Are you hunting high and low for the best electric vehicle related stocks in India that will deliver steady and robust returns in the long run? But you are at sixes and sevens, when it’s time to figure out which stocks will benefit from the electric vehicle. This article features the 7 best electric vehicle stocks India for the long run.
Before offering the best electrical vehicle company shares in India, let’s take a look at:
- What is Electric Vehicle?
- How Electric Vehicle Works?
- What are the types of Electric Vehicles?
- What are the benefits of electric vehicles?
- Why investing in electrical car stocks in India?
Let’s dive in.
What is Electric Vehicle?
Due to the skyrocketing prices of petrol and diesel, the people are in a witch hunt for the alternative way of mobility that will save a few bucks and make this environment greener. To decrease the pollution level and to make our environment green, Electric vehicles are the #1 choice for individuals since electric vehicles don’t need fossil fuels or gases for operation that in turn addresses the issues of pollution, global warming, and counting the best plausible way.
Electric vehicles employ a lithium-ion battery that gives the required energy instead of generating the required power from fuel or gases. Simply put, electric vehicle’s battery promotes longevity and is fuel-efficient too.
How electric vehicle works?
Simply, plug the electric vehicle into a charging point and the battery will store the electricity/power that will provide the required energy to cover the distance. You will find plenty of charging stations across the country to charge your electric vehicle. Lastly, check the prices at the charging stations that allow you to spend less money.
3 Types of electric vehicle
Broadly speaking, there are 3 types of electric vehicles that are available in the electric vehicle segment and they are:
Battery Electric Vehicles – Powered by electricity and doesn’t employ any engine that requires fossil fuels namely petrol or diesel.
Plug-in Hybrid Electric Vehicles – This type of vehicles comes with 2 options. You can run your car either via electricity or via fuels including petrol or diesel.
Hybrid Electric Vehicles – This type of vehicle runs primarily on fuels, but is equipped with an electric battery. Hybrid variant cars can’t be charged from the power stations. However, the Hybrid EV’s battery can be charged via the combustion engine.
3 Benefits of Electrical Vehicles
Let’s take a look at the 3 benefits of buying electric cars in India.
Reason #1. Say goodbye to fossil fuel
Since electric vehicles are equipped with a lithium-ion battery, they don’t require any fossil fuel including petrol diesel, or gasoline, but electrical energy. Hence, the EVs are environment friendly that promotes a greener environment.
Reason #2. Pocket Friendly
No matter what is the price of the EV that you are buying, the government offers great incentives, discounts for going green. Plus, where the diesel variant vehicle costs₹12 for a mile, electric vehicle costs ₹4 to cover the same distance. It makes the EVs more pocket-friendly. For example, Tata Tigor covers a distance of 213 km when it’s fully charged. An added bonus, the EVs don’t play havoc with your budget especially when the fuel prices are in their lifetime high.
Reason #3. Low maintenance costs
Since the EVs run on a lithium-ion battery, this battery lasts for a decade. Plus, the EVs don’t require lubricating the electric empowered engines Thereby it lowers the maintenance costs when compared to the diesel or petrol variant car’s engine.
Plus, since electric vehicles run on lithium-ion batteries, it’s energy-efficient and in turn, the lesser energy is required to make the distance. An added bonus, a majority of the components of the electric cars are made from lightweight and top-rated plastic or fiber which allows your EVs to consume less energy while driving.
Above all, alike petrol or diesel variant cars, electric cars have identical safety features such as airbags will open up when there is a collision. What gives the electric vehicle a competitive advantage over petrol and diesel variant cars is that the electricity supply cuts and in turn there is no explosion, since the electric vehicles don’t come with combustible fuel or gas.
Why investing in electrical car stocks in India?
India has set a goal to run only eco-friendly Electric vehicles on the roads by 2030, so it’s an excellent opportunity for investors who are looking for steady returns. The auto companies that are engaged in the manufacturing of electric vehicles, lithium-ion batteries, electrical components, etc. are the best bets in this EV segment.
To encourage the workforce to adopt electric vehicles there are various initiatives taken by the central government as well as the state governments. For instance, the Govt. of Maharastra has announced that they will give subsidies amounts to 1 lakh when one individual buys the EVs.
