Why am I investing in the Electric Vehicle (EV) Sector in India?

And again, if you’re an investor, don’t put all your money in one stock because this is a highly volatile space right now and this short-term pain will happen in this industry. So don’t get scared.

Hello, everyone.
Welcome to today’s informative article.

So let me start today’s informative article.
by asking you a very simple question.

The question is that by how much do you

think FAANG, FAANG stocks have grown
in the last five years? So FAANG is

Facebook, Amazon,
Apple, Netflix, Google.

So by how much have these stocks
grown in the last five years?

So type out your answers
in the comments section.

And here is some data for you.

So Facebook and Amazon have
seen an increase of 185%

and 500% respectively.

Apple and Alphabet have grown
by approximately 175 percent and Netflix

has grown by 450%.

So almost roughly speaking,

in the last five years,
these stocks have roughly tripled.

Now, you might say Aman these are
American companies, why should be bothered?

Even if you check the data for technology
companies based in India, for example,

TCS is one of the biggest
tech firms in India.

It has grown from twelve hundred
and thirty levels,

from approximately twelve hundred levels
five years ago to approximately three

thousand three hundred levels
as we are sitting today.

So in five years, again, the Indian
technology stocks have also tripled.

So now why am I telling you this story?

The story has a very important lesson.

The lesson is that there are certain

sectors which exhibit really
fast growth in a decade’s time.

So last decade it was tech,

maybe this decade also it will be tech,
but there is an additional one sector,

which I’m betting quite heavily on, which
is called as EV, or electric vehicle sector.

So in this informative article.,

I’m going to cover the ins and outs
of EV sector and I’m going to show you

how to make investments in the EV space
by showing my Small case and showing

my individual stock picking
strategies as well.

So stay tuned to this informative article and share our article
because it would indicate to me that you. really enjoy this type of case study content
and I would continue to shoot it. So let me cover three specific
points in this informative article.. First, let me walk you through the growth
potential of the electric vehicles industry.

Second, let me cover the scope of this
industry in India and what is the primary

value chain, where the value
will be unlocked?

Finally, let me show you the investment
scope of this industry,

and I will share my portfolio of what
specific firms have I invested

in EV the sector and which firms will
I be investing in going forward.

So in order to assess the growth potential
of the EV industry in general,

all across the world, you need
to consider two specific points.

So the first point is that are

the external conditions conducive
for EV sector to grow?

What do I mean by that?

For example,
you might have heard that back in the 70s

when the development of the computer happened,
the cost used to be very high.

One MB of RAM used to cost
insane amount of money.

But as the industry progressed, the cost
of those factors started going down.

Silicon Valley developed. A lot

of investment started pouring
into tech and computer-based companies.

A bunch of positive external developments

happened that really propelled
the technology and the software industry.

So similarly, we are sitting now in the 2020s.

You need to ask yourself the question

that, hey, do I see this EV industry getting
conducive help from external factors?

There are a lot of positive
external factors at play here.

First and foremost,
a majority of the corporations are

becoming more socially
and sustainability-focused.

They are following
something called ESG norms.

Very recently, when Elon Musk dumped
Bitcoins, he gave the criterion that, hey,

these bitcoins extract a lot of energy
and therefore I am dumping bitcoins

because in the mining of bitcoins,
a lot of energy spent and I don’t want

to get into all these
environmental destruction.

So he went out of Bitcoin. His reason

for ditching bitcoins
is up for debate.

But the point that I’m trying
to enforce here is very simple.

Majority of these Fortune 500 companies

are becoming ESG, which is environmental,
social and governance focus.

So they want to invest in initiatives that
promote the sustainability of the world.

Now, we know for a fact that nonrenewable

sources of energy,
for example, oil, wood, etc.

, these are not sustainable.

They cause a lot of damage
to the environment.

So companies, governments,
even multilateral organizations are

pouring in a lot of resources in terms
of exploring alternate sources of energy

and promoting sources
that do not cause pollution.

So from this end, there is a lot of push

in terms of developing
the entire mobility system.

Now, you might be observing
examples of this happening already.

For example, you might have recently seen,

even in your city that e-rickshaws
have become very big.

And this is a very,
very recent development.

This has happened in the last five

to seven years that the e-rickshaw industry in India
has started to become really big.

