If You Are Betting On EV Adoption In India, Here Are Some Stocks You Could Bet On
In order to profit from the EV adoption, one can focus on buying into stocks that truly benefit from the boom.
Over the last few years, investors have been enthused about the prospects of electric vehicle (EV) adoption in India. With regulatory support, easy funding and high demand for EVs in some segments, investors believe that EVs would lead value migration from conventional vehicles to EVs and would help in creating wealth.
Over the last few years, several factors have come together to make EV adoption an easier proposition for the masses. The most significant of these factors are — lower cost of batteries and subsidies provided for the government. According to reports, the prices for batteries have fallen almost 89 per cent over a period of 10 years. Therefore, battery prices are lower and more affordable.
With EVs attracting billions of dollars, as investors perceive them to be the future, it is only a matter of time before EVs replace a significant proportion of the automobile market. According to consultant McKinsey, EV and the related industries have attracted more than $100 billion in funding. Rivian, an EV-maker, had valuations of $100 billion even as it began production in December 2021.
The largest opportunity lies in two-wheelers and three-wheelers in India. The upfront cost of an electric two-wheeler is around one to 1.5 times the value of its traditional counterpart, with the operational costs being similar.
Similarly, for certain three-wheeler models, the upfront cost could even be lower, while operational costs remain similar.
However, for commercial and private four-wheelers, are much higher, both in terms of upfront cost and lifetime operational costs. As a result, a majority of the adoption in India is driven by the two and three-wheeler space. In the three wheeler space, EVs already form 45 per cent of the sales. The two-wheeler space has grown quite rapidly as well, with companies posting multi-fold jumps in volumes — also driven in part by high petrol prices.
In order to profit from the EV adoption, one can focus on buying into stocks that truly benefit from the EV boom. Traditional manufacturers are likely to see sales decline or stagnate in the legacy business, while the tiny EV business grows rapidly. As a result, overall growth might not be too high, or might even be negative — which could ultimately not add much shareholder value. Hence, a better option could be to focus on companies that benefit from the EV boom without having to risk large de-growths from the traditional segment.
Here are a few companies you could check out:
Minda Industries: Minda Industries is an ancillary manufacturer that is increasing its focus on the transition to electric vehicles. Its existing product portfolio of seats, lights and switches is unlikely to be affected by the transition to EVs. The new products being developed include products such as sensors and controllers for the electric powertrain.
Greaves Cotton: Greaves cotton is a manufacturer with a focus on engineering products such as engines for heavy vehicles. With its new acquisition in the EV space, the company is looking to position itself to benefit from the EV wave. It has already made a few acquisitions in the space —Ampere Autos, ELE Rickshaws, and MLR Autos. As a result, it stands to benefit from the rapidly increasing demand in the two and three wheeler space.
Tata Power: Tata Power has been one of the most popular plays on the EV transition. The company is setting up a wide network of charging stations all over India. The company has signed up with Hindustan Petroleum as well, in order to install new stations across India. It already has more than a thousand stations across the country, and plans to reach 10,000 charging station within the next five years.
Lumax Industries: Lumax is a manufacturer of lighting products for automobiles. The company supplies lighting to almost half of the Indian four-wheeler market and commands a 30 per cent share in the two-wheeler market in India. The transition to EVs would not affect Lumax too heavily as it gears up to cater to EV demand. Its existing products are unlikely to be disrupted by the trend as well.
JBM Auto: JBM Auto has begun manufacturing electric buses in India — a market driven by municipal corporations in the country. These administrative bodies are the largest customer for buses as they remain commercially unviable for private operators. It has a focus on developing charging infrastructure and batteries for EVs as well.
Gabriel India: The company is among the largest manufacturers of shock absorber and suspension products with several leading EV manufacturers being its key customers. Given its strong product portfolio, its current products are unlikely to be affected negatively by the EV transition.
HBL Power Systems: HBL Power is a battery manufacturer with deep expertise in the space. The company offers a wide range of batteries for various niche applications. With its years of experience, the company could be a potential beneficiary of the boom.
Exide Industries: Exide is the largest battery manufacturer in India that has partnered up with Leclanche to manufacture lithium batteries. While Lithium batteries still remain a small part of its overall revenues, its contribution is expected to grow with time. Exide, however, remains highly dependent on the traditional automotive industry, which generates more than 73 per cent revenue for the company. Nevertheless, it has announced plans to increase capital expenditure for growing its lithium battery manufacturing base.
Motherson Sumi: Motherson Sumi is one of the largest manufacturers of wire harnesses for the auto sector, and manufactures other components for automobiles as well. Wire harnesses form a critical component of electric vehicles, and are extensively used in EV manufacturing. The company’s factories are spread across the globe and cater to manufacturers worldwide. The company has set a goal of attaining $36 billion in revenue in financial year 2025.
Kabra Extrusiontechnik: The company manufactures batteries under the Batrixx brand. These batteries are battery packs for two-wheeler EVs. The brand is positioned to provide a wide range of battery offerings for both automotive sector and for the storage of green power in the electricity sector.
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