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Why am I investing in the Electric Vehicle (EV) Sector in India? | Fundamental analysis #EVStocks - YouTube
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[0]
And again, if you're a novice investor,
[1]
don't put all your money in one stock
because this is a highly volatile space
[5]
right now and this short term pain
will happen in this industry.
[8]
So don't get scared.
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Hello, everyone.
Welcome to today's video.
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So let me start today's video
by asking you a very simple question.
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The question is that by how much do you
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think FAANG, FAANG stocks have grown
in the last five years? So FAANG is
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Facebook, Amazon,
Apple, Netflix, Google.
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So by how much have these stocks
grown in the last five years?
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So type out your answers
in the comments section.
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And here is some data for you.
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So Facebook and Amazon have
seen an increase of 185%
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and 500% respectively.
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Apple and Alphabet have grown
by approximately 175 percent and Netflix
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has grown by 450%.
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So almost roughly speaking,
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in the last five years,
these stocks have roughly tripled.
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Now, you might say Akshat these are
American companies, why should be bother?
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Even if you check the data for technology
companies based in India, for example,
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TCS is one of the biggest
tech firms in India.
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It has grown from twelve hundred
and thirty levels,
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from approximately twelve hundred levels
five years ago to approximately three
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thousand three hundred levels
as we are sitting today.
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So in five years, again, the Indian
technology stocks have also tripled.
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So now why am I telling you this story?
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The story has a very important lesson.
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The lesson being that there are certain
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sectors which exhibit really
fast growth in a decade's time.
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So last decade it was tech,
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maybe this decade also it will be tech,
but there is additional one sector,
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which I'm betting quite heavily on, which
is called as EV, or electric vehicle sector.
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So on this video,
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I'm going to cover the ins and outs
of EV sector and I'm going to show you
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how to make investments in the EV space
by showing my Smallcase and showing
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my individual stock picking
strategies as well.
[117]
So stay tuned on this video
and please like and comment. Please
[120]
like and comment this video,
because it would indicate to me that you
[123]
really enjoy this type of case study content
and I would continue to shoot it.
[127]
So let me cover three specific
points on this video.
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First, let me walk you through the growth
potential of electric vehicles industry.
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Second, let me cover the scope of this
industry in India and what is the primary
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value chain, where the value
will be unlocked?
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Finally, let me show you the investment
scope of this industry,
[145]
and I will share my portfolio of what
specific firms have I invested
[149]
in EV the sector and which firms will
I be investing in going forward.
[153]
So in order to assess the growth potential
of the EV industry in general,
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all across the world, you need
to consider two specific points.
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So the first point is that are
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the external conditions conducive
for EV sector to grow?
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What do I mean by that?
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For example,
you might have heard that back in the 70s
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when the development of computer happened,
the cost used to be very high.
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One MB of RAM used to cost
insane amount of money.
[177]
But as the industry progressed, the cost
of those factors started going down.
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Silicon Valley developed. A lot
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of investment started pouring
into tech and computer based companies.
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A bunch of positive external developments
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happened that really propelled
the technology and the software industry.
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So similarly, we are sitting now in 2020s.
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You need to ask yourself the question
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that, hey, do I see this EV industry getting
conducive help from external factors?
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There are a lot of positive
external factors at play here.
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First and foremost,
a majority of the corporations are
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becoming more socially
and sustainability focused.
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They are following
something called ESG norms.
[214]
Very recently, when Elon Musk dumped
Bitcoins, he gave the criterion that, hey,
[219]
these bitcoins extract a lot of energy
and therefore I am dumping bitcoins
[223]
because in the mining of bitcoins,
lot of energy spent and I don't want
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to get into all these
environmental destruction.
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So he went out of Bitcoin. His reason
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for ditching bitcoins
is up for debate.
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But the point that I'm trying
to enforce here is very simple.
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Majority of these Fortune 500 companies
[238]
are becoming ESG, which is environmental,
social and governance focus.
[242]
So they want to invest in initiatives that
promote the sustainability of the world.
[247]
Now, we know for a fact that nonrenewable
[249]
sources of energy,
for example, oil, wood, etc.
[252]
, these are not sustainable.
[253]
They cause a lot of damage
to the environment.
[256]
So companies, governments,
even multilateral organizations are
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pouring in a lot of resources in terms
of exploring alternate sources of energy
[264]
and promoting sources
that do not cause pollution.
