Top 10 Automobile Stocks in India

Top 10 Automobile Stocks in India: Automobile stocks are one of India’s best performing industries. The car industry in India is one of the fastest expanding. In India, you may discover a vast variety of vehicles, including automobiles, motorcycles, scooters, and even tractors.

The auto sector is predicted to grow at a 7% CAGR over the next several years as a result of numerous reasons such as rising disposable income, robust demand for automobiles and trucks, and increased government attention on infrastructure development.

Top 10 Automobile Stocks in India

About Indian Automobile Industry

The car industry accounts for around 50% of India’s manufacturing GDP, 26% of industry GDP, and 7.1% of total GDP. Many other industries rely on the automotive and auto component business, including steel, iron, rubber, oil, glass, and so on. The automobile industry accounts for around 15% of overall tax receipts in the country and directly and indirectly employs 3.2 million people. This demonstrates why the car industry is critical to the health of the economy.

India is the world’s fourth largest car market by volume, after only China, the United States, and Japan. Car penetration in India is now 28 per 1000 population, compared to 180 in China and over 800 in the United States, indicating a large runway for the industry in the long term. Because of its young and increasing middle class population, the two-wheeler category leads the Indian vehicle industry in terms of volume. In FY21, it accounted for 77.21% of total car sales volumes. Small and mid-sized automobiles led the passenger car category, which accounted for 15.62% of volume.

The Indian car industry benefits from a variety of variables, including the availability of low-cost trained labour, strong R&D facilities, and low-cost steel manufacturing. The sector also offers excellent potential for investment as well as direct and indirect employment for both skilled and unskilled labour. Original equipment manufacturers are directly responsible for the auto ancillary and tyre sectors (OEMs). OEMs or the replacement market drive the majority of demand for these industries.

Furthermore, the adoption of the voluntary car scrappage programme in Budget 2021 gives promise for the auto sector. Private cars over the age of 20 and commercial vehicles over the age of 15 are required to undertake a fitness test under the programme. A green tax fee at the time of fitness renewal will also disincentivize the usage of older cars. Overall, the automobile industry has a promising long-term future.

What are current trends in Automobile Industry?

GST has had a good influence on this sector since it has decreased the industry’s total cost structure. Aside from that, several efforts and projects are being undertaken by industry and the government to provide the necessary infrastructure for electric cars in the country. To encourage people to replace their old vehicles with new ones, the government is offering discounts and tax breaks through the voluntary vehicle fleet modernization programme (V-VMP). India is also seeking to cut its carbon emissions, which would encourage the use of electric vehicles.

5 Key Points before buying Automobile Stocks in India

The car business is very cyclical, which implies that during an economic boom, vehicle manufacturers may raise their volumes at a rapid pace, but volumes decrease during an economic depression. This is because, unlike critical costs, discretionary spending are simpler to remove from a consumer’s budget during difficult circumstances. Before investing in vehicle stocks, keep in mind the industry’s cyclical nature and avoid being caught at the extreme end of the cycle. Investors can also consider how firms cope with cyclicality and decrease volatility. They strive to reduce expenses during downturns while increasing income during upturns.

Investors can check for the debt to equity ratio among the financial ratios. As a capital-intensive business, investors should look for companies with lower debt-to-equity ratios than the industry average. The inventory turnover ratio is another significant statistic to examine in this industry. This ratio indicates how frequently the firm can sell off its inventory in a given year. The greater ratio should be preferred by the investor since it demonstrates how effectively the firm manages its inventory.

Aside from that, investors should search for vehicle stocks that are fundamentally solid, have robust balance sheets, an established track record, and capable management. Companies should have a clear path to growth and the capacity to recover quickly from downturns.

1 – Company’s Financial Health

Companies with excessive debt should be avoided. If a corporation has too much debt on its records, it may be unable to repay what it owes when its loans or bonds default. This might lead the stock price to plummet drastically, leaving investors with nothing but worthless shares in a bankrupt firm.

2 – Check Out their Cash Flow Situation

Before purchasing any stock, ensure that it has adequate cash flow to last till it can turn a profit and resume dividend payments! If they don’t have enough cash flow coming in every month, they won’t be able to pay off any obligations anytime soon, which lead to problems might down the future if things don’t improve fast enough.

3 – Dealing with Cyclical Nature

Any firm working with this sort of sector must have a strategy in place to deal with the inevitable downturns. A solid firm will be able to recover from these downturns. They’ll be able to withstand the storm and emerge stronger than before. To lessen volatility in their stock price over time, they must have a sound plan for coping with these cycles.

