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Steadfast in its commitment to reducing carbon emissions, the Indian electric vehicles (EVs) market has been continuously expanding. Data from the country’s government reveals that nearly 1.03 million Indian EVs were registered with regional transport offices this year till September 19.
During the period, the two-wheeler segment contributed 56% of the EV sales, followed by three-wheelers and passenger vehicles. According to Fortune Business Insight, the Indian electric vehicle market will grow at a 66.52% CAGR between 2022 and 2029 to reach $113.99 bn.
Moreover, the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) subsidy scheme initiated by the Indian government has been a catalyst in promoting the adoption of electric vehicles and expanding the charging infrastructure across the country.
Also, the Production Linked Incentive (PLI) for the automotive sector has boosted the country’s EV manufacturing industry. Not just this, in 2022, the government also reduced the Goods and Services Tax (GST) on electric vehicles from 12% to 5%, while the GST on chargers/ charging stations for EVs was lowered from 18% to 5%.
McKinsey highlights that improved safety features and enhanced EV servicing infrastructure are other factors that have contributed to EV adoption in India. “Incumbent car manufacturers have announced ambitious product-portfolio electrification targets. Newcomers have launched models specifically designed for India’s urban environments,” says the management consulting firm.
McKinsey also points out that the total cost of ownership for EVs, which was always an impediment for Indian buyers, is now at par with that of vehicles with an internal combustion engine.
That said, the expansion of the EV industry in India faces a major challenge when it comes to manufacturing batteries. The nation heavily depends on imported lithium-ion batteries. However, complications in the supply chain have arisen due to geopolitical conflicts, first in Ukraine-Russia and now in the Middle East.
How to invest in EV stocks in India?
With increased government support, the electric vehicle sector in India is looking at positive times ahead. Here are three stock picks that might help investors to tap into the sector’s growth prospects.
Tata Motors
One of India’s top automakers, Tata Motors, entered the EV space in 2019 with its Tigor EV, an electric compact sedan, and its electric bus, Tata Ultra. After that, it launched the Nexon EV in 2020 and the Tiago EV in 2022. Tata Motors and its subsidiary, the UK-based Tata Motors European Technical Centre (TMETC), have major EV ambitions for India. With R&D support from Jaguar Land Rover, Tata Motors is focused on making the personal EV segment more affordable.
The company saw a 24.2% year-on-year increase in its revenue, reaching Rs 3.46 tn ($42 bn) in the fiscal year ended March 2023. During this same timeframe, Tata Motors’ operating income came in at Rs 549.5 bn ($6.59 bn) compared to an operating loss of Rs 174.22 bn ($2.09 bn) posted in the same period last year.
Stocks of Tata Motors are listed on the Bombay Stock Exchange (BOM: 500570) and the National Stock Exchange of India (NSE: TATAMOTORS). The company has a market cap of Rs 2.55 tn ($31 bn). Since last year, the company’s shares have climbed by 55.2%. Along with that, Tata Motors has a PE ratio of 16.26 and a price-to-book ratio of 4.74.
Mahindra & Mahindra
Mahindra & Mahindra (M&M) is an Indian conglomerate with a focus on automobiles. In March 2011, the company officially stepped into the EV market with Mahindra REVAi. It later stopped the production of REVAi but launched Mahindra eVerito and Mahindra eSupro in 2016.
Additionally, Mahindra has a rich portfolio of three and four-wheeler electric vehicles. The company has a strong presence in the commercial electric vehicles segment, as well as in the SUV passenger car market.
Mahindra witnessed a 34% year-on-year increase in its revenue, reaching Rs 1.21 tn ($15 bn) in the fiscal year ended March 2023. During this same period, Mahindra & Mahindra’s operating profit rose by 42.5% year-on-year to Rs 159.3 bn ($1.91 bn).
The company’s stocks are listed on the National Stock Exchange of India (NSE: M&M) and the Bombay Stock Exchange (BOM: 500520). M&M has a market capitalisation of Rs 1.93 tn ($23 bn). The company’s stock has climbed by 22.4% in the past year. It has a PE ratio of 14.7 and a price-to-book ratio of 2.20.
Olectra Greentech
Olectra Greentech is India’s leading electric bus and truck manufacturer. Besides, the company is also engaged in manufacturing composite polymer insulators. In the past, Olectra has delivered electric buses to several state transport units, such as the Telangana State Road Transport Corporation, the Brihanmumbai Electric Supply and Transport Undertaking (BEST), and the Maharashtra State Corporation.
For the fiscal year ended March 2023, Olectra Greentech saw a year-on-year revenue increase of 84% to Rs 10.9 bn ($130.88 mn). Additionally, the company’s operating income for the year surged by 105% on an annual basis to Rs 1.1 bn ($12.98 mn).
Olectra has a market cap of Rs 99.32 bn ($1.19 bn) and is traded on the Bombay Stock Exchange (BOM: 532439) and the National Stock Exchange of India (NSE: OLECTRA). The company’s shares surged 147.55% since last year. It has a PE ratio of 127.51 and a price-to-book ratio of 12.11.
Editor’s note: All stock movement figures as of November 28, 2023.
