Best EV Stock? - YouTube

Hi, everyone. Welcome to today's video on today's video

I am going to discuss about the EV sector in India.

A lot is happening in this space.

There are very interesting investment opportunities in this space,

especially given the volatility right now in the market.

It there might be some really good

investment opportunities that you can explore.

So on this video, I'm going to discuss number one,

the prospects of EV sector in India right now.

Number two, I'm going to analyze two

specific stocks which you have requested me on this channel.

Which two stocks?

I will not tell you now because when you drop off, you don't watch the entire

video, understand how the things and then make a lot of loss in the stock market.

So please watch the video till the very end.

Also give a thumbs up.

Just a very quick Disclaimer.

I have created a series of small cases.

You can go and check it out.

Excellent investment opportunities in those as well.

So you can check that in the description box.

All right, so let's start our analysis

first and foremost, let us talk about the macros in the EV space right now.

Point number one. And this is a fact.

This is something that everyone is clear about.

This is something that we don't need more clarity and discussion about.

What is it?

So a very evident fact is this that right now we are sitting in a space where all

the automobiles that you see from conventional automobiles,

which is diesel and petrol based vehicles, they are going to shift to EV.

This is 100% going to happen.

It is already happening in a bunch of different countries.

Companies like Tesla have been built around this particular phenomena.

The entire political discussions are also

converging about how humans can preserve environment.

And one key change is moving towards EV.

So this sector is happening and therefore everyone seems to be bullish about it.

It's only a matter of time by when do we

get from point A to point B, point A being conventional vehicles

to point B being when all these conventional vehicles are replaced by EVs.

So to talk about the prospects of EV

market in India, I think this is a very good snippet.

Please take a look at this.

It categorically say that the EV market

in India is expected to reach $152.21 billion by 2030.

The market is expected to expand at a category of 94.4 from 2021 to 2030.

So this is definitely one of the fastest

growing industries that is out there not only in India but across the world.

So immense potential, very positive regulations around it.

Indian government is supporting it.

There are a bunch of different schemes

that you can go and read about on Wikipedia.

Everything seems to be converging on the EV sector.

So everyone, including me, is very bullish on the EV space.

So this brings us to the second question

that OK, great transition is going to happen from point A to point B being

where there is EV 100% EV adoption and point A being conventional vehicles.

So we are transitioning from point A to point B.

But how soon can we do it?

That's the simple bottom line here, because this journey from point A to point

B is filled with a lot of roadblocks that I'm going to explain just in a minute.

Now, there are five key challenges.

Let me quickly explain that because this

is very important for you to understand if you are an investor in this space.

So the first key challenge from transitioning from point A to point B

is that the price of EV infrastructure is very high.

And one key thing that can be attributed

to this fact is the high cost of electricity in India.

Now you would say EV works on battery.

How does electricity comes into the picture?

Actually, it does in the sense that, for example, if you have to manufacture

electric vehicles, then the source of that electricity should

also be renewable in nature in majority of the cases.

Otherwise, what's the point of building

EVs if it is harming the environment so it doesn't sit well with the audiences.

So therefore, the electricity should be available for low price.

Now, due to certain surge in the prices of energy, which also includes electricity

in China and other parts of the world, this momentum of EV has come down.

Therefore, you would see a lot of EV

oriented stocks taking a hit very recently, even in India,

this is the first key challenge that especially in a country like India

where the cost of energy is high compared to other parts of the world.

We need to figure out a way to bring

the electricity costs down so that more manufacturing of EV vehicles can take

place and we can become more cost effective in terms of producing these

electric vehicles and it can become a sustainable industry in itself.

Now, the second key challenge in this entire journey is that at what speed can

the infrastructure, the peripheral infrastructure can be built

to support the entire development of EV ecosystem.

Think about it in this way that if you are

manufacturing an EV electric vehicle, then that's just one part of the equation.

What do you do with that EV? You need to have proper charging stations.

You need to have proper infrastructure in terms of charging stations.

You need to have original equipment manufacturers.

You need to have a bunch of distributors.