It has started replacing a lot

of conventional sources of transportation
like Tempos, autos, etc.

And now people are adopting e-rickshaws.

That’s a step in a positive direction,

which you and I are clearly
witnessing. Now even,

speaking from a government’s point

of view, even the government policies
are somewhat promoting that EV market.

For example,
if you take a look at European Union, EU,

so what they have started doing is
that they have started levying a lot

of taxes on conventional
sources of transportation.

If your vehicle is extremely heavy,
then you will have to levy heavy taxes.

Now I will link a study here and I will

flash that part of the study
to support this argument.

So please take a look.
Now, whether we look at it from a trend

perspective, that hey whether oil
usage is going up or down.

If you look at it from a government’s push

perspective, whether they are supporting
EV policies or not or whether we look

at it from a corporate point of view,
whether they are supporting ESG norms or not,

the point is that EV industry is getting

a lot of external support,
which forms the right set of conditions

for it to grow. In order to clearly
assess the potential of the industry,

it is also very important to assess

whether or not EV industry
can grow profitably.

This is a very important point because
there are a lot of products and industry

where the growth happens, but the growth
does not happen in a profitable manner.

Would the EV industry fall
in such a category?

My answer is no, and I will
give you the reasons why.

So there is mass adoption of electric

vehicles, be it electric bikes or
electric scooters or electric cars.

It is already happening at scale.

Now, here is a study that was done
by the NitiAayog,

which published a report called India’s
Electronic Mobility Transformation.

So it estimates that by the year 2030,
the EV sales penetration in India would stand

at 70 percent for commercial cars,
30 percent for private cars,

40 percent for buses and 80 percent
for two and three-wheelers.

So this is a very important estimate
that has been given by the NitiAayog.

Very important for you to consider
because this really depicts

in which direction people
are going to buy their vehicles.

Are they going to continue buying their

traditional vehicles or would they shift
to these new-age vehicles which are as EVs?

So it is clearly happening.

That shift is clearly happening.

And NitiAyog has
categorically pinned that down.

There was another study that was published
by Auto News in Europe,

and it categorically says that,
by the mid-decade,

EV sector profitability will match
internal combustion engine-based vehicles.

Now, this is a very big statement to make

because so far for the last hundred
and twenty years,

we have been using conventional sources
of energy to drive automobiles as we are seeing.

Even now, right now,
the profitability over these 120 years

since the Ford invention happened,
it had improved in this IC engine,

internal combustion engine-based vehicles,
which are traditional vehicles.

The profitability has gone up because
of the fact that engine efficiency

improved, manufacturing
efficiency improved,

A bunch of other efficiencies came in.

So the same lifecycle will
the payout for EVs also.

Now, this is a very big statement

that by the mid-decade,
the profitability of EVs will match

that of internal combustion
engine-based vehicles.

This is a very big statement because going
forward by the year 2025 onwards,

it is only a matter of time that EVs will
become more and more cost-efficient.

Even their battery lives will improve.

New developments will happen.

New R&D budgets will come

in. So a bunch of developments
will keep on happening.

And people or industries who are
participating in the EV industries will

actually make massive amount
of profits going forward.

Now, since the growth potential
of EV industry is massive,

people are going to buy EVs and companies

are going to get more and more efficient
in terms of driving their profitability.

So it is just a matter of time that India
will benefit from this revolution.

So let us analyze the EV industry in India,

where does the industry stand
and where can it go from here on?

So first and foremost,
you can categorize the EV industry in India

into three different buckets.
First will be brands that actually sell,

which are putting their logo
and stickers on different things.

For example, you have two-wheelers and four-wheelers.

So which of these companies and brands are

supporting and giving
you the final product?

So that is the first category.

The second category would be called as
OEM or original equipment manufacturers.

So in order to build an electronic
vehicle, what do you need?

You need a bunch of things.

You need an engine,
you need a steering wheel.

You need a bunch of different things.

So OEMs, original equipment manufacturers

are the ones who actually build these
individual parts,

which are eventually assembled by someone
else and then brands put their stickers and sell them.

So this second category is called OEMs.
And third is the overall infrastructure.

So once you have an EV in your hands,
what are you going to do with it?

You have to go to its charging
port to get the charging done.

