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.
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
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?
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
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
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.
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
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
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
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.
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
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
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,
They are not doing highend,
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.
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,
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.
So this is one trend-based
an investment that I have done.
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.