How Is EV Adoption Impacting Auto Stocks In India

EV adoption in India is at an all-time high, driven by changing consumer preferences, among other factors. Rising prices of fuel, governmental incentives on EV purchases, and the inherent consumer realization of the need to opt for sustainable solutions are contributing to this growth. 

This change in the auto sector has made an impact on the stock market as well, causing significant fluctuations for both traditional and emerging players. For investors, keeping up with these dynamics is essential to gain insight into the potential impact on their investments and top opportunities to explore.

The Growing EV Sector in India 

Causing massive ups and downs in the auto investment segment, the EV sector in India is growing at a rapid pace, projected to grow at a CAGR of 28.52% between 2024 and 2029 to reach a valuation of USD 18.319 billion. 

Some of the key factors that are fueling the growth of this sector include the following: 

1. Policy Framework: Governmental policies such as the FAME II Scheme (Faster adoption and manufacturing of electric vehicles) are among the primary policies that are fueling the growth of the EV market. This scheme incentivizes the production of batteries required for electric vehicles, as well as extends subsidies that encourage the production of EVs as well as their adoption. 

2. Increasing Cost Of Fuel: Traditional vehicles run on fuels like petrol and diesel, the cost of which is continuously rising. Given this rise, consumers are more motivated to opt for electric vehicles which prove to be cheaper to operate. 

3. Rising Investments and Options: The increasing popularity of electric vehicles has encouraged traditional automotive manufacturers to expand into this domain, providing consumers with more options. In a sensitive market such as India, the entry of trusted brands like Tata Motors and Mahindra & Mahindra has played a pivotal role in increasing consumer acceptance and adoption of electric vehicles.

4. Improvements In EV Infrastructure: The biggest challenge that has surrounded electric vehicles is the lack of infrastructure to support them. However, the EV charging infrastructure is improving every day, providing individuals with the resources needed to charge their vehicles safely. With continued improvements, the adoption is expected to only continue improving. 

5. Consumer Preference Shift: Rising awareness among consumers about the incrementally damaging impact of fossil fuels on the environment and the need to move towards sustainability has resulted in increased demand for electric vehicles. With this shift, there also comes a demand from trusted brands to make EVs and a shift towards those that are providing such options. 

How EV Adoption is Shaping the Landscape of Auto Stocks in India 

The rising EV sector is impacting auto industry stocks significantly in India, causing tremendous fluctuations for both legacy and rising players. Some of the prominent ways it is shaking up auto stock performance in India are as follows: 

Impact on Legacy Brands

The biggest automotive names in India, including Tata Motors, Maruti Suzuki, and Mahindra and Mahindra have faced a lot of change in their stock performance due to the EV revolution. 

• Tata Motors has achieved a great leap, conquering nearly 63% of the market share in the EV domain in 2024. Although this is a major leap from the previous year’s 72%, the company still maintains a leadership position in this segment. The company’s bullish expansion in this segment is driving its growth and directly impacting its stock performance. 

• Maruti Suzuki has remained in the back seat when it comes to EV adoption. Where other brands have invested massive amounts in developing their EV line and even launched many models (Tata Motors), Maruti Suzuki has only recently announced its intention to launch an EV line. 

This reluctance has negatively impacted the company’s sales as well as harmed its stock performance immensely. However, the poor stock performance has also been attributed to other external factors in addition to this. 

• Mahindra & Mahindra has been taking the Indian auto industry stocks by storm in recent years, revamping its classic vehicles and launching a bunch of new options. Its simultaneous investments to the tune of INR 10,000 Cr in the EV segment, along with defined plans to launch five unique EV models, is impacting its stock performance positively. The company has already started launching some of its EV models in the market and aims to launch even more models in gradual batches by 2027. 

• Hyundai has also faced a drop in sales and negative stock performance due to its lack of EV models. With the rising competition in the electric vehicle segment, and the growing consumer demand for EVs, the company is facing a challenge which can be understood by the poor performance of its IPO. Among other factors, the lack of electric models was a leading factor behind his unexpected performance. 

Rise Of New Players

New players in the EV vehicle segment, most prominently Ather and Ola Electric, have made a big impact on auto stocks in India. These players have disrupted the performance of EV stocks in India, pushing traditional brands to expand their scope and dive into EVs. 

• Ola Electric: Launching a line of electric two-wheelers, and launching its IPO in 2024 valued at INR 6145 Crores, the company shook up the auto stocks landscape, demonstrating the potential of EV companies. Despite battling production challenges, the company has cemented a leading position in this niche. 

• Ather Energy: Ather Energy has also attained a lot of popularity and plans to launch its IPO soon, which could have an impact on auto stocks, particularly when considering companies involved in two-wheeler vehicles. 

Conclusion 

The electric vehicle segment in India is rising, and shaping the future of auto stocks in the country. As companies delve deeper into this domain, their performance is going to equally change in the stock market. While EV manufacturing is one factor, it will be crucial for these companies to remain at par with changing consumer expectations and innovate models that meet the consumer preference, while maintaining quality that consumers can trust. 

Brands that are able to keep up with this challenge are anticipated to prevail over those that maintain a distance from EVs.