You need some kind of permit.

So there is an entire
infrastructure around it.

So this is where you can
bifurcate the EV industry.

So three parts, one is brands,

which eventually sell you stuff, OEMs who
actually, build the individual components,

and third and finally,
we have the entire infrastructure

in which government,
private start-ups participate to build this

entire infrastructure which supports
the EV industry in totality.

So let’s go through each of these
points one by one very quickly.

Now, if you look at major brands in India,
there are companies like Bajaj,

there are companies like
Hero Moto Corp.

These are brands that are trying

to participate in the EV industry
and launching their own set of vehicles.

Now, there is no point in taking a look
at the current portfolio because as we

speak, these companies are
coming up with newer and newer

products, but we need to be aware
that which companies are in the two-wheeler

and four-wheeler manufacturing
space when it comes to EVs.

So these could be literally any company.

So Tata is also doing it.

Bajaj is also doing it,
Maruti is also getting into the game.

Mahindra and Mahindra is also doing it.

Now, these
all the traditional players who used

to manufacture traditional cars and bikes
are now getting into the EV space.

Now, many international players,

for example, Tesla recently
entered the Indian market.

Tesla is already selling high end EV cars
in us, so it might enter the space.

And similarly, other international big

manufacturers and big brands might come
into the Indian market and would try to dominate

the space because this is
a super lucrative space.

Now, the second component,

which is called as OEM, original
equipment manufacturers.

This is where the major
game lies for the EV players.

Now, there was a study that was done

by Center for Energy Finance, and
there are some important considerations.

And I will flash this
table in front of you.

It’s written very minutely, so I’ll
read out the important points from it.

It will help you understand more about
the OEM manufacturers in India,

what are their profit margins and where
it is within this OEM bucket,

there is major scope for improvement,
development and growth.

So let’s look at the EV component

manufacturing sector
in slightly more detail.

Now, first and foremost,
if you need to get an IEV done, be it a bike,

be it a car, you need
a bunch of components.

So the first component that you generally
need is called as a battery pack.

Now, battery is one of the most critical
components for any EV,

and it costs approximately 40
percent of the entire amount.

So this is a big cost.

This also means that the selling price

of this particular component
would be very high.

And if you are actually making investments

in battery companies in India,
it might be a good trade.

So I’ll talk about this in Section three,
please watch it till the end.

But an important point to note down is

that battery is one of the key
components in India.

There are a lot of problems when it comes

to Indian battery manufacturers,
for example.

They are not doing highend,
efficient manufacturing,

bunch of regulatory related issues, bunch
of issues around procuring raw materials.

Those issues are there.

I’m not saying that those issues will not
be there, but this is a growing industry.

So I am hopeful that the government,

in conjunction with the private sector,
will be able to sort out these issues.

But the important point to note is
that the battery segment of EV is very,

very important because it contributes
40 percent of the entire cost.

Then we look at electronic motors,

power electronics, vehicle integration,
which ranges from 10 to 20 percent,

and these are other important components
that need to be kept in mind.

Now, the key takeaway from this
segment is very, very simple.

Now, if you look at the OEM component

manufacturing, then this needs to actually
play up for the EV industry to become big.

Because what happens is this, for example,
let’s say that if you are talking about

a traditional vehicle, let’s assume that
we are trying to build a Ferrari in India.

Now, why can’t we build
a Ferrari in India?

The reason is very simple that the OEM
for Ferrari, the engine is designed

in Italy, now some other components
are designed in Germany.

Now if these components keep on getting

designed in Europe and bring those
components to India and manufacture it.

There will be a lot of import duty.

There will be a lot
of skilled manpower required.

There will be a bunch of other issues.
Right.

So the bottom line is that since EV is

such a big opportunity for the governments,
the government are pouring in an insane amount

of money in terms of building up this
industry. When I say that the government is

looking to build up this industry,
where do you think that they would start?

They would start by supporting the OEMs.

Now, here is a very important research
a statement that I want to read out

 

 

.

So it says that there are multiple
challenges in terms of manufacturing

batteries and there is a national
mission on this front.

It is called a national mission

on transformative mobility
and battery storage.

So even the government realizes that, hey,

we need to build up our OEM system
in India in order to create

and structure the EV industry. Now
in order to support OEMs,

what do we need?
We need to get really efficient in terms of

building up batteries. Now to support that
they have started a national mission.

