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  • Mar 15, 2024 - Electric Vehicle Stocks in India Get Another Boost with the EMPS Scheme: Top EV Stocks to Benefit

Electric Vehicle Stocks in India Get Another Boost with the EMPS Scheme: Top EV Stocks to Benefit

Mar 15, 2024

Electric Vehicle Stocks in India Get Another Boost with the EMPS Scheme: Top EV Stocks to Benefit

On Wednesday, 13 March, the Indian government announced a new scheme - Electric Mobility Promotion Scheme (EMPS) 2024 - to promote the sale of electric two-wheelers (e2W) and three-wheelers (e3W) in the country.

The allocation for the scheme was Rs 5 billion (bn). The EMPS will supplant the FAME-2 scheme which expires on 31 March 2024.

It will be valid for four months from April to July 2024. Then a new scheme could either replace it or this scheme could be extended.

So, what is the EMPS all about?

The main idea behind this new scheme is the promotion of e2W and e3W. A secondary idea is to eventually wean the industry away from subsidies.

The government has lowered the maximum subsidy cap for e2W to Rs 10,000 per vehicle from the previous Rs 22,500, and for e3W to Rs 50,000 from Rs 111,505. Both categories of vehicles will receive an incentive of Rs 5,000 per kilowatt-hour (kWh).

This is a welcome move and a big positive for both the manufacturers and the consumers.

The Minister for Heavy Industries, Mahendra Nath Pandey, had this to say...

  • "The reduction in subsidy amount is a response to high demand. The objective is to bolster the industry while preparing it for a post-subsidy environment. Subsidies cannot be sustained indefinitely. The allocated Rs 500 crore will be utilised to support around 400,000 e2W and e3W over a span of four months."

Under the EMPS, there are no incentives for electric four-wheelers (e4W) and e-buses.

The reason for this, as reported by the media, is due to the existing schemes such as the Auto PLI and PM-eBus Sewa Scheme. These schemes cater to e4W and e-buses. On the other hand, the EMPS will cater to e2W and e3W.

The auto industry was hoping for an extension of the FAME-2 scheme which covered their products.

Tata Motors, for example, wanted FAME-2 to be extended by another three years for four-wheelers. This scheme was to expire in 2023 but was extended last year to 31 March 2024. There was no extension this time around.

EV Market in India

India is the third largest auto market after China and the US. The EV market is growing rapidly.

As per an article in the Business Standard, EV sales have increased more than 45% so far in 2024. This is despite the subsidy cuts and changes in regulations.

EV registration figure at the end of 2023 was about 1.5 million (m) units. This was much higher than the EV registration figure at the end of 2022 of a little over 1 m. This growth has pushed up the overall EV penetration in the country beyond 5%. It stands at 6.3% today.

5% is seen as the level of adoption necessary for a new technology to start being widely used. When this happens, the entire EV supply chain in India will fire up. Revenue and profit growth will explode across the value chain.

This is why India's automakers have been investing heavily in electrification. The country is close to a tipping point in EV adoption. This also explains why the government is keen on eventually ending the subsidies. The industry won't need them soon. EV makers are close to standing on their own feet.

Top 4 EV Stocks in India

#1 Tata Motors

No surprises here. This is the first name that comes to mind when thinking about EVs in India.

Tata Motors is the dominant force in the Indian electric vehicle (EV) market. This dominance will likely continue for at least a few more years, perhaps longer. And every potential car buyer in India is acutely aware of it.

The situation with the company is akin to a brand name being associated with a technology. Like how Xerox was associated with photocopying. In the case of Tata Motors, it's EVs in the Indian auto market.

This situation won't change until the company faces serious competition from other EV makers. That will eventually happen of course. But it's not the case today.

In fact, we believe it's now safe to say that Tata Motors is slowly but surely changing how the world looks at India when it comes to technology.

If someone asked you to name the first thing that comes to your mind about German or Japanese technology, it would likely be their cars. BMW and Volkswagen are symbols of German engineering. Honda and Toyota are symbols of Japanese engineering.

As the world transitions from conventional vehicles to EVs, Tata Motors will make a name for itself globally, just as it has already done in India.

The company has a clear plan to transition to a mostly EV company by 2030 and has backed the plan with billions in funding, leadership support, and technology partnerships.

