India is entering a new chapter focused on sustainable travel. The urgency to cut pollution and clean up our cities is greater than ever. Aiming to make 30% of vehicles electric by 2030 shows a clear direction.
This ‘EV’olution in how we move offers many opportunities. Investors are eager to see where the future of transportation is heading. In this blog, we will explore the EV industry and highlight stocks that could seize this opportunity.
Why invest in EV stocks?
The electric vehicle sector is at the heart of a revolution in transportation. In 2023, more than 250,000 units were sold globally each week, a massive leap from 2013, when per-year sales didn’t even reach that figure.
Several key factors are driving this momentum:
Government push:
Governments worldwide, including in India, are implementing rigorous measures to reduce carbon emissions. The country’s ambitious target of net-zero emissions by 2070 highlights the critical role of electric mobility in environmental strategies.
These policies not only support the industry but are actively shaping its future, making this an attractive area for financial growth.
Economic implications:
India’s commitment to this sector also makes economic sense. Reducing reliance on oil imports is a strategic move for the nation. On a global scale, the rise in electric mobility displaced approximately 1.7 million barrels of oil per day in 2023, roughly 3% of the total demand for road fuel.
Affordability:
Technological advancements have been another significant force. The cost of batteries, which are central to electric vehicles, has plummeted to an all time low in 2023. This can be further reduced due to the custom duty waivers announced in Budget 2024 in India.
This price reduction can make these vehicles more accessible, bringing them closer to the affordability of traditional petrol and diesel options. As battery efficiency improves further, the appeal of this technology is expected to increase even more.
Also read: Automobile industry in India
Indian EV market
Sales of diesel vehicles slightly decreased from 12 to 11% in 2023, while sales of petrol-powered vehicles fell from 86% in 2020 to 76% in 2023. But, the sales of alternative fuel vehicles had increased by more than 400%, marking a significant change in what Indian consumers are choosing.
In 2023, over 1.5 million units of electric vehicles sold in India. Plus, 2 years ago, electric vehicles accounted for a mere 1.75% of all vehicle sales. By 2023, this figure had risen sharply to 6.38%. The EV sector is expected to expand considerably, with projections of reaching $120 billion by 2030 in the country.
Key to this momentum has been governmental intervention. Like the FAME schemes–Faster Adoption & Manufacturing of Electric Vehicles schemes– which has provided substantial financial assistance, has made electric vehicles more accessible. Several states are transitioning their public transport fleets to electric. For example, Delhi has 1970 electric buses.
You may also like: Ola vs Uber vs Rapido: The battle for India’s ride-hailing market
Factors to consider before investing in EV Stocks
- Financial robustness: Evaluate how a firm’s earnings have evolved over time. Steady income growth suggests a firm foothold in the sector.
- Tech leadership: The rapid pace of change in this sector demands continuous innovation. Firms that consistently allocate resources to research and development are better positioned to stay ahead of the curve.
- Distribution network reach: How efficiently a firm can deliver its products to both urban centres and rural areas will affect its market penetration.
- Customer loyalty and retention: A broad and devoted customer base acts as a buffer against market volatility. Firms that have built strong brand loyalty are better positioned to successfully launch new products.
- Global expansion potential: Consider whether the firm is looking to expand beyond domestic borders. Access to international markets not only diversifies revenue streams but also positions the firm to benefit from global trends in electric mobility.
Key players in the Indian EV ecosystem
The EV sector offers multiple investment avenues, each presenting unique opportunities. Here are major categories to consider
- Manufacturers: Companies manufacturing electric cars, bikes, and commercial vehicles.
- Battery and component suppliers: Firms providing lithium-ion batteries and critical parts like drivechains.
- Charging and power infrastructure: Businesses involved in building and operating charging networks, battery swaps, and energy storage systems.
- Tech innovators: Developers of advanced software and technology for electric vehicles.
- Mobility and financial services: Operators of electric fleets, providers of EV financing, and managers of electric bus/fleet systems.
Here are five companies that are expected to capitalise on the EV boom in 2024, listed based on their Return on Equity- RoE% (as of August 14, 2024). Although a strong RoE indicates effective profit generation, it doesn’t ensure future outcomes or returns.
It’s a useful filter for narrowing choices within the EV sector but should not be the only one. The real value of an investment comes from analysing other financial metrics, current market conditions and other conditions as noted earlier which are crucial in determining a firm’s future prospects.
- Tata Motors
With a dominant 67% share (Q1FY25), Tata Motors commands India’s electric vehicle segment. The Nexon EV is #1 electric SUV currently. Currently, 12% of the brand’s total sales come from electric models, showcasing the company’s drive towards eco-friendly transportation in an increasingly competitive industry.
- Concord Control
Since its establishment in 2011, Concord Controls has focused on delivering critical electrical systems for Indian Railways. As a provider of battery chargers and control panels, the firm plays an essential role in advancing railway electrification.
- Uniparts India
Founded in 1994, Uniparts India is a big player in highly specialised engineering systems for off-highway vehicles (OHVs). The company handles everything from initial design to production, focusing on intricate and essential parts. With operations spanning more than 25 countries, Uniparts leverages its extensive reach to address the demands of the niche market.
- Bharat Electronics
Primarily known for its defence technology, the company is also making strategic moves into the EV space. The firm is engineering lithium-ion batteries and power systems designed for two- and three-wheelers. Beyond this, BEL is advancing the development of compact charging solutions and exploring hydrogen fuel cell innovations through key partnerships.
- Hero MotoCorp
As a leader in India’s 2W market, it is intensifying its focus on electric mobility. The firm already has 6 EV models and is preparing to introduce new EV scooters, targeting diverse customer needs, from business users to daily commuters. Beyond new products, Hero is also focused on expanding charging solutions and strengthening its sales channel.
Here’s the financial performance of the aforementioned companies in FY24.
| Fundamental metrics (In ₹ Cr) | Tata Motors | Concord Control | Uniparts India | Bharat Electronics | Hero MotoCorp |
| Sales | 437,928 | 66 | 1,140 | 20,268 | 37,789 |
| Expenses | 378,389 | 48 | 938 | 32,554 | 8,804 |
| Profit before tax | 27,955 | 18 | 163 | 5,090 | 1,408 |
| Net profit | 31,807 | 13 | 125 | 3,742 | 1,032 |
| RoE (%) | 37.5 | 25.7 | 24.7 | 24.2 | 21.2 |
You may also like: Here’s everything you need to know about Ola Electric’s IPO
Bottomline
Investing in the Indian EV sector offers multiple avenues for growth, each with distinct risks and rewards. From established automakers to emerging tech firms, opportunities abound. However, a careful examination of financial stability, technological innovation, and market trends is crucial before committing to any investment in this dynamic industry.
