Overview Of EV Sector In India
The electric vehicle has now become a national megatrend. Frequently, EV companies make headlines in news publications. This suggests that the EV revolution has nearly swept the nation. In India, the EV stocks footprints are poised to capture the market. It would not be an exaggeration to say that the vast majority of automobiles sold in India could one day be electric vehicles, given the level of excitement among automotive aficionados. Graphite India and HEG were the leading companies in the EV industry in 2017 when the country was only beginning to research and expand in the sector. If we evaluate these stocks today, they have both increased by more than 800 percent over the past year. In this article, we will be elaborating on the EV industry’s potential in the approaching years.
With the transition to electrification, the Indian automobile industry appears to be on the verge of undergoing a significant transformation. India’s Electric Vehicle (EV) sector is in its infancy at present. As of FY 2020-21, it accounts for just 1.3% of total vehicle sales. However, EVs are becoming widely accepted. EV sales are accelerating, particularly in the area of two-wheeled vehicles.
According to a report by the consulting firm RBSA Advisors, India’s EV industry is projected to develop at a Compound Annual Growth Rate (CAGR) of 90 percent over the next 10 years, reaching $150 billion by 2030.
Numerous investors, including domestic mutual funds, intended to capitalize on this spectacular surge. They are investing in Indian EV category stocks. And not only Original Equipment Manufacturers (OEMs) of automobiles are likely to benefit. Numerous EV ecosystem auxiliary industries, including component suppliers, battery makers, chemical companies, and EV charging service providers, will profit. In this paradigm transition to electric transportation, the profit potential is enormous.
As of now, there are no mutual fund that is dedicated to the EV sector. However, multiple fund houses such as Nippon India, Navi are flocking to get their hands on EV sector dedicated mutual funds through SEBI approval.
Automobile Industry Outlook
The automobile industry provides around 7.5% of India’s GDP and a whopping 49% of manufacturing GDP, having a substantial ripple effect on the economy. Consequently, as the EV business grows and gains popularity, many auto-related ancillary industries and sectors will also see growth, if they can keep up with the trends.
According to the SIAM (Society Of Indian Automobile Manufacturers), the manufacturing and service sectors, including dealerships, employ eight million people directly. The vehicle industry in India is extremely diverse. It includes two-wheeled vehicles (2W), trucks and cars (4W), buses, and auto-rickshaws (3W) and plays a vital part in the country’s economic development.
India was the world’s greatest producer of tractors and the second-largest producer of buses in 2020, as well as the largest producer of 2W AND 3W. By the end of 2025, vehicle penetration is anticipated to reach 72 automobiles per 1,000 people. India accounts for forty percent of the global engineering and R&D expenditure total of $31 billion. Eight percent of the nation’s R&D budget is allocated to the automotive industry.
Future Outlook Of Electric Vehicle In India
The Automotive Mission Plan (AMP) 2016–2026 encapsulates the collective aspirations of the Indian government and automotive sector regarding the industry’s scale, contribution to India’s development, and worldwide footprint and competitiveness. The AMP anticipates that by 2026, the industry will contribute more than 12 percent of India’s GDP and more than 40 percent of the manufacturing sector.
An estimated 65 million direct and indirect employment will be produced by the automotive industry during the next decade. After studying the preceding data, it is impossible to question the industry’s potential in terms of traction, expansion, and fostering economic progress and prosperity.
The crucial concern, however, is whether the industry’s current road map and business model are sustainable and scalable enough to serve 135 billion citizens in the long run. To solve this question, “Electric Vehicles” were introduced several years ago. With the introduction of electric vehicles, India’s automobile industry is undergoing a technical shift. India is on the verge of a revolution in e-mobility.
Despite not being a global leader in promoting and establishing an e-mobility ecosystem, this paradigm shift in mobility appears inevitable and practical for a variety of compelling reasons. In contrast to China, Europe, and Russia, which together account for 94 percent of the market share for EV vehicles, India at present has a low adoption rate for EVs.
Why Switch to Electric Vehicle?
Numerous startups, OEMs, and manufacturers have begun analyzing the opportunity trends in the industry and have also made great progress. A desire to lower pollution levels, hence improving air quality and dependency on oil imports has boosted the rationale for EV adoption, despite the glacial rate of advancement resulting from several endless infrastructure and environmental obstacles.
Adoption of EVs will reduce India’s reliance on other countries because petrol and diesel, which are fuels for internal combustion engine (ICE)-based mobility systems, require an extensive and expensive supply chain that is susceptible to disruption from weather, geopolitical events, and other factors.
EVs, on the other hand, must use electricity as a power source for their vehicles. Over the past decade, advancements in wind and solar electricity production technologies have substantially decreased the cost of electricity generation and made clean, low-carbon, and affordable power infrastructures possible.
