Top 3 Stocks that Are Investing Heavily in India's EV Supply Chain

A few years ago, investors were ploughing their cash into any electric vehicle shares loosely related to the industry.

However, this hype has gradually cooled, shifting its focus to a crucial aspect of the technology: the batteries.

As the world is moving away from fossils and adopting EVs, the importance of batteries has taken centre stage.

The demand for batteries in major automotive markets is rapidly increasing, creating tons of opportunity for EV battery manufacturers.

However, with its increasing demand and low availability, many manufacturers, including big conglomerates, are considering building their battery gigafactories or partnering with other companies to address the supply issues.

This race is further speeding up with three stocks entering the race.

#1 Hindalco

First on the is Hindalco.

Hindalco Industries is an Indian aluminium and copper manufacturing company. The company is a subsidiary of the Aditya Birla Group.

Hindalco is the largest aluminium rolling and recycling corporation in the world, as well as a major copper player. It is also one of Asia's top primary aluminium producers.

In a proactive move, the company has thrown its hat into the EV ecosystem.

Hindalco, on 12 December 2023, announced its plans to invest Rs 8 billion (bn) to set up a battery aluminium foil plant in Odisha as it evaluates opportunities in the electric mobility value chain.

The Odisha unit will be located alongside a 25 MW solar power plant and can access additional solar energy from a 400 KV national grid connection.

This 25,000-tonne plant will be commissioned by July 2025.

Hindalco expects national demand for battery-grade aluminium foil to reach 40,000 tonnes by 2030, prompting their foray into this space. The unit will initially focus on exports.

The target market will be abroad and domestically.

Hindalco is in the process of qualifying as a supplier with lithium-ion cell manufacturers in India, Europe and the United States.

Hindalco has further signed a memorandum of understanding (MoU) with Phinergy, a metal-air battery technology firm, and IOC Phinergy, a joint venture between Phinergy and the Indian Oil Corporation.

The MoU commits to research, development and pilot production of plates for aluminium-air batteries and recycling of aluminium after usage in batteries.

Going ahead, the company is focused on downstream expansions in India, with an emphasis on increasing contributions from value-added products.

This strategy aims to enhance profitability and protect the company from fluctuations in aluminium prices.

Further, it expects to sustain its positive momentum in the copper business, driven by increasing volumes, robust demand, and improved TC/RC (Treatment Charge/Refining Charge) margins.

For more details, see the Hindalco company fact sheet and quarterly results.

#2 KPIT Technologies

Second on the list is KPIT Technologies.

KPIT Technologies is a mid-sized IT firm that caters primarily to the automotive industry. It offers software solutions for electrification, autonomous driving, connected vehicles, software standardisation, and vehicle engineering and design segments.

The company, on 12 December 2023, unveiled sodium-ion battery technology.

The technology, developed in-house by researchers at the city-based company over the last eight years, will be put through external testing and deliver revenues after a year.

KPIT is the first company in India to come out with the technology and only fourth in the world to possess a proven technology solution for sodium-ion battery storage.

The company opted for a different approach to its project by bringing on board electrochemists, a departure from its usual practice of hiring software engineers.

They conducted extensive testing on various chemical compositions before ultimately selecting the more readily accessible sodium.

These include the ability to charge a vehicle for shorter trips in less than half an hour, thus making it more cost-effective and also more remunerative for the driver as more trips can be undertaken on the same vehicle in a day.

The overall cost of the battery will be up to 30% lower than the present alternatives, and the company is in talks with both existing auto industry clients and those interested in other applications of energy storage.

In the development stage, the technology has been tested internally in a smaller group and in the next phase, which lasts about 6-9 months, it will be tested on select vehicles outside.

The company will also be marketing the technology in export markets in Europe and East Asia as the biggest opportunities.

Going forward, the company is actively seeking partnerships and acquisitions to bolster its capabilities and expand its reach.

For more details, see the KPIT Technologies company fact sheet and quarterly results

#3 Servotech Power

Last on the list is Servotech Power.

Servotech Power Systems is an India-based company engaged in the end-to-end manufacturing, procurement and distribution of advanced solar products.

The company plans to set up its manufacturing facility in the GCC (Gulf Corporation Council) region. The facility is currently in the sampling, certification, and registration process.

Further, the company is setting up a new EV plant in Uttar Pradesh with a manufacturing capacity of 10,000 EV DC chargers per year.

This facility will not only manufacture chargers but will also support the company's future R&D. To support this, the company has committed Rs 3 bn in investment.

The company has issued warrants worth Rs 750.6 million (m) at Rs 83.4 per warrant for setting up manufacturing capacity and supporting R&D activities.

Apart from this, the company has filed two patents for the EV charger technology. These patents enable users to fast charge any GB/T Bharat DC 001 vehicle based on 72v/96VDC through a CCS2 connector using a small additional gadget.

Servotech Power will also work on developing a model for constant engagement with universities and IITs to promote innovation.

In the next 2-3 years, the company plans to set up 5,000 charging stations under its subsidiary, Servotech EV Infra, responsible for developing robust charging infrastructure.

As a supplier to many oil marketing companies (OMCs) and original equipment manufacturers (OEMs), Servotech Power already has a presence across India. But the company envisages having its network.

For more details, see the Servotech Power Systems company fact sheet and quarterly results.

Conclusion

India has proactively recognised the central role of batteries in the overall sustainability of electric vehicles.

NITI Aayog, the Government of India's policy think tank, has introduced a Battery Swapping Policy, focusing on maximising their use and promoting end-of-life recycling.

This involves providing research and development support with grants for various activities encompassing material modelling, electrode and electrolyte synthesis, material characterisation lab-scale prototype testing, and recycling processes.

To give a further boost to the electric vehicle (EV) adoption in the country, the government is considering introducing another production-linked incentive (PLI) scheme for batteries, Union Minister of Power, New & Renewable Energy.

This will further bolster the company's position in EV battery Space.

Moreover, with an upcoming election in 2024, there is an added layer of uncertainty and potential policy shifts that could impact the stability and benefits of these schemes.

Hence, it is imperative to conduct thorough research before making any investments.

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