So this entire ecosystem needs to be built

only then EV can be adopted at a massive scale in a country like India.

Now, here is a snippet of a very

interesting study that was done on this topic.

And what it simply says is the public charge points per million of population.

And if you consider countries like Norway,

then the number of charging stations per million of the population is very high.

They are already very advanced in terms of EV adoption, right.

Ev adoption.

But if you consider something like India,

so New Delhi, Chennai, Kolkata, Mumbai, Bangalore.

So you will see that our infrastructure

right now is really poor and it is not that good right now.

This is both good and bad news.

Good news, because this means that EV

industry or EV infrastructure space in India will only grow with time.

That's very good.

That's good for companies also to make money.

It is bad in the sense that the adoption

rate of EV in India is not that high to begin with.

And there are a lot of systemic challenges

that India will have to witness in its journey from point A to point B.

So this brings us to the third challenge

that an entire supply chain needs to be created.

Now, India has been trying to build its manufacturing base for decades now.

It's not as if that we have been able

to become like a leading manufacturer of intelligent manufacturing or high end

manufacturing that has not happened in India at all.

India lead from from being an agriculture

oriented economy or an agriculture economy to being a service economy.

We skipped the manufacturing part quite a bit, which is not a great telltale sign

for a country like India because it just simply shows that at a macro level,

we are not very good in terms of aggregating and creating supply chains.

This has been one of the key problems.

Hopefully, this problem will get solved.

There are both pros and cons to it.

This topic in itself is so wide that I can speak about it for an hour.

But just to cut the long story short here

that in terms of creating supply chains, we need adequate raw material,

we need to move it in terms of building a transportation infrastructure.

We need to figure out a way to ship EVs out of India.

Also, because if some company in India has to become a global EV manufacturer,

be it from an OEM batteries, other car component space to becoming

a leading brand in EV cars, we need to have that global supply chain

ready where we can leverage India and start shipping out that product.

So we are not at that scale, not because of an EV related issue here,

but generally because of the fact that we are not that well integrated.

This process is changing, but this will take time.

The fourth key challenge that we have in the EV industry are the vested interest.

Now, what do I mean by vested interest?

Now, there are so many big players.

I will not name them.

You can get them in the comment box.

Which players am I talking about?

They are not directly into EV space

currently, but they are into conventional manufacturing space,

so they might not benefit from this entire EV revolution that might happen now.

Yes, EV revolution will happen with time.

It will definitely take place.

But Meanwhile, they will try to derail the process as much as they can and delay

it to the maximum possible extent that they can.

There are always vested interest.

If cars are already getting sold and if people have vested interest in it,

why would they want to shift to new industries, new processes,

and again try to build its brand from scratch in that new sphere.

Now the fifth and final challenge and this is the biggest challenge that I see is

in terms of pivoting the existing businesses.

Let me try to prove this point by taking

you through the example of Amara Raja batteries.

Now, if you try to understand where amara raja batteries operates,

it predominantly manufactures lead acid based batteries.

So there are different types of batteries Amara raja basically manufactures or most

of its manufacturing happens in lead acid based batteries.

Yes, they already have a bunch of existing

suppliers, distributors, very good retail network distribution network.

They are able to ramp up their revenues

and have been able to grow this company to a very large scale.

But having said this, their expertise is in lead acid based batteries.

Now what type of batteries do EV cars generally use?

So let me take you through an article

and the following energy store systems are used in HEVs, PHEVs and EVs.

So these are different battery types that can be used.

Lithium ions can be used, nickel metal,

hydrate based batteries can be used and lead acid batteries can be used.

This is where amara raja is currently existing.

Now, what is the primary issue with lead acid based batteries?

So lead acid batteries can be designed

to be high power and inexpensive, safe and reliable.

However, low specific energy,

poor cold temperature performance, short calendar and cycle life impede their use.

Advanced high power lid acid batteries are being developed, but these batteries are

only used in commercially available electric dry vehicles.

In simple terms,

what they are trying to say is that you know what lead acid based batteries are

good for EVs but highend type of lead acid based batteries.

Amara Raja is currently not into it.

