India's Electric Vehicle Market To Ride High Ahead, Here's How!

India, which is the third largest car market in the world, may not have the top seat when it comes to electric vehicle cars currently but that hasn't stopped global investors from investing. The latest hot deal would be of Singapore's Temasek with Anand Mahindra's EV business. However, the real challenge for the EV makers in India is to win the market's enthusiasm too, as per Reuters.

On Monday, a Reuters report revealed that the scarcity of opportunities to ride the boom means India is likely to throw up more hot deals. Electric vehicles made up less than 2% of cars sold in the country in 2022 compared to about 25% in China where Tesla TSLA and BYD dominate. India also has fewer startups: Tata Motors has over 70% market share in EVs, followed by China's MG Motors' 12% and M&M's 7%. Traditional car giants don't offer much. The $34 billion Maruti Suzuki has a 42% market share in passenger vehicles but it is dragging its feet in making the transition to clean energy models.

The report added that the next challenge for India's EV makers is to win the market's enthusiasm too.

On August 3rd, Temasek and M&M signed an agreement where the former will invest Rs 1200 crore into MEAL (Mahindra Electric Automobile Limited), the four-wheeler (4W) passenger electric vehicles company. Notably, Temasek's investment will be in the form of Compulsorily Convertible Preference Shares ('CCPS') at a valuation of up to Rs 80,580 crore, resulting in Temasek's ownership of a 1.49% to 2.97% stake in MEAL.

Temasek will join British International Investments (BII) as an investor in MEAL. With this investment, Mahindra's EV subsidiary's valuation goes up by 15% from up to Rs 70,070 crores to up to Rs 80,580 crore. As per the regulatory filing, The breadth of global experience of these marquee investors will be valuable for MEAL. The amount invested is consistent with the Mahindra Group's plan to minimize dilution.

This would be the second big endorsement for Mahindra. However, the report revealed that when it was announced markets reacted somewhat on a muted note. Notably, M&M and Temasek deal is less grand than compared to Tata Group-backed automobile flagship Tata Motors which has raised $1 billion in investment for its EV business from private equity firm TPG in 2021.

Last week, on August 11, Tata Motors announced the achievement of an outstanding milestone of 1 Lakh Tata EVs.

In its statement, to 'Go Beyond', Tata Motors has already declared its 3 phase EV strategy. The company plans to offer different body styles at several accessible price points, meeting the evolving needs of EV consumers. It has showcased future concepts at the Auto Expo 2023 - the Curvv, Harrier EV, Sierra EV and the Avinya. These aspirational EVs will open up new segments of customers in India.

After July monthly sales, LKP Securities in its note said, "We remain positive on the sector. However, our choice is in the following order -PVs, 2Ws and CVs. Stocks specifically, within the 2Ws, we like Bajaj Auto as we expect the sequential growth seen in June to continue hereon as the $ scenario may improve in Africa. Also, the EV strength gaining from Chetak and upcoming launch of e-3W can be additional positives. Domestically on the motorcycles side as well the company is posting decent numbers. TVS too looks promising with its dominance in EV scooters and solid performance by its star performers like NTorq, Jupiter, Apache, Raider and the recently launched Ronnin. While on the PV side, we like M&M because of its thrust on rural markets through its leadership in tractors business, prudent capital allocation and a robust growth strategy in UVs, EVs and CVs. We find MSIL expensive on valuations currently. We like Ashok Leyland within CVs as it has a diversified revenue base deriving from LCVs, Defense, MHCVs, exports and spares."

According to the brokerage, every dip in the stocks shall provide good opportunities for investors to accumulate them from a medium to long-term perspective.

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