These initiatives are lucrative for a lion’s share of the workforce and will boost the demand for the electric vehicle. Hence, the companies in the EV segment will be benefitted the most and will deliver robust returns when invested for the long run.
How to choose the best electrical vehicle shares in India?
No matter what the price of the share is, before investing in any stock do check its fundamentals since when the fundamentals of the company are intact the company or stock can deliver the best plausible returns.
Parameter #1. Debt to Equity Ratio
When you take a look at the balance sheet of the big bulls like Maruti Suzuki, Tata Motors, it’s as clear as the sky is blue that the big bulls have debts. But what matters the most is that the debt to equity ratio.
The debt to equity ratio is derived once the company’s total liabilities are divided by its total shareholder equity.
Since the debt to equity ratio of the companies varies from sector to sector, as a good rule of thumb, don’t invest in such companies that has a debt to equity ratio higher than 1 no matter what is the market cap of the company or what’s its brand value.
When a company’s debt to equity ratio is below 0.25 then it can be assumed that it can repay the debt with ease without any default even its sales and profit margin plummet in the scenario of a business downturn.
Parameter #2. Profit Margin
Profit margin discloses what cent the company has made a profit by selling either services or products when the total sale stands at ₹1 in a financial year. For example, if Minda Industries has achieved a 17% profit margin in a financial year, then it’s as clear that Minda Industries has made a profit of ₹0.17 when its total sale is ₹1 in a financial year.
The profit margin helps stock analysts, individual investors to gauge the financial health of the company and the efficiency of the management team. When a company delivers a double-digit profit margin growth then it can be assumed that the management is quite efficiently managing the business and utilizing the shareholder’s equity to generate a profit by running a business operation. Since profit margin varies from sector to sector, as a good rule of thumb, pick a company that has a profit margin higher than 15% during the last 5 years.
Parameter #3. Earnings Per Share
The Earnings per Share can be calculated when the end result of Net revenue and total dividend payout in a financial year is divided by its total shares outstanding.
This is the widely used matric to find how much rupee a company makes for each share it has outstanding in a financial year. The higher the EPS is, the best the company is to start investing in it. When a company has higher EPS, then there is a possibility that the retail investors will be willing to pay a higher price if they think that the company is delivering a robust profit year on year relative to its market price.
Parameter #4. Dividend Payout
When you are hunting high and low for a company that will provide a regular, steady cash flow in a financial year, then dividend-paying stocks are a lifesaver. When a company has a whopping profit that doesn’t need to be reinvested, the lion’s share of the profit made in a financial year in their business, they usually declare dividends to cheer the shareholders. Simply put, invest in those companies profit margin of which surges year on year, and have an excellent track record of dividend payout regularly.
Parameter #5. Return on Equity
The ROE publicizes how profitable a company is since the ROE takes account of net profit, dividend payout, assets, and the liabilities a company has. The ROE can be calculated once the net profit is generated by a company in a financial year is divided by its shareholders’ equity.
Alike EPS, the ROE varies from sector to sector. To make an investment decision, do analyze a specific stock with its peer companies. Don’t compare a technology stock with a company that belongs to utilities since the companies operating in the utilities have higher assets and debt burden than those who belong to the technology, or retail sector. As a good rule of thumb, include those companies in your stock portfolio of which the ROE is higher than 15% and have a debt to the lower level to witness a satisfactory return in the long run.
Parameter #6. Return on Capital Employed
While investing in the capital-intensive sectors including automobile, oil, steel, telecommunications, and transportation that have a significant debt burden, Return on Capital Employed is a lifesaver. No matter what is the market cap of the company, RoCE tells a retail investor how efficiently the management of the company turns the available capital into profits.
RoCE can be calculated once you divide the Earnings before interest and tax by capital employed in a financial year.
Simply put, the RoCE tells an investor what is the profit made in a financial year when the total capital employed stands at ₹1.
The higher the RoCE is, the lucrative the investment opportunity is. As an intelligent investor, invest in those stocks that have stable or rising RoCE and stay clear from companies where RoCE is volatile or plummeting.