4 – Lowering Volatility

The beta coefficient of car stocks may be used to calculate volatility using regression analysis on historical data. The lower the beta coefficient, the less volatile it will be when compared to other companies in the same sector or industry groupings such as oil & gas or telecom services, for example, while higher values indicate higher volatility levels, which may not be suitable for long-term investors who want stable returns over time without worrying about sudden drops due to external factors such as global economic slowdowns, for example. Which, if they occur at an unexpected moment, may have a substantial impact on the company’s sales volumes.

5 – Visible Growth

This implies you should seek for organisations that are open about how they want to expand in the future and how much they aim to sell each year. It is critical to consider growth visibility and the capacity to recover from downturns. You want to ensure that the organisation has a long-term growth strategy and has demonstrated the capacity to recover from adversity.

Top 10 Auto Stocks to Buy in India – List of Best Auto Shares to Buy

High return ratios, reduced debt to equity ratios, growth in wholesale and retail volumes on a quarterly and year-on-year basis, profit margins, and other factors should be considered. The model portfolio shown below covers the top stocks in the Indian car sector in which to invest. It considers the aforementioned elements, as well as additional strengths, shortcomings, and performance consistency.

Sr. No.Company NameCMP – NSE (15 Augus 2022)
1Maruti Suzuki India Ltd.Rs. 8,695.95
2Tata MotorsRs. 476.70
3Mahindra & MahindraRs. 1,264.00
4Bajaj AutoRs. 4,038.00
5Eicher Motors Ltd.Rs. 3,207.00
6Samvardhana Motherson International LtdRs. 122.80
7Hero MotoCorp Ltd.Rs. 2,758.00
8Balkrishna IndustriesRs. 2,182.00
9Ashok LeylandRs. 147.30
10Sona BLW PrecisionRs. 568.00

1 – Maruti Suzuki India Ltd.

Maruti Suzuki, a joint venture between Maruti and Suzuki, is India’s largest automobile manufacturer, accounting for more than half of all vehicles on the road. Over the years, it has built unrivalled brand equity. The firm offers a diverse product range that includes models from every market sector.

It prioritises continual process improvement, effective cost-cutting strategies, and adaptable production processes. Due to its high cash generation capacity, the firm has a stable balance sheet with no debt and a RoIC of 28%. Aside from hybrids, the automaker is concentrating on EV, CNG, ethanol, and bio-CNG engines. It also intends to deploy its first EV in 2025.

As more competitors and models compete for a piece of the expanding pie, competition in the domestic vehicle industry may heat up, resulting in price competition and reduced realisations. Given Maruti’s minimal presence in SUVs, its market share in passenger vehicles has recently fallen below 50%. However, the corporation is positioning itself to capture market share in the sector with the introduction of four SUVs in the pipeline.


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2 – Tata Motors

Tata Motors Ltd is ranked second among the finest automotive stocks in India. Tata Motors is a subsidiary of the massive Tata Group. The company was created in 1945, prior to independence. Its headquarters are located in Mumbai. Tata Motors Group is a world-class vehicle manufacturer. As a subsidiary of the prestigious Tata group, it provides the globe with a diversified range of automobiles, sport utility vehicles, trucks, buses, and defence vehicles. Through a robust worldwide network of subsidiaries, associate firms, and Joint Ventures (JVs), it has activities in India, the United Kingdom, South Korea, South Africa, China, Brazil, Austria, and Slovakia, including Jaguar Land Rover in the United Kingdom and Tata Daewoo in South Korea.

Land Rover Jaguar Ltd. Tata Motors Ltd (TML) purchased the historic British brands Jaguar and Land Rover from Ford in 2008 and combined them in 2013 to establish one undivided corporation. The company’s goal is to address the underlying difficulties that will assure JLR’s long-term prosperity. Land Rover accounted for 74% of JLR sales in FY20, with Jaguar brand cars accounting for the remaining 26%. JLR is the largest contributor to TML’s revenue, accounting for about 80% of the group’s sales in FY20.

As more competitors and models compete for a piece of the expanding pie, competition in the domestic vehicle industry may heat up, resulting in price competition and reduced realisations. Given Maruti’s minimal presence in SUVs, its market share in passenger vehicles has recently fallen below 50%. However, the corporation is positioning itself to capture market share in the sector with the introduction of four SUVs in the pipeline.

3 – Mahindra & Mahindra

Mahindra & Mahindra Ltd comes in second on the list of the top automobile business stocks. The company was founded in 1945 under the name Mahindra and Muhammad. It is a subsidiary of the Mahindra group of enterprises.

Mahindra and Mahindra has the special distinction of being India’s largest producer in particular vehicle categories. It is a major tractor manufacturer, producing approximately 4 lac tractors every year. The company’s yearly sales is Rs.44,574 crores, with a profit after tax of about Rs.4,000 crores. The market capitalization of Mahindra & Mahindra is Rs.1,06,218 crores. Its vehicle sharing cost is around Rs. 850.