It is getting into it, but it is not currently into it.

That's a second part.

If you take a look at Tesla, what type of batteries are they using?

So we get some really interesting statistics.

So here you can see the Tesla cars comes with powerful lithiumion batteries.

The batteries used in Tesla are sourced from Panasonic.

Tesla is expected to begin its India operations this year.

Very interesting point that Tesla or companies like Tesla,

which is trying to project itself as a leader in the EV manufacturing space.

It is using lithium ion batteries,

so probably the current ecosystem or the current business models of big OEM

manufacturers like Amara raja in India would need to change quite substantially

for them to benefit from this wave of EV adoption.

Now this will be a major pivot for something like Amara Raja.

It's not as if that they can very easily do it.

It also does not mean that they can't do

it right, because they already have existing suppliers, distributors, retail,

channel, sourcing, manufacturing, everything in place.

They can adopt that technology,

curate it and start producing that at a massive scale.

Would it be easy for them to do? We have to see.

But what I'm essentially getting at is this that right.

Now there is no clear winner in the EV space.

Now these points get further consolidated

and I will ask you to read this particular snippet.

This is a very important snippet.

The growing popularity of EV is prompting

the leading auto manufacturers to launch EVs in India.

For instance, in October 2019.

This is fairly recent.

Maruti Suzuki, a leader in the conventional vehicle

market, announced plans to launch EV for personal use.

Similarly, in August 2021,

Tata Motors launched Tata Tiger EV and so on and so far.

The bottom line is that if you take a look at the recently of this news,

you will clearly see that big players are coming in.

They realize the potential of this market, but everyone is a newcomer in this space.

They have to pivot their business model.

We don't know to what extent and how successfully they will be able to pivot

their business models and will become leaders in this space.

Very difficult for anyone to predict.

Therefore, it becomes very important for us to trade cautiously in this sector.

So now let me take you to the fun section where I will discuss two specific stocks

in the EV sector, which are leading names in this industry.

And let us try to see whether there are good investment opportunities here,

if we are investing how we should go about investing.

So let's first understand amara raja batteries.

Now the stock price is down by approximately 40% from its peak.

Right. So probably a great place for you to go

and start investing from that perspective, from a value buying perspective,

that the price level of the stock is definitely not expensive.

So let us take a very quick look at the numbers of Amara Raja batteries.

If we take a look at the profits, you will see that company has grown very well.

Right.

So it has almost in the last ten years from 1500 crores, we have grown to 7100

crores, almost five times growth in a matter of ten years.

Really good. Right.

So absolutely no problem.

There even profits have grown.

The company knows how to increase its sales.

The company knows how to increase its profit.

What is the problem?

As spoken in the previous section,

the primary problem is that the entire world is moving towards EV.

amara raja batteries has a major orientation towards what type of batteries.

Please go and rewind the video, watch it and comment below.

That will make me super happy.

That will help me understand that you're learning something out of the videos.

So undertaking this pivot to lithium ion batteries that might take some time.

We don't know how effectively how prominently Amara raja can do it.

Fundamentally speaking, is it a bad company?

Absolutely not. Is it available at a bad price?

Absolutely not. It is available at a good price.

It is a very good company.

But we are talking about a changing trend.

Therefore, it is very important for us

to understand whether or not this company will be able to pivot start taking small

small positions, but don't go all in and invest all your money in one go.

I made one big bucket investment in Amara Raja.

I will make another one very soon and then I will sit tight.

I will monitor the situation.

These type of stocks you should only

purchase in small small amounts because these are trend based stocks.

We don't know who the clear winner in this

particular industry is, but this also means that there is a great opportunity.

If it appears that Amara Raja is going

to become a leader in this space, then it stock will skyrocket 100%

and that is where you will make a major gain as an investor.

So therefore take small positions in an SIP format in such stocks.

That is my advice to you.

Please don't go and bucket all your investment in one go.

The second stock, which is a very talked about stock, which is of Tata Motors.

Tata Motors has given massive returns.

Here is a small snippet from an article you can go and read it.

Essentially, Tata Motors rose by 63%

in the last 21 trading days in comparison to SNP 500 index.

