Two-wheeler stocks edge higher on likely rural boost, FAME III rollout

Bajaj Auto has been the worst performer over the same period.

Two-wheeler stocks, including Bajaj Auto, TVS Motors, and Hero MotoCorp, traded in the green, rising up to 1 percent ahead of the budget. Investors are hopeful that Finance Minister Nirmala Sitharaman will introduce measures to boost rural consumption.

The auto industry is betting that the upcoming Budget will emphasise boosting rural income, which could drive an uptick in demand for automobiles, especially for two-wheelers.

Also, the prospects for a rural recovery appear bright given the forecast for a normal monsoon.

The major players in the segment have seen their share slip up to 3.5 percent in the last month. Bajaj Auto has been the worst performer over the same period.

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Broadly, it is the two-wheeler segment on which the auto industry is pinning its hopes.

Two-wheelers, which have led the industry growth for the last few quarters, are hoping for targeted incentives like FAME 3.0 (Faster Adoption and Manufacturing of Electric Vehicles). Such incentives could make electric two-wheelers more affordable and accelerate their adoption.

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Morgan Stanley's Binay Singh suggests that two-wheelers, three-wheelers, and e-buses will be key focus areas for the government as the current Electric Mobility Promotion Scheme (EMPS) ends on July 31, 2024.

Read more: Fertiliser stocks surge up to 13% a day before Budget on hopes of rural focus

"We anticipate more support for local battery production and innovation, which are critical for the sustainability and cost-effectiveness of EVs. Increased backing for the 'Make in India' initiative and the localized manufacturing of electric two-wheelers could enable Indian manufacturers to create efficient and sustainable mobility solutions that compete with international brands," said Chakravarthi C, Managing Director of Quantum Energy.

Also read: Fertiliser stocks surge up to 13% a day before Budget on hopes of rural focus

Furthermore, the government's target of having 30 percent electric vehicles on the road by 2030 hinges on the expansion of the FAME program, which the EV industry is actively advocating for.

He added, "A specialized PLI plan for recycling lithium-ion batteries is being proposed. This plan aims to encourage the growth of the recycling industry and significantly contribute to India's sustainability goals. The government could support this initiative by extending the PLI scheme to encompass the entire value chain, from manufacturing to recycling."

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