Mutual Funds Investing In Electric Vehicles
- L&T Large And Mid Cap Fund
This plan, originally introduced in May 2006 as the L&T India Special Situations Fund, was renamed and reclassified as a Large & Midcap Fund in accordance with SEBI’s mutual fund categorization and rationalization regulations.
The fund seeks to achieve long-term capital appreciation by investing in a diverse portfolio of primarily equities and equity-related securities, with a minimum exposure of at least 35% to large- and mid-cap businesses.
As of March 31, 2022, the L&T Large Cap Fund & Midcap Fund portfolio was allocated approximately 54 percent to large-caps, approximately 36 percent to mid-caps, approximately 8 percent to small-caps, and the remainder to cash and other investments. L&T Midcap Fund & Large Cap maintains a broad portfolio of 56 equities, of which 10 are EV-related and account for approximately 21.9% of its total assets.
Tata Motors, Sona BLW Precision Forgings, and Minda Industries are included in the EV portfolio of the fund. It has exposure to the charging infrastructure sector through its investments in Reliance Industries and Tata Power.
It has invested in companies like Tata Elxsi and L&T Technology Services that offer software and comparable solutions for electric vehicles (EVs). It also owns Tata Chemicals and Neogen Chemicals, chemical suppliers for lithium-ion cell technologies, battery recycling, and battery manufacturing.
- Templeton India Value Fund
In September 2003, the Templeton India Growth Fund was introduced. However, it has always adhered to a value investment strategy. It was renamed Templeton India Value Fund in accordance with SEBI’s re-categorization and rationalization regulations. It invests in undervalued companies that have the potential to generate wealth through capital appreciation over the long term.
As of March 31, 2022, Templeton India Value Fund’s portfolio consisted of 34 stocks, with approximately 70 percent of its net assets invested in large-caps, 11 percent in mid-caps, and 7 percent in small-caps. Twenty-five percent of the portfolio is comprised of approximately eight EV-related stocks.
The EV portfolio of the Templeton India Value Fund includes auto OEMs like Tata Motors and Bajaj Auto as well as EV charging infrastructure providers including NTPC, Indian Oil Corporation, Power Grid Corporation, and Bharat Petroleum Corporation.
In addition, its portfolio includes Bharat Electronics, a manufacturer of electronic devices, and Exide Industries, a manufacturer of EV batteries.
- Quantum Long Term Equity Value Fund
In March 2006, Quantum Long Term Equity Value Fund was introduced as a Value Fund.
Using a bottom-up approach to stock selection, the fund seeks to invest in firms that can profit from the predicted expansion and development of the Indian economy and its markets.
As of March 31, 2022, the Quantum Long Term Value Fund’s portfolio consisted of roughly 80 percent large-cap stocks and around 20 percent mid-cap stocks. There was a fraction of cash and cash equivalents. In March 2006, Quantum Long Term Equity Value Fund was introduced as a Value Fund. Using a bottom-up approach to stock selection, the fund seeks to invest in firms that can profit from the predicted expansion and development of the Indian economy and its markets.
As of March 31, 2022, the Quantum Long Term Value Fund’s portfolio consisted of roughly 80 percent large-cap stocks and around 20 percent mid-cap stocks. There was a fraction of cash and cash equivalents. Quantum Long-Term Equity Value Fund owns a concentrated portfolio of 29 equities, of which about 7 are EV-related and account for 20.2% of its total assets. Automobile original equipment manufacturers such as Mahindra & Mahindra, Bajaj Auto, Eicher Motors, and Hero Motocorp dominate the fund’s EV portfolio.
In addition to these stocks, the portfolio has exposure to providers of EV charging infrastructure, such as NTPC and Power Grid Corporation of India, as well as battery manufacturer Exide Industries.
- Axis Value Fund
The Axis Value Fund was introduced in September of 2021. The fund seeks consistent long-term capital appreciation by investing primarily in equities and equities-related securities in accordance with a value investing approach.
Under this strategy, Axis Value Fund maintains a diverse portfolio. As of March 31, 2022, approximately 64 percent of its portfolio is allocated to large-cap stocks, 20 percent to mid-caps, 9 percent to small-caps, and the remainder to cash and other investments.
Axis Value Fund currently has 32 stocks, seven of which are related to electric vehicles. Its EV portfolio presently accounts for around 19.5% of its total assets, with top allocations to Tata Motors and Mahindra & Mahindra. In addition, the fund is involved in auto-related companies like Minda Corporation and Suprajit Engineering. In addition to EV commodity stocks and charging infrastructure stocks, such as Hindalco Industries, Bharat Petroleum Corporation, and Tata Power Company, the portfolio has exposure to EV commodity stocks.
- HDFC Large Cap And Mid Cap Fund
In February 1994, HDFC Large & Midcap Fund, formerly HDFC Growth Opportunities Fund, was introduced. The fund invests mostly in large and mid-cap firms and strives to maintain a portfolio that is appropriately diversified.
