Before You Buy Your First Electric Vehicle Consider Buying this Stock

Jul 29, 2020

What do you think are the most advanced tools used for investing?

Super computers? Large Bloomberg terminals?

They are very useful, of course but there's more.

Did you know that sophisticated hedge fund managers today use satellite imagery to predict asset prices?

That's right.

For instance, one of them has pioneered the concept of satellite-image car counting.

The technique helps analysing satellite images of parking lots outside retailers. Based on the images, the analysts judge the growth of the retail chain.

But don't give all credit to the hedge fund managers. It was none other than legendary Sam Walton who devised this method of judging growth.

He would fly over competitors' parking lots and count the number of cars. Then he would fly over Walmart's parking lot and count the number of cars there. The difference gave him a sense of direction in his business.

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Can we get such a bird's eye view for growth in electric vehicles (EVs) too?

Of course, it is too early to count electric vehicles in parking lots.

Nevertheless, we could count the number of charging points in our vicinity, over the years, to gauge the growth prospects of EVs.

Now, there are three main elements responsible for accelerating EV deployment.

  • Launch of electric versions of two wheelers, passenger cars, and commercial vehicles
  • Creation of the charging infrastructure
  • Laying the supply chain roadmap (for batteries and components)

So far, we have mostly heard of car makers laying down plans to spend on the assembly lines for their electric vehicles.

But the next phase of growth is gathering pace.

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In this phase, the power ministry is targeting 4 m-plus population cities under the EV policy initiative. It has approved setting up 2,636 electric vehicle charging stations across 62 cities in 24 states.

So, it is expected that at least one charging station will be available at every 4 kms in most of the selected states.

Not surprisingly, Maharashtra leads the pack.


Not just that. Government utilities aren't the only ones lining up to tap the opportunity.

106 public and private entities have approached the government for permissions to set up about 7,000 EV charging stations.

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This clearly shows the vehicle manufacturers have enough incentive to capture this latent demand.

The tax benefit in terms of a lower GST rate (at 5%) is a further shot in the arm of the EV industry.

Now, betting on car makers or power utility companies based on their EV plans would be futile for now.

None of them derive a substantial proportion of revenue from electric vehicles or the charging infrastructure, yet.

However, I have been researching one company that is already seeing a significant upside on the EV runway, for few years now.

And despite intense competition in EV manufacturing and charging, this company is unlikely to have many competitors, for several years.

The stock is a good long term investment in my opinion.

Stay tuned for more...

Warm regards,

Tanushree Banerjee
Tanushree Banerjee
Editor, StockSelect
Equitymaster Agora Research Private Limited (Research Analyst)

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5 Responses to "Before You Buy Your First Electric Vehicle Consider Buying this Stock"

Vachan Tatiwar

Aug 4, 2020

Preferably buying EV Stock

Like (1)

Pratap Desai

Aug 1, 2020

I would like to buy the ev stock

Like (1)

usha nair

Jul 30, 2020

It's a great idea to get ready for evehicles.....but we need to know what the govt policies are .Secondly these are v expensive and not everyone will be able to afford it. Yes a reduction in the gst will be a plus factor

Like (1)

Laxmikant

Jul 29, 2020

Great

Like (1)

Peeyush Agrawal

Jul 29, 2020

You know the catch with satellite Imaging method of judging production or growth? If the company knows this, and they want to inflate their valuations, they will start having fake insurance truck trips going and coming from their manufacturing hub- you would think production has increased but it is empty truck.

Like (1)
  
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