Overview
The Indian electric vehicle industry is changing itself to restructure the transportation scenery with enormous potential driving people to slowly lean towards a change towards brighter and eco-friendly future for India while becoming a major producer as well as a key supplier of EVs into the world apart from the huge consumption of its population. Among environmental challenges such as rising global temperatures and higher pollution levels at alarming rates, innovation and expansion of electric vehicles and cleaner fuels have led to higher sustainable mobility. The EV industry has been counted as a key determinant of India’s vision towards a developed economy by 2047 due to which major players of the automobile industry are grabbing this opportunity to fight against climate issues and expand their market share. These sentiments have contributed positively towards the EV stocks in India
EV Stocks, Industry and Market Size
The Indian automobile industry holds the third rank in global automobile sales and aims to collaborate between manufacturers and policymakers to promote greener options. The automotive sector accounts for over and above seven percent of the country’s total GDP further offering substantial employment opportunities. According to IBEF, the EV industry in India is anticipated to reach around USD 34.80B in 2024 surging at a rate of 26.05% every year to reach USD 110.74B till 2029. So will the EV stocks see a rising trend in India. Similarly, the Global IEA projects the market share of the EVs to rise from 4% in 2020 to roughly 18% in 2023 with the total EV sales reaching up to 10 lakh units in 2022. Further, Government support in the form of fiscal incentives to promote domestic production to fulfill sales up to 1 crore unit sales till 2030 while generating employment opportunities for its masses.
SWOT of EV STOCKS / INDUSTRY IN INDIA
Strengths
Relative Abundance of exploitable renewable energy resources- Due to its strategic location, the Indian subcontinent has renewable resources in abundance including a large deposit of lithium reserves was discovered which accounts for its primary strength.
Skilled Manpower and Technology- Apart from being the most populous country in the world, India is also one of the countries with the highest skilled manpower in the world which could be leveraged for EV manufacturing and innovation.
Changing consumer preferences – With rising disposable incomes and awareness towards environmental safety, there has been a shift in preference towards the use of cleaner fuels and electric vehicles. These sentiments make EV stocks bullish in India.
Weaknesses
Strict Government regulations- Due to the levy of excise duty rates, not authorizing permits of vehicles within the state, volatility of fuel prices, etc have posed significant weaknesses for the Indian auto manufacturers to expand their business operations.
Uneconomical for Indian masses- Although certain auto manufacturers have been producing EVs in India, EVs in India still are uneconomical for its middle-income class despite the tax reductions made by the Government.
Lack of Charging Infrastructure: Underdeveloped charging and battery infrastructure due to limited public spaces and lack of logistics are a concern for the Indian EV industry impacting the EV stocks too.
Safety and Reliability Features- To facilitate widespread EV adoption, Safety and reliability features shall be considered by the auto manufacturers. However, incidents of Battery fires and random breakdowns and inexperience regarding electric motors, etc. concerns need to be addressed.
Inadequate Incentives from Manufacturers: Since, EV batteries fall under the 18% GST rate category, making it unfeasible for the manufacturers to produce EVs. Lowering the GST rates on the same would be required to lower production costs and make it an attractive buy for consumers.
All these factors will be seen as a deterrent towards the faster growth of EV stocks in India.
Opportunities
Supportive Government Policies-Government initiatives on the state as well as central level with a keen focus on public adoption of electric vehicles through several supportive policies including FAME India, the Production-Linked Incentive scheme, and advanced chemistry cell (ACC) batteries, have significantly accelerated the adoption of electric vehicles incentivizing EV manufacturers to explore the possibilities of switching all their vehicles to electric in the next few years.
Technological Development and Innovation- Presently, various technological advancements and technological innovations such as fast-charging stations, sophisticated battery technology, intelligent charging schemes, and bidirectional charging capabilities, etc. among others have been attempted for the purpose of making EVs more feasible and appealing to middle-class salaried population.
Rising Export of EVs- Supportive government policies and programs have not only led to a rise in EV production in India but also have led to the export of EVs outside India to a host of countries like Nepal Vietnam, Brazil, Guatemala, and Australia some nations who have helped the EV export market in India to grow by 246.3 percent in last year reaching roughly around Rs.21L last year. All these things will positively impact the EV stock movement.
Threats
Insufficient charging infrastructure: Lack of proper charging infrastructure has been one of the key reasons for consumers to refrain from purchasing EVs. For instance, in the year 2019, India had only 650 charging stations against 0.3 M in countries like China.
Range Anxiety: Range anxiety could be understood as the concern of the buyer regarding the sustainability of battery charging for driving long distances. Some improvements have been made, however, due to the perception regarding the unsuitability of EVs for long-distance travel in countries like India.
Limited options: As EV production in India is in a nascent stage, there are limited EV options available in Indian markets as compared to conventional vehicles. Thus, there is a need to include more options for the consumers including affordable EV vehicles to facilitate requirements as per consumer preferences.
Once all these components are taken care of and infrastructure built, EV stocks will have a even better outlook in India.
Industry Outlook and Major Developments
The Indian EV industry could be divided into- original equipment manufacturers, battery producers, and charging station suppliers. Each of the above-mentioned segments presents new opportunities for early start-ups and innovators creating ample business expansion opportunities in India. In the past three years, the EV industry stated a massive growth of around 2000% rising from 19 thousand units to sales of 4L units last year. Ola, Tata, Hyundai, Maruti Suzuki, Toyota, etc. are some of the reputed players in the EV industry who have committed investments in the manufacture of vehicles and battery production technologies. Stocks of these players along with auxiliary service providers in the EV industry, is sure to benefit from these commitments.