And why this is a very important point to understand.

The stock rose after the company announced

it will raise 1 billion in its passenger EV business from TPG rise climate.

So essentially on the announcement

that Tata Motors is going to enter the EV space, the stock became a rocket.

Okay, so let us try to understand the business slightly more fundamentally

so that we are not making any major mistake.

So let us try to first and foremost understand about Tata Motors.

Where does it make its money from right now, if you take a look at the market

share of Tata Motors, you will see that medium and heavy

commercial vehicles, for example, school bus trucks, all this stuff.

Tata Motors has 59% its market share from there.

These will become EVs right away.

I highly doubt it because these will

require even more powerful batteries and bunch of other developments.

So this is far away in the innovation timetables.

First, bicycles, rickshaws will get operationalised in EV,

then cars and other stuff and then finally trucks and heavy vehicles.

So we are quite far away and Tata Motors

has the most share right now in this particular space.

Second, commercial vehicles, even here it is doing fairly well.

Then there is light commercial vehicles, then it has pickups market share.

So essentially overall a very sound

company in terms of the market share that it has.

Now here is where the interesting part is

that if you take a look at the revenue breakup, 78% of the revenue comes

from Jaguar Land rover, which is an international subsidiary of Tata Motors.

It mostly operates in international markets.

This gets reflected in where Tata Motors is selling its products.

So it's selling most of its products in USA, China, India.

These are three major locations and very well diversified.

Right?

Tata Motors is not necessarily an India oriented play.

It is an international play which is both good and a bad thing.

Why? Good thing.

Because Tata can actually represent India

on the forefront of EV, it can become a competitor to something like Tesla.

But on the flip side,

it has to compete with companies like Tesla which are way ahead in the race,

especially in markets like China and US, where Tata Motors will find it hard

to break in and attract market share away from Tesla.

So now, very quickly,

let us take a look at the run up that has happened in the stock.

So from its bottom, the stock has gone up to approximately 57% high.

So this needs to reflect

in the performance of Tata Motors over the next two, three years at the very least.

So let us take a look at the performance

numbers so we can divide this into two parts.

One is conventional business, what tata Motors is currently doing

with the growth part of it that if they get onto this EV bandwagon,

can they generate additional sales in the next four or five years?

So let us study that.

So let's take a look at from 2010 and let's take a look at now.

Right. So since 2017, 2016, 2015.

So if we study the performance of tata Motors from 2014 onwards,

it's not as if that the sales have skyrocketed.

Right. It is approximately at that 250 level

Mark, 300 level Mark hardly any major growth in sales in percentage terms.

What about profits?

Have profits grown massively? No.

In fact, profits have come down, which is not a very healthy sign.

So at this stage when the stock has already given a run up of 55%

on the promise that it is getting into the EV space going forward.

Even if we assume that tata motors is going to become like a leading player from India

and will put up India's EV contingent on the world map.

Even if we assume that the narrative is

very far off this entire 55% drive in stock price, it is not getting any

backing from the financials of the company as of now, this is my perspective.

Again, this is not a stock buying or selling recommendation.

Please act as per your understanding.

So my bet is and this is where we will start concluding the video that if you are

looking to take positions in the EV industry, number one, play the VC game.

This is what I am also trying to do what is meant by VC games.

Vc game simply means that go and invest in 100 companies.

Even if five companies win or you have a hit rate of four or 5%,

then those five companies will offset all the loss that you have made from 95

companies because the industry is growing at a such a massive pace.

So I would rather pick a range of different companies as and when I see

more opportunities in the EV space, I will keep on informing all of you.

This is rule number one that I will follow

rule number two, I will not buy overpriced stocks, especially news driven stocks.

For me, Tata Motors right now is a news driven stock.

Number three. If I see good opportunities of value

buying, I will go and purchase some of that stock.

For example, Amara raja is a value buy

opportunity for me, so I'm investing a little bit money on that.

This is my perspective. Let me know.

What did you think about? The video gave it a thumbs up.

Share it with your friends, and I will see you the next time.

Bye.