Electric vehicle segment in India is considered as the next big thing and much valuable stock picks for wealth creation can be found in this segment.
Crude oil is a limited resource. According to estimates the world is likely to run out of crude oil completely by the year 2040. That’s why there is a huge potential for vehicles running on electricity in not just India but world over.
Switching over to electric vehicles will benefit India in mainly two ways. Firstly, India is one of the top importers of crude oil in the world which not only increases the country’s import bill but also increases our dependency on other countries. According to ratings agency ICRA, every decline in barrel of oil by $10 would mean a saving of $15 billion in India's net oil import bill. India spent $111.9 billion on oil imports in 2018-19, up from $87.8 billion in the previous fiscal year.
Secondly, India tops the list of countries with high pollution, a significant proportion of which can be attributed to pollution caused by vehicles. Pollution is a silent killer which not increases the risk of cardio-vascular diseases but also puts a huge strain on the country’s already fragile health care system.
Though still in a nascent stage, the electric vehicle segment in India has huge growth potential and is projected to reach $707.4 million by 2025. Government schemes and subsidies have helped immensely in the growth of the market. But many infrastructure challenges remain like the lack of adequate charging stations and high initial cost of buying electric vehicles.
The government is targeting a gradual transition in multiple stages in the form of year 2023 for 3 wheelers, year 2025 for 2 wheelers and 2030 for 4 wheelers to replace from current internal combustion engines (ICE). For boosting electric vehicle segment in India, government has introduced the FAME 2 scheme (Faster Adoption and Manufacturing of Electric and Hybrid vehicles) which offers subsidy for electronic vehicle buyers with a budget allocation of Rs 10,000 crore.
The NDA government under PM Narendra Modi has setup an ambitious target of all-electric vehicle fleet in India by the year 2030. The idea behind this huge aspiration is to reduce the import bill on fossil fuels like petrol and diesel as well curb the menace of rising pollution which is causing serious health problems to people.
However, to make customers switch over from combustion vehicles to electric vehicles large scale government incentives would be required as currently electric vehicles are priced higher. In China and America, electric vehicles are gaining mass acceptance as the price is not too heavy on the customer’s pockets, thanks to the government subsidies.
Top stock picks in the electric vehicles segment
Manufacturers of lithium-ion batteries
Companies engaged in the production of lithium-ion battery business in India can be considered as top stock picks for wealth creation. It is a very niche segment with very few companies in India currently having the expertise and capability to produce lithium-ion battery which is one of the most important components of an electric vehicle. Batteries in electric vehicles need to be replaced at regular intervals and which means assured repeat business for companies in this field.
Manufacturers of anodes used in lithium-ion batteries
With the demand of lithium-ion batteries increasing, the demand for anode materials used in making lithium-ion batteries will also rise. There are very few companies in this specialized segment which manufacture anode materials for lithium-ion batteries making them top stock picks.
Manufacturers of auto wiring harness and panels
The transition from internal combustion to electric power will make many parts redundant. However, auto wiring harness and panels will remain an integral part of all vehicles. So auto ancillary companies engaged in manufacturer of auto wiring harness and panels will continue to remain in demand making them top stock picks.