4 – Bajaj Auto

Bajaj Auto is a well-known brand that ranks among India’s leading automakers. It mostly produces two-wheelers and three-wheelers.

It is the world’s leading maker of three-wheelers. Bajaj Auto is also the world’s third largest maker of two-wheelers. Apart from local sales, Bajaj Auto sells its goods to over 79 countries. It shipped 2.05 million units in the previous year alone.

The company’s yearly revenue is Rs. 27 thousand one hundred thirty-three crores, and its net earnings surpass Rs. 5,000 crores. The market capitalisation of Bajaj Auto is Rs.1,04,099 crores. Its car share price is really high, now trading about Rs. 3580.

5 – Eicher Motors Ltd.

Eicher Motors Ltd is ranked sixth among India’s leading automobile stocks. This company is the country’s oldest operating two-wheeler manufacturer. Last year, it produced and sold 609,403 bikes.

This was accomplished through the country’s more than 2000 studio stores and dealerships. It also has a strong worldwide network of over 750 retail shops in over 60 countries. It has three production plants, all of which are located near Chennai. Royal Enfield is one of the Company’s most popular brands.

The company’s yearly sales is Rs.9000 crores, with a net profit of more than Rs.20 crores. Eicher Motors’ market capitalization is Rs.74,953 crores. Its share price for motor vehicles is about Rs.2706.

6 – Motherson Sumi Systems

Motherson Sumi Systems ranks second on the list of the top ten auto stocks. This company is a specialised provider of full-system solutions to customers in the automobile industry. It is a back-end supplier for the automotive industry.

Wiring harnesses, vision systems, modules and polymers, precision metals, and solutions are among the products in its range. It has 230 production plants scattered throughout 40 nations. The company’s yearly sales is USD 8.2 billion. The market capitalization of Motherson Sumi Systems is Rs.70,723 crores. Its machine share price is currently around Rs.156.

7 – Hero MotoCorp Ltd.

Hero MotoCorp Ltd is the next best motorcycle stock to purchase on the list. Hero MotoCorp is a renowned motorcycle and scooter manufacturer.

The company also makes and sells car replacement components. In 2021, it will have manufactured and sold 100 million devices. Its domestic network includes over 270 dealers and over 9000 dealer touchpoints.

In addition to local sales, the Company sells its products to over 40 countries. It has an annual turnover of Rs. 30,800 crores and a net profit of Rs. 3000 crores.

Hero MotoCorp’s market capitalization is Rs.53,594 crores. Its motorbike shares in India are worth over Rs.2670.

8 – Balkrishna Industries

The company primarily produces tyres for various automobiles. Its principal product is a type of tyre known as Off-Highway Tires. Vehicles in the agricultural, industrial, and construction industries utilise these tyres.

In addition, the company sells its products to a number of nations. It is classified as a 4-star export house. Its yearly sales is close to Rs.6000 crores, with a profit of more than 1200 crores. The company’s market capitalization is Rs.36,998 crores. Its stock price is relatively high, hovering around Rs.1905.

9 – Ashok Leyland

Ashok Leyland Ltd is the first company to make the list of honourable mentions for heavy vehicle stocks to purchase. It produces big commercial vehicles. The company is a subsidiary of the Hinduja Group. Its headquarters are in Chennai. Trucks, defence vehicles, buses, and diesel engines are among the products in its range.

With the Make in India movement gaining traction, the Company’s product demand is projected to skyrocket. It has a market capitalization of Rs. 36,591 crores. Its share price is now at Rs.124.

10 – Sona BLW Precision

The company is a leading supplier of automotive parts and components. The year it was founded is 1995. It is a global leader in the provision of electric car parts. The product line of the company comprises starters, generators, alternators, gearboxes, couplings, and so on. India accounts for 25% of its revenue, with the remainder coming from exports to Europe and America.

Its yearly sales is Rs.1566 crores, with an after-tax profit of more than Rs.200 crores. The market capitalization of Sona BLW Precision is Rs.3915 crores. Its share price is reasonable, now trading about Rs.56.

Conclusion

If you want to invest in car stocks, make sure your broker has access to information regarding these risks so you can take proper action as necessary. Because the car sector is cyclical, its success frequently coincides with the general economy. During a recession, new automobile sales fall but demand for old cars rises. Automobile stocks are likewise very volatile since they are influenced by changing customer sentiment and industry developments. When purchasing car stocks, it is critical to diversify your portfolio with various sorts of assets. Furthermore, keep in mind that there is always the potential that an automaker could go bankrupt and default on its payments, which might mean that your funds are gone permanently if you do not have proper insurance in place.