Parameter #7. Price to Sales Ratio
P/S Ratio lets an investor know what rupee investors are willing to pay when the company’s total sales generated in a financial year is ₹1 no matter in which sector the company is operating or what’s the market cap of the company.
You can calculate the Price to Sales ratio either by dividing the market price of the stock by the company’s sales per share in a financial year or the total market cap of the company by the company’s total sales over a period of 3 months or a year.
To pick the best stocks, compare whether the stock’s P/S ratio is in line with the industry average. The lower the P/S ratio is, the more undervalued a stock is. That’s why it’s a good idea to invest in those stocks of which P/S ratio is on the lower side when compared to their sectoral peers.
Parameter #8. Price to Earnings Ratio
To gauge the valuations of a company, the Price to Earnings Ratio is a handy tool. One can calculate the P/E ratio by dividing the market value per share to its earnings per share for a financial year.
The P/E ratio tells how much time it will take to earn back your initial investments in the scenario of you have made an investment in any company. For instance, a P/E ratio of 12 indicates that when you own the cent percentage share of the company, then it will take 12 long years to earn back your capital in the scenario of the profits is unaltered.
Alike EPS, and ROE, the P/E ratio varies from one sector to another. When a sector has a higher P/E, then it may be an indication that the investors are willing to pay a higher price and in turn, the P/E ratio gets elevated. On the flip side, when a sector has a historically low P/E ratio then it can be assumed that the investors are not expecting higher earnings growth in the future and that’s why they aren’t willing to pay a higher price to own stock in the sector. The best idea is to start hunting the stocks that are trading much lower than their historical average with robust earnings and start investing in them.
Parameter #9. Price to Book Ratio
To check what the market is placing a security’s value in respect of its book value, the price to book ratio is one of the handy matrices. The Price to Book Ratio can be calculated once you divide the market value per share by its book value per share.
When the P/B ratio is <1, then generally it’s treated as undervalued. A stock with a P/B ratio >1, is overvalued.
The Price to Book ratio helps a retail investor to calculate what will be left in the scenario of the company goes bankrupt and is forced to liquidate all of its assets to repay the debt in full. That’s why you should invest in those companies with a P/B ratio <1. However, you are free to invest in those companies where P/B ratio varies between 1.0 and 2.0.
Parameter #10. Beta
To scan whether the volatility of a specific stock is in line or not with the overall market volatility, beta is a metric you should watch out for. When a stock’s beta is 1.2 then it signals that the stock is 20% more volatile when compared to the overall market volatility. For instance, when a beta stands at 1.25 then it can be concluded when the market surges 100% then the stock will surge 125%. On the flip side, it will plummet 75% if the market plummets 50%.
7 Best Electric Vehicle Stocks India
Since India has set a target to run only electric variant vehicles by 2030, there are multiple automobile companies that will reap the benefits on the electric vehicle segment. Considering the above fact, here are the 7 best companies that are worth considering.
Tata Motors is the market leader in the segment of commercial vehicles in not only the domestic market but also globally. Tata Motors is the 2nd biggest bus manufacturer and the 4th biggest manufacturer of Trucks. For global presence, Tata Motors acquired Jaguar Land Rover, Hispano Carrocera, Marcopolo, Daewoo Commercial Vehicles Company, and counting. Tata Daewoo, Tata Hispano, Jaguar Land Rover, Tata Marcopolo, etc. are some of the globally well known brands of Tata Motors.
Tata Motors, the automotive big-bull of the Indian domestic market, has entered its footsteps in the electric vehicle space by launching Tata Nexon EV. The company has announced that it will launch 10 Battery Electric Vehicles by 2025 that will run a bare minimum of 200km on a single charge. What gives Tata Motors a competitive advantage is that Electric vehicles come with an 8-year warranty on batteries.
Plus, Tata Motors will set up charging infrastructure across the country. The company is hunting high and low to explore partnership opportunities with the companies that are the big bulls in the cell and battery manufacturing sector to secure the supplies of acid-led batteries.
