The Indian automobile industry has showcased a robust recovery in 2024, following the challenges posed by the pandemic. Sales across segments including two-wheelers, passenger vehicles, and commercial vehicles have witnessed significant growth, driven by improving economic conditions and rising consumer confidence.
India’s auto industry bounced back strongly last year after demand and sales slumped during the peak period of the COVID-19 pandemic in 2021. Total vehicle sales during 2023 recorded an overall increase of 11% from 2022, with growth visible across all segments. Retail sales of two-wheelers grew by 9.5%, three-wheelers by 58.5%, cars and SUVs by 11%, tractors by 7%, buses and trucks by 8%, according to the industry body Federation of Automobile Dealers Associations.
Key players in the sector such as Tata Motors, Maruti Suzuki, M & M, Bajaj Auto and Eicher Motors have reported encouraging financial performance, backed by increased production and domestic sales. The focus on electric vehicles (EVs) has intensified, with several automakers investing heavily in research and development to establish a strong foothold in this growing segment.
How Auto Stocks Performed in 2024
The Nifty Auto index has climbed 75% over the past year, while the benchmark Nifty has increased by over 29%. In March, the auto index rose by 5%, marking its fifth consecutive month of gains since November 2023. During this period, it surged by 34.5%.
Nifty Auto
Most of the auto stocks in the Nifty Auto delivered more than 25% return in the last six months with Mahindra & Mahindra leading the chart with 70% returns.
Why are Auto Stocks in Focus of Investors Worldwide?
The global automobile sector is rapidly transitioning from the internal combustion engine (ICE) to battery-electric vehicles. And the transition has opened up new investment opportunities in the sector. A bit of background about the quick transition to electric mobility worldwide.
The Paris Climate Agreement came into force on 4 November 2016. 194 countries, including India, signed it. The PCA is a legally binding international treaty to strengthen global response to climate change and keep global temperature rise below 2 degrees Celsius above pre-industrial levels. The countries also agreed to make efforts to limit the temperature increase to 1.5 degrees Celsius.
Therefore, governments are making efforts through policy schemes to make a quick transition to e-mobility and increase the share of renewable energy sources to reduce the impact of climate change globally.
ICE to Electric Transmission in India
The transition from internal combustion engine (ICE) vehicles to electric vehicles (EVs) is proving more complex than anticipated. Consumers are interested in alternatives to fuel-powered vehicles but are not fully embracing EVs, preferring hybrids or CNG vehicles. This trend is influencing car manufacturers globally, including in India.
Maruti Suzuki India, the country’s largest car maker, expects its CNG car sales to increase by over 30% to around 600,000 units this fiscal year. The company sold about 450,000 CNG passenger vehicles last year and aims to reach 600,000 in FY24-25.
Despite the push towards EVs, Maruti Suzuki India anticipates that in five years, ICE vehicles like CNG, biogas, flex fuel, ethanol, and blended fuel vehicles will still make up 60% of its sales. Hybrids are expected to account for 25% of sales, while only 15% will be battery electric vehicles (BEVs).
Road Ahead for Auto Stocks in India
Overall, the outlook for the Indian auto sector remains positive, supported by the country’s growing middle class, urbanization, and infrastructure development.
Auto stocks are going through a transition phase, and stocks focusing more on EV play are benefitting. With improving chip supply, auto companies can focus on increasing production and sales revenue.
Auto Stocks to be in Focus in 2024
In the emergence of the EV revolution, auto ancillary, battery technology, and manufacturers, auto OEM stocks will be in focus in 2024. The following are some of the auto stocks that will be in focus in 2024:
Tata Motors
Tata Motors is one of the multibaggers’ of recent time in the auto industry. Known for its strong presence in commercial vehicles, it has also gained significant market share in passenger cars. With a focus on innovation and sustainability, Tata Motors is expanding its global footprint while catering to the diverse needs of the Indian market.
| Market Cap | CMP (as of 2nd August, 2024) | All-Time High Level | PE Ratio | 5 yr CAGR Return | ROCE |
| ₹ 4,03,917 | ₹1100 | ₹1179 | 12.6 | 53% | 17.4% |
In the quarter ending June 2024, Tata Motors reported a profit of Rs. 5692 crores as compared to Rs.3301 crores in the same quarter last year, registering a growth of 53%.
