts for both personal and commercial EVs. Check utilisations for recently installed public EV charging points since low asset sweating is a cash burn risk. Such demand analysis indicates market adoption barriers and clarifies growth runaway length.
In addition to market share metrics, compare product specs, capital costs, and customer ticket sizes against close competitors side-by-side instead of conducting generic industry-level analysis to assess competitive strengths/weaknesses and implications for the target firm’s business prospects.
Capital-intensive automaking entails sizeable debt. So, assess net debt levels versus operating profits and future principal/interest obligations. Also, check the cash runway.
Conclusion
India is moving towards using more electric vehicles, which means there are good investment opportunities as more electric vehicles are used for transportation. However, it’s important to choose the right stocks in the electric vehicle industry to make the most of this trend and get good returns on your investments.
Some of India’s major electric vehicle companies are Tata Motors, Mahindra & Mahindra, Ola Electric, Ather Energy and Okinawa. These companies offer various EVs, from affordable scooters and bikes to cars and buses.
Before deciding on EV stocks, consider financial health, operating metrics, technology maturity, competitive positioning, growth plans, addressable market size, government policy benefits, and make-in-India initiatives.
As a high-growth sector, moderately high-risk EV stocks can comprise 15% to 40% of your equity investments, depending on your risk tolerance and investment duration. Adopt a staggered investment approach.
EV manufacturing, charging networks, and battery production currently hold immense potential. With rising environmental consciousness and policy support, these segments are critical to accelerating EV adoption and are worth exploring.
Along with direct stock investing, mutual funds and ETFs focused explicitly on the EV theme offer a convenient way to gain portfolio exposure to this sector while benefitting from professional management.
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