The company is the largest passenger car company in India with a market share of 52% in the domestic market. No matter what is your budget, a majority of the Indians will visit the Maruti showroom to check out the cars since Maruti Suzuki’s price range varies between 2.99 Lakh and 14.25 Lakh. Dzire, Swift, Baleno, S-Cross are the widely popular brands of Maruti Suzuki. What gives the Maruti Suzuki a competitive moat over its peer companies is that it has 3.5k showrooms and service centers across India to offer the best service.
Thanks to Maruti Suzuki’s vast distribution network across the country, the chances are higher that the Maruti Suzuki will come out with flying colors in the electric vehicle segment. The company has recently announced its upcoming plan. The company will develop electric vehicle technology by 2025 and will launch electric variant sport utility vehicles.
This is the largest two-wheeler manufacturer [Motorcycles, Scooters] in the world since 2001. In India, it captures a market share of over 50% in the two-wheeler segment. Recently the company has touched 100 million mark in respect of satisfied customers around the globe. Splendor, Xtreme, Passion, Maestro, Pleasure+ are the well-known brands of Hero Moto Corp. Hero MotoCorp has entered its footsteps in 40 countries across 4 continents including Asia, Africa, America, and Europe.
Recently Hero MotoCorphas invested in a Bengaluru-based Electric Vehicle startup Ather Energy. Plus, the company has a plan to utilize the Jaipur, and Stephanskirchen facility for research & development of Electric variant cars.
This is an Indian automobile manufacturing company which is the 2nd largest Manufacturer of commercial vehicles in India and the 3rd largest Manufacturer of buses in the world. Plus, Ashok Leyland is the 10th largest manufacturer of trucks across the globe. Its product portfolio includes buses, trucks, Light Commercial Vehicles, Defence vehicles, electric vehicles, and counting. Ashok Leyland has entered its footsteps in 50 countries and has set up 9 manufacturing plants worldwide [Czech Republic, UK, and the United Arab Emirates].
The commercial vehicle maker has initiated a pilot program for electric buses in Ahmedabad, Chennai, and London through its UK subsidiary. Plus, the company is working day in day out to launch its electric buses ASAP.
No matter what type of vehicle you have bought be it a 2-wheeler, 3-wheeler, or 4-wheeler, Exide industries have a wide array of products that will satisfy your need. Exide Industries is the largest lead-acid storage battery manufacturer in India and the 4th largest around the globe. Exide industries portfolio include Automotive Batteries, Industrial Batteries, Inverter Batteries, Genset Batteries, Submarine Batteries, and counting. Plus, Exide industries have a vast distribution network across 50+ countries. Exide, Champion, Chloride, SF Sonic are the world famous brands of Exide Industries.
Exide industries put efforts to develop lithium-ion batteries and other EV components to accelerate the growth in the EV segment.
Tata Power is India’s largest integrated power company with a 12,808 MW generation capacity that is engaged in renewable/conventional energy generation, transmission, and distribution. For eco-friendly greener energy solutions, a solar carport has been set up with Tata Motors that will help to reduce 1.6 lakh tones of CO2. To make your electric vehicle charging easy and convenient, Tata Power has initiated to set up the charging infrastructure across the country. You can check your nearest EV charging stations, download and install EZ Charge mobile app, and charge your Electric vehicle no matter where you are riding.
To support the government’s ‘National electric mobility mission’, this company has set up charging stations across India including Mumbai, Delhi, and Hyderabad. To provide the fast electric vehicle charging solutions to the customers, the company is customizing the infrastructure across the country.
Graphite India is India’s largest electrodes manufacturer with 98000 tons per annum electrode capacity. Besides India’s electrode manufacturer, Graphite India is the largest manufacturer of Synthetic Graphite and Carbon in India. This is the pioneer in the field of Carbon and Graphite products in India since it has been manufacturing Graphite Electrodes way back in the 1960s.
With the electrical vehicle push, the demands of the battery and battery components will witness a steep rise and Graphite India will benefit the most.
- Read also: Which stocks to buy for long term investment in India
- Read also: 7 Best Undervalued Stocks to Buy Now in India
Hope this article will help you to find the best electric vehicle stocks in India that will deliver steady and consistent returns in the long run.
Have I missed any electric car stocks India? Make a comment and I will update this list ASAP.
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