[266]
So from this end, there is a lot of push
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in terms of developing
the entire mobility system.
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Now, you might be observing
examples of this happening already.
[274]
For example, you might have recently seen,
[276]
even in your city that e-rickshaws
have become very big.
[279]
And this is a very,
very recent development.
[281]
This has happened in the last five
[282]
to seven years that the e-rickshaw industry in India
has started to become really big.
[286]
It has started replacing a lot
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of conventional sources of transportation
like Tempos, autos, etc.
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And now people are adopting e-rickshaws.
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That's a step in a positive direction,
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which you and I are clearly
witnessing. Now even,
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speaking from a government's point
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of view, even the government policies
are somewhat promoting that EV market.
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For example,
if you take a look at European Union, EU,
[307]
so what they have started doing is
that they have started levying a lot
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of taxes on conventional
sources of transportation.
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If your vehicle is extremely heavy,
then you will have to levy heavy taxes.
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Now I will link a study here and I will
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flash that part of the study
to support this argument.
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So please take a look.
Now, whether we look at it from a trend
[325]
perspective, that hey whether oil
usage is going up or down.
[328]
If you look at it from a government's push
[330]
perspective, whether they are supporting
EV policies or not or whether we look
[333]
at it from a corporate point of view,
whether they are supporting ESG norms or not,
[337]
the point is that EV industry is getting
[340]
a lot of external support,
which forms the right set of conditions
[343]
for it to grow. In order to clearly
assess the potential of the industry,
[347]
it is also very important to assess
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whether or not EV industry
can grow profitably.
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This is a very important point because
there are a lot of products and industry
[356]
where the growth happens, but the growth
does not happen in a profitable manner.
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Would EV industry fall
in such a category?
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My answer is no, and I will
give you the reasons why.
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So there is a mass adoption of electric
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vehicles, be it electric bikes or
electric scooters or electric cars.
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It is already happening at scale.
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Now, here is a study that was done
by the NitiAayog,
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which published a report called India's
Electronic Mobility Transformation.
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So it estimates that by the year 2030,
the EV sales penetration in India would stand
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at 70 percent for commercial cars,
30 percent for private cars,
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40 percent for buses and 80 percent
for two and three wheelers.
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So this is a very important estimate
that has been given by the NitiAayog.
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Very important for you to consider,
because this really depicts
[401]
that in which direction people
are going to buy their vehicles.
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Are they going to continue buying their
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traditional vehicles or would they shift
to these new age vehicles which are as EV?
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So it is clearly happening.
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That shift is clearly happening.
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And NitiAyog has
categorically pinned that down.
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There was another study that was published
by Auto News in Europe,
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and it categorically says that,
by the mid-decade,
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EV sector profitability will match
internal combustion engine based vehicles.
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Now, this is a very big statement to make
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because so far for the last hundred
and twenty years,
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we have been using conventional sources
of energy to drive automobiles as we are seeing.
[437]
Even now, right now,
the profitability over these 120 years
[441]
since the Ford invention happened,
it had improved in these IC engine,
[446]
internal combustion engine based vehicles,
which are traditional vehicles.
[449]
The profitability has gone up because
of the fact that engine efficiency
[452]
improved, manufacturing
efficiency improved,
[454]
bunch of other efficiencies came in.
[456]
So the same lifecycle will
pay out for EVs also.
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Now, this is a very big statement
[461]
that by the mid-decade,
the profitability of EVs will match
[465]
that of internal combustion
engine based vehicles.
[468]
This is a very big statement because going
forward by the year 2025 onwards,
[472]
it is only a matter of time that EVs will
become more and more cost efficient.
[476]
Even their battery lives will improve.
[478]
New developments will happen.
[479]
New R&D budgets will come
[480]
in. So a bunch of developments
will keep on happening.
[483]
And people or industries who are
participating in the EV industries will
[487]
actually make massive amount
of profits going forward.
[490]
Now, since the growth potential
of EV industry is massive,
[493]
people are going to buy EVs and companies
[495]
are going to get more and more efficient
in terms of driving their profitability.
[499]
So it is just a matter of time that India
will benefit from this revolution.
[503]
So let us analyze the EV industry in India,
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where does the industry stand
and where can it go from here on?
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So first and foremost,
you can categorize the EV industry in India
[512]
into three different buckets.
First will be brands that actually sell,
[515]
which are putting their logo
and stickers on different things.
[518]
For example, you have two
wheelers and four wheelers.