However, the Russia-Ukraine war, supply chain disruptions, rising fuel prices, and a lack of necessary infrastructure, etc. are some of the roadblocks faced by the industry lately. To address such challenges, the industry is working towards pioneering financing models and working on the advancement of battery technologies to reduce reliance on importance and make EVs economical for the general masses.
Emphasis on larger production of ACC battery storage, building more manufacturing centers, mounting government support towards the building of charging infrastructure, and possible 100% relaxation of FDI has led the industry to grow at a rapid pace. Now, start-ups and reputed businesses are gradually joining forces to accelerate the EV production and innovation processes that comprise solutions such as mobility-as-a-service, developing charging infrastructure, and financial models.
Govt Initiatives for Industry Promotion
Launch of the comprehensive e-AMRIT portal- The e-AMRIT portal (https://www.e-amrit.niti.gov.in) acts as a one-stop shop to attract manufacturers to enter the industry and raise awareness with respect to the adoption of EVs and their purchases like charging infrastructure, financing options as details about supportive government policies, investment opportunities and subsidies applicable for manufacturers.
Production Linked Incentive Scheme or PLI- The Production Linked Scheme for ACC Battery Storage Manufacturing was rolled out in 2021 in order to encourage local production of such batteries and lessen the reliance on imports. This scheme will incentivize the manufacturers with the essential infrastructure leading to a significant reduction in costs of production.
Launch of New EV Policy- The Government of India announced the bold EV policy aiming to transform India into a manufacturing hub for electric vehicles by attracting foreign companies to set -up their business units in India. Upon fulfillment of certain conditions like waiver of customs duties for a minimum investment of USD500M, building manufacturing units within three years attain 50% value addition locally within five years.
Why should Investors consider investing in EV stocks?
Global Leadership- With its strong reputation, the Indian EV stocks and the overall industry is poised to become a global leader in terms of EV manufacturing and consumption attracting foreign investment and growth opportunities.
Higher Growth Potential: The Government of India is taking major steps to reduce carbon emissions by encouraging their citizens to use sustainable modes of transportation leading to widespread adoption of EVs apart from the supportive policies to encourage EVs and battery production in the country. Such giant steps are expected to render EVs more economical for the Indian masses causing higher profits for companies as well as investors in EV stocks.
Emphasis on sustainable environment- Following its international commitments to a sustainable environment, the Government is emphasizing on the use of cleaner fuels for zero carbon emission, and large-scale adoption of EVs is expected to be a large part of it leading to higher profits for investors in EV stocks in India.
Innovation and Technological Advances- Innovations such as automated driving, EV technology, advanced battery systems, etc. have made EVs a great choice for investment.
Global Reach- Prominent automakers in India are not manufacturing EVs for Indian consumers but also selling their vehicles across borders demonstrating an extensive global reach that reduces the risk of volatility and diversifies investment portfolio for investors.
Which attributes to consider while investing in EV stocks in India?
Revenue growth- Since the Electric vehicles industry is capital-intensive, only those businesses that have shown continuous revenue growth will be able to innovate and induct new technologies.
R&D Expenses- As the EV industry is still in its nascent stage and evolving continuously, the emphasis on research and development is vital for business growth. Thus, businesses who commit funds for research and innovation demonstrate their dedication to adapting to changing technologies to leverage emerging opportunities, maintaining their relevance, staying ahead in the competition by introducing new products and lowering business costs, etc. signifying growth for investors.
Production Capacity- In order to ensure long-term and sustainable growth, EV companies need to have sufficient production capacities through adequate inventories, reduce lead time, and avoid order delays leading to economies of scale and profit margins for investors.
Distribution Strength- Customer’s reach within the company’s outlets could be signaled by the distribution strength across all urban and rural areas within the country to facilitate better services for the customers which facilitates market share, brand value, and convenience for customers and growth for EV stock investors.
Customer Base- A larger customer base for a company indicates its customer service and demand growth. A loyal consumer base indicates brand loyalty for the company and its products, indicating a stronger position among the market competitors and hence higher profit margins for the EV stock investors.
Product Portfolio– EV companies with a broader product portfolio will naturally address the requirements of a wide range of clients which will cut down the dependence of businesses on reliance on one or two vehicle models. Prominent EV manufacturers will have more probability of fulfilling regulatory requirements for emissions, safety efficiency, etc. which will boost brand value and gain larger market share for business and hence higher profits for investors.
Who should invest in EV stocks?
Investors with a keen interest in technological advancements in the automobile industry with a certain understanding of the associated risks of the automobile industry. However, the investors should also consider their investment aims and risk tolerance level before making any final decision regarding investment in EV stocks in India.
Future Prospects for the Industry.
Since the Indian EV industry is the third largest in the world in terms of volume it is in a promising position to attract foreign companies and investors in India realizing the great Indian EV ambition that will require a projected annual battery capacity of 158 GWh in the next five years offering enormous investment opportunities for investors.
In order to boost market demand in the EV segment, various policies have been introduced for two-wheelers, and limiting manufacture of key components like ACC battery storage as well as electric vehicles and auto components under PLI schemes. Apart from this, certain Indian states have introduced state-wise EV policies to appeal to industrial investments turning the adoption of EVs a more feasible proposition for the consumer market. Ultimately, the growth and development of the EV stock market shall depend on factors such as availability of capital, enhanced infrastructure, availability of choices for consumers, and advancements in original equipment, batteries, and charging point operatives.