Now, this is a step in the right direction
and it shows there will be a lot

of investments that will be made
by the government going forward.

Now, what else is the government doing? Now
in order to support battery production,

government is also running production linked
incentive scheme or ACC battering storage

manufacturing, which will incentivize
domestic production units.

So all in all, government is putting
in a lot of effort in terms of building up

the OEMs and a lot of support
and investment will go to them. Now very

quickly, touching up on how the government
is building infrastructure.

Infrastructure is a very key issue when it

comes to EVs, and government at the back
end needs to develop the infrastructure,

pass on the regulation, pass on the benefits,

give a lot of incentives to people
to come and invest in the EV space.

So what is the government doing?

So if we take a look at the state

mandates, the government of Karnataka has
introduced a comprehensive EV policy.

Tamil Nadu has come up with another supply

an ecosystem where they are
trying to build OEMs.

There is a lot of administrative

and investor-related support that has been
given by the Tamil Nadu government as well.

So the government is also proactive in terms

of building the backend infrastructure,
supporting OEMs.

This industry is already growing.

So all in all,
the situation looks conducive

for accelerating the next
leg of the growth. Which brings me

to the final part of this informative article. that, hey,

so since this industry is growing,
so tell us, where should we invest

and what are some of the key
stocks that we should look at?

So if you’re looking to invest

in the EV sector, there are essentially
two ways in which you can do this.

So the first strategy is for beginners

and intermediate level users
and intermediate-level investors.

So you can go to Small case and look for
a Small case called as electric mobility.

Now, here, if you go to the Small case,

you can check the stocks and weights
and you can actually look at different

OEMs, different manufacturers,
different brands, and try to see whether

or not you are satisfied with this
and make the investment.

For example, I’m personally investing
in a company called Amara Raja Battery Ltd.

I bought this stock a few days

ago and I’m running it at a loss,
I’m showing you my lost portfolio.

Now, please remember that I am
a long-term investor in the EV space.

I’m keeping at least a 10-year horizon.

This loss, I’m certain will
turn into a massive profit.

So this company I’ve already invested in.

Now there are other batteries
manufacturers that you can pick.

And again, if you are a novice investor,

don’t put all your money in one stock
because this is a highly volatile space

right now and this short term pain
will happen in this industry.

So don’t get scared.
A better approach is that just go invest

in this Small case because
they’ve diversified it

really, really well.

For example, what are some of the other

companies in which I have
already made an investment?

So I made an investment in Hero motocorp.

Why have I made an investment

in Hero Moto Corp?

The reason is very simple,
that Hero MotoCorp is one of the leading

companies when it comes to
two-wheeler manufacturing space.

So they have a massive distribution
the system already in place.

And therefore I feel that when the EV market

starts to take off, Hero motocorp can
actually accelerate its profitability.

Right.

So this is one trend-based
an investment that I have done.

Now,

if you look at Indian Oil Corporation Ltd
now, many of you will say that, hey,

how is it EV? Now IOCL is actually going
to play a different role altogether.

For example, the IOCL very recently,

with Sun mobility, has launched
a battery swapping facility.

Now, IOCL, as you might be aware that you

might have seen a lot of petrol pumps
that IOCL owns and operates.

Now, as the EV industry grows,

it will require charging stations
it will require maintenance.

So IOCL can get into that
business very easily.

Therefore, I have made
investments in IOCL as well.

So the easiest way for you,

if you are a beginner and intermediate
the user who cannot track their investment,

is to just literally go
invest in this Small case.

The reason is very simple again,

that there is a rebalancing
that happens for this portfolio.

So there will be experts who will look

at this portfolio periodically and drop
and add some new stocks into it

as per the market conditions.
I am a slightly advanced user,

so I am picking individual
stocks as I have shown you.

So the strategy B is that you can go

and like me, you can keep on making
investments in the EV industry.

So I hope that you enjoyed this informative article..
Please give it a thumbs up,

that would indicate to me that you
enjoyed the content and you would want me

to continue to make such
an informative article. in the future.

So let me know which other industry you
would want me to shoot a case study on.

I’d be very happy to do it.

And I will see you in the next informative article.