The most recent example of its EV push is the expansion of their Sanand plant in Gujarat. This plant is Tata Motors' largest manufacturing facility in India. It currently produces a wide range of vehicles which includes the Tiago, Nexon, and Altroz.

The expansion of the Sanand plant will see the addition of a new lithium-ion battery production facility, expected to be operational by as early as 2025.

The Tata Group's investment in lithium-ion batteries is part of its broader strategy to transition to electric vehicles. The company is also working on developing its own electric vehicle charging infrastructure.

To know more about the company, check out Tata Motors fact sheet and quarterly results.

#2 TVS Motor

It's not an exaggeration to say the EV segment could make or break the case for TVS Motor.

The two-wheeler company has invested heavily in R&D to develop technology, improve its product development, and more. The management has clearly made a bold strategic decision.

TVS Motors has already implemented an EV capex plan of over Rs 10 bn. It will spend much more over the next few years developing an EV ecosystem.

It aims to have electric vehicles across segments like delivery, commuter premium, high-performance sports, and electric three-wheelers. The company also aims to launch its range of EV products in foreign markets.

In FY23, the company became the second-largest player in high-speed electric two-wheeler segment only behind Ola Electric.

TVS Motor will dispatch a record volume of more than 200,000 scooters, based on its EV platform, in the current financial year ending this month.

The company plans to launch more products in the 5-25kW segment in 2024. It's also planning to launch an electric three-wheeler.

Starting from August 2023, the company accelerated the production of its existing EV scooter, iQube, by an additional 25,000 units per month. The company has a production target of 100,000 EVs in FY24, up from 50,000 units in FY23.

The company has also unveiled a novel electric two-wheeler called TVS X. It's designed to appeal to the younger demographic, particularly Generation Z and Millennials. It has committed to a capex of Rs 2.5 bn for this effort.

To know more about the company, check out the TVS Motor fact sheet and quarterly results.

#3 Hero MotoCorp

Back in 2021, Hero MotoCorp announced its entry into the EV 2-wheeler space.

At that time, it was considered to be a late entrant. The market wasn't convinced about its strategy.

But that was then. Things have changed now. The market has accepted the slow and steady strategy of the company.

Under its VIDA EV brand, the company has embarked on a clear expansion plan across the country. The FY24 target is to distribute the brand across 100 cities.

Keeping the cost-conscious Indian consumer in mind, the company cut the prices of VIDA V1 Plus and VIDA V1 Pro scooters by around Rs 20,000. The management said it would use its existing dealer network to scale up EV sales across the country.

In September 2023, the company announced a further increase in stake in Ather Energy (not to be confused with Aether Industries) with a Rs 5.5 bn investment. Prior to this, Hero already owed 33.1% stake in the company.

Ather designs, manufactures, sells, and services electric two-wheelers. Ather also has its own charging infrastructure. It's also engaged in the EV battery business.

The company has announced plans for an IPO aiming to raise US$ 400 million (m) through the share sale, targeting a valuation of US$ 2 bn.

To know more about the company, check out the Hero MotoCorp fact sheet and quarterly results.

#4 Bajaj Auto

Another strong contender in the 2 and 3-wheeler EV space is Bajaj Auto.

A couple of years ago, Bajaj Auto formed a 100% subsidiary, Chetak Technology Ltd (CTL) to tap into the thriving electric vehicle market. This subsidiary develops new EV technologies and products. It will have its own dedicated manufacturing facility.

Their efforts to capitalise on the booming EV industry seems to be working. Bajaj Auto's domestic sales of its electric scooter Chetak (re-introduced in 2021) grew over four times, from 8,187 units in FY 2022 to 36,260 units, in FY 2023.

While the company did cut the price of the EV bike, this kind of surge in demand was unprecedented.

On the back of this success, the company is now extending its distribution network to over 100 cities and investing in expanding capacity.

It will invest over Rs 7.5 bn for FY 2024, a part of which will also be spent on debottlenecking exercises to ramp-up its EV component volumes.

Bajaj Auto is also expected to benefit from improved sales of premium bikes like Triumph Speed 400 and Scrambler 400X.

To know more about the company, check out the Bajaj Auto fact sheet and quarterly results.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

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