As compared to other countries, the market share of electric cars is extremely low in India.
The government has been continuously pinching the domestic auto makers for manufacturing electric vehicles to ensure the successful implementation. There is a demand for electric mobility as the rollout for same is being targeted by 2023 for 3W, 2025 for 2W and 2030 for 4W to replace from current ICE. Also, for encouraging this sector, it has introduced the FAME 2 scheme (Faster Adoption and Manufacturing of Electric and Hybrid vehicles) which provides subsidy for EV buyers having an outlay of Rs 10,000 crore.
As compared to other countries, the market share of electric cars is extremely low in India. The government has been incentivizing to encourage sales & manufacturing of EVs. Also, steps have been taken to invite global battery manufacturing companies to India, which was missing earlier. Many private players had to incur huge spending on recharging & infrastructure for EVs.
The recent budget unveiled a bundle of joy for Electric Vehicles. To shape up, the custom duty has been exempted on parts for electric vehicles such as e-drive assembly, on-board charger, e-compressor and charging gun. In addition, zero custom duty on lithium-ion cells would further help in reducing the cost of batteries and aid local battery manufacturers to enlarge their business since they are not yet manufactured domestically.
Moreover, the reduction in GST rate to 5 percent from 12 percent, which is lower than 28 percent GST applicable on ICE, makes EVs much more attractive. The added spark was the incentive to encourage the purchase of EV, making it affordable. There will be income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to buy electric vehicles (on or before March 2023). Thus, in aggregate, the benefit is about Rs 2.5 lakh over the loan period to the taxpayers.
To state, in the maiden budget, it was clearly seen how much importance was given for imparting EV and to a much cleaner, healthier and greener environment. However, the biggest challenge is the lack of charging infrastructure for EV adoption.
Below are the four listed players which had already jumped into this race and can get first mover advantage.
Tata Chemicals: CMP Rs 600 | Target: Rs 730 | Return: 22 percent| Tenure: Long term
To enhance the specialty product market, Tata Chemicals will soon be entering the lithium-ion battery business, where the company plans to build an integrated business which includes cell manufacturing, battery recycling, and battery production.
Currently, it has technology tie-ups and R&D partnership in the lithium battery and the battery recycling business. For this, the company has already signed agreements with CSIR-CECRI, Karaikudi, the ISRO and C-MET to strengthen a lithium-based energy storage solution strategy. The work has already been commenced.
Moreover, the government is also pushing and encouraging EVs as a priority. The company is already in talks with a couple of auto majors. The expected supply from the same is about three years from now. Thus, the company has pulled up its socks to fit in to the future of e-mobility.
Hero MotoCorp: CMP: Rs 2,570 | Target: Rs 3,200 | Return: 25 percent | Tenure: Long term
Hero MotoCorp has made a sizeable strategic investment (32.31 percent) in the electric two-wheeler manufacturer Ather Energy, based out of Bengaluru. Being the electric scooter startup, Ather Energy would expand into newer markets. It has already launched a range of path-breaking and innovative electric scooters. Going forward, it would expand its reach to about 50 cities across the country in five years and also worldwide.
In 2018, it opened its flagship product Ather 450 for pre-orders in Bengaluru and delivered the same during September. Now, it is targeting Chennai and will eventually take it up to 30 cities by the end of FY23.
Moreover, a new manufacturing facility is expected to be set up to produce one million vehicles a year. Not only this, it is looking to set up 6,500 fast charging points, being the need of the hour, over the next five years.
Thus, the above-stated Ather plans would give a first mover advantage and indirectly benefit Hero.
Himadri Speciality Chemical: CMP: Rs 95 | Target: Rs 120 | Return: 26 percent | Tenure: Long term
HSCL is going to be an ace in the product basket as it expands capacity and ramps up the production. The application of advanced carbon is in the making of anodes for Li –ion batteries which is likely to witness exponential growth given the rising demand from portable electronic equipments, electric vehicles and energy storage systems.
Moreover, the company is all geared up to set an additional capacity of 20,000 MTPA for ACM plant to be used for lithium ion batteries. The project is to be commissioned in phases, first 5,000 tonnes capacity to come up by H1FY20 and the rest by Q4 FY20. This is expected to aid higher operating margins and improve its return ratio as well. Owing to the immense potential for Lithium ion batteries, it is estimated that the demand for anode material will augment at 20-25 percent CAGR over the next two years, providing HSCL significant headroom for growth.
Greaves Cotton: CMP: Rs 130 | Target: Rs 155 | Return: 20 percent | Tenure: Long term
In order to de-risk the current businesses and plan for future growth and sustainability, the company is focusing on transforming itself into a "fuel-agnostic" player and providing a one-stop-shop for the EV buyer. With the new product range of high speed electric vehicles at Ampere (holds 72.11 percent) and 2X growth in CNG engines for 3W, it is transforming into a formidable B2C Player in Last Mile Mobility. It will contribute the incremental revenue growth and boost the share of non-auto segment.
Currently, it sells 2W Ampere vehicles and 3W e-rickshaws from about 120 retail outlets, integrating all 300+ retail outlets to sell the entire range of products including Ampere. With FAME II backing E 2W, Ampere’s position is strengthened in the slow speed segment. However, localization norms could surprise.In addition, the company is producing 1,800 Ampere electric bikes as of now and plans to ramp it up 5000 units per month during this fiscal; adding to 1,000 e-rickshaw sales mark in India. With this, the company paved way for a strong foundation for promoting clean shared mobility in the last mile transportation segment, which may provide much needed growth uptick and help margins to inch up from current levels.
The author is Senior Research Analyst at Rudra Shares & Stock Brokers Ltd.
Disclosure: Rudra or its research analysts, or his/her relative or associate do not have any direct or indirect financial interest (except L&T Finance Holdings Ltd.) nor any other material conflict of interest at the time of stock recommendation, in the subject company. Also, Rudra or its research analysts, or his/her relative or associates does not have actual/beneficial ownership of one percent or more securities of the subject company.Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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