[520]
So which of these companies and brands are
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supporting and giving
you the final product?
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So that is the first category.
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The second category would be called as
OEM or original equipment manufacturers.
[530]
So in order to build an electronic
vehicle, what do you need?
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You need a bunch of things.
[534]
You need an engine,
you need a steering wheel.
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You need a bunch of different things.
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So OEMs, original equipment manufacturers
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are the ones who actually build these
individual parts,
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which are eventually assembled by someone
else and then brands put their stickers and sell it.
[548]
So this second category is called as OEMS.
And third is the overall infrastructure.
[552]
So once you have an EV in your hands,
what are you going to do with it?
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You have to go to its charging
port to get the charging done.
[558]
You need some kind of permit.
[559]
So there is an entire
infrastructure around it.
[562]
So this is where you can
bifurcate the EV industry.
[564]
So three parts, one is brands,
[566]
which eventually sell you stuff, OEMs who
actually build the individual components,
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and third and finally,
we have the entire infrastructure
[573]
in which government,
private start ups participate to build this
[577]
entire infrastructure which supports
the EV industry in totality.
[580]
So let's go through each of these
points one by one very quickly.
[583]
Now, if you look at major brands in India,
there are companies like Bajaj,
[586]
there are companies like
Hero Moto Corp.
[588]
These are brands that are trying
[589]
to participate in the EV industry
and launching their own set of vehicles.
[594]
Now, there is no point in taking a look
at the current portfolio because as we
[597]
speak, these companies are
coming up with newer and newer
[600]
products, but we need to be aware
that which companies are in the two wheeler
[604]
and four wheeler manufacturing
space when it comes to EVs.
[606]
So these could be literally any company.
[608]
So Tata is also doing it.
[609]
Bajaj is also doing it,
Maruti is also getting into the game.
[612]
Mahindra and Mahindra is also doing it.
[615]
Now, these
all the traditional players who used
[617]
to manufacture traditional cars and bikes
are now getting into the EV space.
[621]
Now, many international players,
[622]
for example, Tesla recently
entered the Indian market.
[625]
Tesla is already selling high end EV cars
in us, so it might enter the space.
[630]
And similarly, other international big
[632]
manufacturers and big brands might come
into the Indian market and would try to dominate
[636]
the space because this is
a super lucrative space.
[639]
Now, the second component,
[640]
which is called as OEM, original
equipment manufacturers.
[643]
This is where the major
game lies for the EV players.
[646]
Now, there was a study that was done
[647]
by Center for Energy Finance, and
there are some important considerations.
[651]
And I will flash this
table in front of you.
[653]
It's written very minutely, so I'll
read out the important points from it.
[657]
It will help you understand more about
the OEM manufacturers in India,
[660]
what are their profit margins and where
it is within this OEM bucket,
[664]
there is major scope for improvement,
development and growth.
[667]
So let's look at the EV component
[668]
manufacturing sector
in slightly more detail.
[671]
Now, first and foremost,
if you need to get an IEV done, be it a bike,
[675]
be it a car, you need
a bunch of components.
[677]
So the first component that you generally
need is called as a battery pack.
[680]
Now, battery is one of the most critical
components for any EV,
[684]
and it costs approximately 40
percent of the entire amount.
[688]
So this is a big cost.
[689]
This also means that the selling price
[691]
of this particular component
would be very high.
[693]
And if you are actually making investments
[695]
in battery companies in India,
it might be a good trade.
[698]
So I'll talk about this in Section three,
please watch it till the end.
[700]
But an important point to note down is
[702]
that battery is one of the key
components in India.
[704]
There are a lot of problems when it comes
[706]
to Indian battery manufacturers,
for example.
[709]
They are not doing highend,
efficient manufacturing,
[711]
bunch of regulatory related issues, bunch
of issues around procuring raw materials.
[715]
Those issues are there.
[717]
I'm not saying that those issues will not
be there, but this is a growing industry.
[720]
So I am hopeful that the government,
[722]
in conjunction with the private sector,
will be able to sort out these issues.
[726]
But the important point to note is
that the battery segment of EV is very,
[730]
very important because it contributes
40 percent of the entire cost.
[733]
Then we look at electronic motors,
[735]
power electronics, vehicle integration,
which ranges from 10 to 20 percent,
[739]
and these are other important components
that need to be kept in mind.
[742]
Now, the key takeaway from this
segment is very, very simple.
