Expectations are high that the Union Budget 2024 will include measures to accelerate EV (electric vehicle) penetration in India. The automobile sector expects Union Finance Minister Nirmala Sitharaman to make some announcements on the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme, enhanced production-linked incentive (PLI) schemes, and other incentives to boost the EV sector.
“To propel EV adoption further, the auto industry has key expectations from the Budget. These include a comprehensive EV promotion scheme that succeeds FAME and focuses strongly on research and development (R&D). Increased incentives for EV R&D are crucial to foster technological advancements domestically,” said Abhishek Jain, the head of research at Arihant Capital.
“The industry seeks enhanced production-linked incentive (PLI) schemes for EV manufacturing. Strengthening PLIs will incentivise local production and lessen reliance on imports. By addressing these expectations, the Budget can play a pivotal role in achieving India’s aspirations for sustainable mobility and establishing itself as a global EV leader,” said Jain.
Meanwhile, H.D. Kumaraswamy, Union Minister of Heavy Industries, said at an event on Tuesday that the third phase of the FAME scheme will be announced shortly but not in the upcoming Budget. The FAME II scheme ended in March.
Even though the announcements related to the FAME scheme may not be part of the Budget, industry observers believe the EV sector will remain one of the top priority sectors of the government as it remains committed to getting to net-zero emissions by 2070.
Mint spoke to several experts to get their insights on how Indian investors should play the EV theme for the long term. Here’s what they said:
Amit Goel, the co-founder and chief global strategist at Pace 360
There is much anticipation surrounding the Union Budget 2024’s impact on manufacturing and the EV sector.
We believe investors should consider investing in Auto ETFs focusing on manufacturing or electric vehicles, as these offer diversification and potentially lower risk than picking individual stocks.
Additionally, investors should look for well-positioned companies to benefit from Budget announcements.
This could include companies that manufacture EV components, traditional automakers transitioning to EVs or companies involved in building charging infrastructure.
Kashyap Javeri, a fund manager and the head of research at Emkay Investment Managers Ltd
The jury is still out on which technology will come on top for automobiles and particularly passenger vehicles, whether it will be EV Hybrid or ICE engines will continue to rule the roost.
Having said that, the industry will not have to wait for the Budget to incentivise the production of fuel-efficient and environment-friendly vehicles.
The incentives for hybrid vehicles, alternate fuel vehicles, and EVs will come through the Budget or outside it.
Our strategy is to invest in stocks which are either tech-agnostic or present across all technologies.
Ruchit Jain, Lead Research, 5paisa.com
Stocks in the EV themes have witnessed decent outperformance in the last few quarters as the government’s focus on these sectors has led to strong investor interest.
In the upcoming Budget, we expect that the government will continue to take measures to boost the manufacturing sector and also adopt growth-oriented strategies to boost the growing EV sales in India.
The government’s strong emphasis on promoting electric mobility and reducing emissions could substantially grow the EV sector. Investors can look for buying opportunities in stocks such as Mahindra and Mahindra, Tata Motors and Exide.
Kripashankar Maurya, AVP-Research, Choice Broking
To capitalise on the expected boost in high-growth manufacturing sectors from the Union Budget 2024, consider focusing on companies in Electronic Manufacturing Services (EMS), semiconductors, EV-related components, solar energy, lithium cell production, and shipbuilding.
These areas are set to benefit from policies like the Production Linked Incentive (PLI) scheme and the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) policy.
1. EMS and Semiconductors: Look at companies like Dixon Technologies, Kayens Technologies, SPEL Semiconductor Ltd and ASM Technologies Ltd, which are expanding their manufacturing capabilities and are integral to electronics and semiconductor growth.
2. EV-related Components: Companies such as Exide Industries, Amara Raja Batteries, Minda Corp, Uno Minda, Motherson Sumi and JBM Auto are key players in supplying components for electric vehicles, benefiting from the EV sector’s growth.
3. Solar Energy: Firms like Adani Green Energy Limited, Tata Power Renewable Energy Limited, Azure Power Global Limited, Sterling and Wilson Renewable Energy Limited and Borosil Renewables Limited are leading in the solar energy sector, poised for growth with increasing emphasis on renewable energy.
4. Lithium Cell Production: Companies like Exide Industries and Amara Raja Batteries are investing in lithium cell manufacturing, which is essential for the EV sector’s expansion.
5. Shipbuilding: Look at companies like Mazagon Dock Shipbuilders Ltd, ABG Shipyard Ltd, Cochin Shipyard Ltd, Garden Reach Shipbuilders & Engineers Ltd and Krishna Defence & Allied Industries Limited, which are set to benefit from increased government focus on enhancing maritime capabilities and domestic shipbuilding.
Diversifying across these stocks can help leverage the anticipated policy boosts in these high-growth manufacturing sectors.
Parth Shah, a research analyst at StoxBox
With the government’s firm commitment towards net zero emissions, sustainable development, and the Make in India initiative, we expect the government to align its policies with those reducing pollution, addressing climate change, and promoting manufacturing via PLI incentives.
We expect the FY24-25 Union Budget to be a foundation for the $10 trillion GDP plan. Thus, we anticipate that focus on emerging areas such as AI, EV & EV infrastructure and semiconductors would be a top priority for the government.
In accordance with such expectations, we advise the participants to look for stocks with strong manufacturing capabilities and strong relations with customers focusing on such emerging areas.
Investors can consider the following two stocks for a potential 20 per cent upside over a 12-month horizon:
Fiem Industries
It is engaged in the manufacturing and supplying auto components like lighting and signalling equipment to two-wheelers and four-wheeler original equipment manufacturers (OEMs), enjoying a significant market share of over 30 per cent.
The majority of its supply is to domestic OEMs (contributing 90 per cent of the revenue mix). The company focuses on the EV segment, which has the first-mover advantage. The company is steadily enhancing its EV capabilities and extending its customer list, which is currently at 28 EV OEMs.
Sandhar Technologies
The company is engaged in manufacturing and assembling automotive components, with a primary focus on safety and security systems.
It is currently focusing on developing products for EV applications and plans to release products in this financial year.
The company’s main clientele is domestic two-wheeler OEMs, and its manufacturing plants operate at 80-90 per cent capacity utilization at the consolidated level.
With the company’s focus on increasing its manufacturing capacity alongside increasing content per vehicle, we expect the business performance to improve ahead.
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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.