Mahindra & Mahindra Ltd
Mahindra & Mahindra is a leading Indian multinational conglomerate. With a strong presence in the automotive sector, it offers a wide range of SUVs, commercial vehicles, and tractors. The company has diversified into other businesses, such as agriculture, aerospace, and financial services, establishing itself as a major player in the Indian economy.
| Market Cap | CMP (as of 2nd August, 2024) | All-Time High Level | PE Ratio | 5 yr CAGR Return | ROCE |
| ₹ 341,292 | ₹2745 | ₹3014 | 30.9 | 38% | 13.6% |
The company recorded a profit of Rs. 3546 crores in the quarter ending June 2024, which was 3.8% lower than the profit of Rs. 3684 crores recorded for the same quarter last year.
Ashok Leyland
Ashok Leyland is a leading Indian commercial vehicle manufacturer. Known for its robust trucks and buses, the company has a strong presence in both domestic and international markets. It is part of the Hinduja Group and has been at the forefront of India’s commercial vehicle industry for decades.
| Market Cap | CMP (as of 2nd August, 2024) | All-Time High Level | PE Ratio | 5 yr CAGR Return | ROCE |
| ₹ 73,939 | ₹252 | ₹259 | 29.6 | 31% | 15% |
In the quarter ending June 2024, the company reported a profit of Rs.551 crores as compared to Rs.584 crores in the same quarter last year, registering a loss of 5.8%.
TVS Motor Company Ltd
TVS Motor Company is a leading Indian two-wheeler manufacturer. Known for its diverse product range, including motorcycles, scooters, and mopeds, TVS has a strong domestic and international presence. The company emphasizes innovation and sustainability, with a focus on electric mobility.
| Market Cap | CMP (as of 2nd August, 2024) | All-Time High Level | PE Ratio | 5 yr CAGR Return | ROCE |
| ₹ 1,22,094 | ₹2570 | ₹2602 | 74.9 | 38% | 14.7% |
The company recorded a profit of Rs. 412 crores in the quarter ending March 2024, which was 26% higher than the profit of Rs. 336 crores recorded for the same quarter last year.
Samvardhana Motherson International Ltd
Samvardhana Motherson International Ltd is a global automotive components giant. It manufactures a wide range of products like wiring harnesses, plastic components, and rearview mirrors. With a strong global footprint, the company is a key supplier to major car manufacturers. Known for its acquisition strategy, Motherson is a significant player in the automotive industry.
| Market Cap | CMP (as of 2nd August, 2024) | All-Time High Level | PE Ratio | 5 yr CAGR Return | ROCE |
| ₹ 1,32,072 | ₹195 | ₹209 | 46.0 | 28% | 13.7% |
In the quarter ending June 2024, Samvardhana Mothersonreported a profit of Rs. 1444 crores as compared to Rs.699 crores in the same quarter last year registering a remarkable growth of 69.5%.
You may want to check other auto stocks: Hero Motocorp, Eicher Motors, Exide, Hero Motocorp, Bharat Electronics, Tata Power, etc.
Conclusion
With strong play in the EV theme, increasing automobile exports, better visibility of chip supply, and softer metal prices will benefit the auto stocks in 2024. However, you must be careful with your investments as global uncertainty remains that can impact auto stocks.
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FAQ
Are auto stocks cyclical?
Yes, auto stocks are cyclical, as households and businesses can defer purchases if they are short of cash.
Which auto stocks gained the most in 2024?
Mahindra & Mahindra, , Samvardhana Motherson International Ltd and Ashok Leyland are some of the best-performing auto stocks of 2024.
Which auto company is the leader in the 4W EV segment?
Tata Motors is the leader in the 4W EV segment in India, with over 80% market share.
I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
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