EV theme: Stocks that can benefit from this new trend

By Livemint
Government policies to reduce reliance on oil imports, and recently announced subsidies are providing impetus to EV sales in several states (Bloomberg)

The electric vehicles (EVs) disruption in India is being led by key factors like its affordability, sustainability, performance. EVs are an emerging opportunity with government policies to reduce reliance on oil imports, and recently announced subsidies like FAME that have been providing impetus to EV sales in several states.

Experts believe that adoption of EVs would be a transitional change rather than an abrupt one. “We expect EV adoption to be prominent in the 2W segment followed by Public Mobility. The adoption would be slow and gradual in the 4W segment owing to better economies associated with upcoming biodiesel and hybrid vehicles in India," said Sreeram Ramdas, Analyst, Green Portfolio.

Government's initiative to look for alternate (to petrol) and evolution of public need act as positives for the EV space. Also, EV opportunities for 2 wheelers, 4 wheelers, PVs and others would be different and cannot be merged. 

Basudeb Banerjee, a research analyst at Ambit Capital believes that 2Ws are in a better potential advantage from 4Ws as far as EV transition is concerned as car electrification looks a bit far away and may not be widely adopted. “Few auto component players like Sona Comstar, Minda Corporation are better placed to benefit from EV theme based on their supplies and EV related products," Banerjee said.

Vijay Sarthy an analyst at Anand Rathi advised to look for companies that engage with multiple products with key original equipment manufacturers (OEMs) and those that can be top 3 market share position in most of their products. “EV is evolving with really no clear technology. India might even have combination of ethanol blended, CNG, hydrogen, Lithium based EV or non-lithium based EVs," Sarthy said.

Analysts believe that the main roadblocks during the transition would be the high initial purchase price, range of travel, and the issue related to the lack of charging infrastructure in the country. “Nevertheless, we forecast a 35% CAGR growth until 2025 and further accelerated growth as these issues subside," Ramdas of Green Portfolio added.

India's EV revolution that has just started will lead to create many beneficiaries. “We have identified Precision Camshafts and Salzer Electronics as the key beneficiaries of this transition," said Ramdas. While Salzer is on route to set up EV charging stations in the next 8 months, Precision Camshafts aim to become an EV OEM in the long term. This gives exposure to companies at different stages of value addition and that is fundamentally solid, he added.

 


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