As of March 31, 2022, approximately 50 percent of its portfolio is allocated to large-cap stocks, 36 percent to mid-caps, 9 percent to small-caps, and the remainder to cash and other investments.
The HDFC Large & Midcap Fund holds a large portfolio of 131 stocks, of which about 17 are related to electric vehicles. Its EV portfolio accounts for around 19.4 percent of its current assets.
The fund is invested in original equipment manufacturers and auto components, including Tata Motors, Sona BLW Precision Forgings, Bharat Forge, Ashok Leyland, Motherson Sumi Systems, Exide Industries, TVS Motor Company, Mahindra & Mahindra, and Hero MotoCorp. In addition, the portfolio is exposed to several EV-related stocks, including Bharat Electronics, Gujarat Flourchemicls, L&T Technology Services, and Tata Chemicals.
EV Stocks in India
- Hero Electric
Hero Electric, a subsidiary of Hero MotoCorp, is the largest manufacturer and distributor of electric two-wheelers in India. In this market segment, the corporation has the first-mover advantage.
Hero Electric has also garnered the favor of the Indian populace due to the affordability of its scooters. Current product offerings include Photon, Optima, NYX, Flash, and Atria. These versions are available in comfort speed (LX) and city speed (HX) configurations. Optima and NYX models also offer double battery configurations. The variety of models, first-mover advantage, and popularity all indicate a potentially successful future for the company. Investors that are eager to ride this share can purchase Hero MotoCorp shares.
- Tata Elxsi
Tata ELXSI is involved in the creation and distribution of car software. Initially, the software was solely required for automotive media systems. It is currently a different situation. EVs are fundamentally distinct from conventional ICE (Internal Combustion Engine) vehicles because they lack a transmission. EVs require only one gear to manage power transmission. This is because EV motors do not require combustion to produce sufficient amounts of electricity.
Consequently, the transmission of power from the motor to the drivetrain is no longer a mechanical operation. The single-speed motor accepts additional power to deliver the same amount of torque. This is managed by a smart drive selector, a software-based component of the vehicle. Here is where Tata ELXSI share price excels the most.
- Amara-Raja
Undoubtedly, the battery is the most essential component of an electric car, just because the car does not use fossil fuels does not mean it requires no fuel at all. The company also operates in additional auto-accessory markets. If Amara Raja does not ring a bell, Amaron Batteries certainly does.
Amara Raja Batteries Shares , the Amara Raja group’s flagship company and the originator of Amaron Batteries, is India’s largest manufacturer of car batteries. Additionally, the corporation has a significant international presence, with a stronger impact in the Asia-Pacific region.
- Tata Power
EVs are powered by batteries, but not the easily replaceable AA variety. EVs must be “recharged” at designated charging stations; a standard wall outlet will not suffice.
Tata Power is making progress in creating the necessary infrastructure to support the forthcoming EV movement. The Tata Power shares is engaged in establishing public structures for recharging fleets and public transportation, as well as providing retail choices for recharging personal vehicles with residential power lines.
- Mahindra and Mahindra
So far, we have addressed the 2-wheeler market and EV industry peripherals. Now the big weapons arrive (cars, actually). Mahindra & Mahindra has the largest line of electric vehicles in India. The company offers both public and private transportation choices. The product line includes the eVerito and e20 Plus for private drivers and fleets, as well as the eSupro, eAlfa Mini, Treo, and Treo Zor for public transit.
Conclusion
The future of the vehicle industry is unquestionably in the EV market. It is not a matter of “if” but “when” EVs will become the nation’s primary mode of mobility. People in the country are understandably wary of anything new, and bureaucratic red tape is also evident. However, if the aforementioned companies survive the change, the shares have the potential to do strongly when electric vehicles arrive in India. Keep a close check on the aforementioned stocks and mutual funds.
FAQs
-
Which mutual funds invest in EV stocks?
Kindly, find the above-mentioned examples dealing with mutual funds that invest in the EV sector.
-
Which mutual fund is best for electric vehicles?
Historical growth or returns are not indicative of guaranteed future returns. However, one thing is certain the electric vehicle industry is poised to grow globally. You must do your research as per financial objectives and investment horizon, and invest in a balanced diversified portfolio.
-
Are there any EV mutual funds?
No, there is no mutual fund that is dedicated to the EV stocks. However, multiple fund houses such as Nippon India have applied to SEBI for the launch of EV sector dedicated mutual funds.
Interested in how we think about the markets?
Read more: Zen And The Art Of Investing
Watch/hear on YouTube:
Start investing through a platform that brings goal planning and investing to your fingertips. Visit Kuvera.in to discover Direct Plans and Fixed Deposits and start investing today.
#MutualFundSahiHai #KuveraSabseSahiHai!