[745]
Now, if you look at the OEM component
[747]
manufacturing, then this needs to actually
play up for the EV industry to become big.
[752]
Because what happens is this, for example,
let's say that if you are talking about
[755]
a traditional vehicle, let's assume that
we are trying to build a Ferrari in India.
[760]
Now, why can't we build
a Ferrari in India?
[762]
The reason is very simple that the OEM
for Ferrari, the engine is designed
[766]
in Italy, now some other components
are designed in Germany.
[768]
Now if these components keep on getting
[770]
designed in Europe and bring those
components to India and manufacture it.
[774]
There will be a lot of import duty.
[776]
There will be a lot
of skilled manpower required.
[779]
There will be a bunch of other issues.
Right.
[781]
So the bottom line is that since EV is
[783]
such a big opportunity for the governments,
the government are poring in insane amount
[788]
of money in terms of building up this
industry. When I say that the government is
[791]
looking to build up this industry,
where do you think that they would start?
[795]
They would start by supporting the OEMs.
[797]
Now, here is a very important research
statement that I want to read out.
[800]
So it says that there are multiple
challenges in terms of manufacturing
[804]
batteries and there is a national
mission on this front.
[807]
It is called a national mission
[808]
on transformative mobility
and battery storage.
[811]
So even the government realizes that, hey,
[813]
we need to build up our OEM system
in India in order to create
[817]
and structure the EV industry. Now
in order to support OEMs,
[820]
what do we need?
We need to get really efficient in terms of
[823]
building up batteries. Now to support that
they have started a national mission.
[827]
Now, this is a step in the right direction
and it shows there will be a lot
[830]
of investments that will be made
by the government going forward.
[833]
Now, what else is government doing? Now
in order to support battery production,
[836]
government is also running production linked
incentive scheme or ACC battering storage
[841]
manufacturing, which will incentivize
domestic production units.
[844]
So all in all, government is putting
in a lot of effort in terms of building up
[848]
the OEMs and a lot of support
and investment will go to them. Now very
[852]
quickly, touching up on how the government
is building infrastructure.
[855]
Infrastructure is a very key issue when it
[857]
comes to EVs, and government at the back
end needs to develop the infrastructure,
[862]
pass on the regulation, pass on the benefits,
[864]
give a lot of incentives to people
to come and invest in the EV space.
[868]
So what is the government doing?
[869]
So if we take a look at the state
[871]
mandates, government of Karnataka has
introduced a comprehensive EV policy.
[875]
Tamil Nadu has come up with another supply
[877]
ecosystem where they are
trying to build OEMs.
[880]
There is a lot of administrative
[882]
and investor related support that has been
given by the Tamil Nadu government as well.
[886]
So government is also proactive in terms
[888]
of building the backend infrastructure,
supporting OEMs.
[891]
This industry is already growing.
[893]
So all in all,
the situation looks conducive
[896]
for accelerating the next
leg of the growth. Which brings me
[899]
to the final part of this video that, hey,
[901]
so since this industry is growing,
so tell us, where should we invest
[904]
and what are some of the key
stocks that we should look at?
[907]
So if you're looking to invest
[908]
in the EV sector, there are essentially
two ways in which you can do this.
[912]
So the first strategy is for beginners
[914]
and intermediate level users
and intermediate level investors.
[917]
So you can go to Smallcase and look for
a Small case called as electric mobility.
[922]
Now, here, if you go to the Smallcase,
[924]
you can check the stocks and weights
and you can actually look at different
[928]
OEMs, different manufacturers,
different brands, and try to see whether
[931]
or not you are satisfied with this
and make the investment.
[934]
For example, I'm personally investing
in a company called Amara Raja Battery Ltd.
[938]
I bought this stock a few days
[940]
ago and I'm running it at a loss,
I'm showing you my loss portfolio.
[943]
Now, please remember that I am
a long term investor in the EV space.
[946]
I'm keeping at least a 10 year horizon.
[948]
This loss, I'm certain will
turn into a massive profit.
[951]
So this company I've already invested in.
[953]
Now there are other battery
manufacturers that you can pick.
[956]
And again, if you are a novice investor,
[958]
don't put all your money in one stock
because this is a highly volatile space
[962]
right now and this short term pain
will happen in this industry.
[965]
So don't get scared.
A better approach is that just go invest
[968]
in this Smallcase because
they've diversified it
[970]
really, really well.
[971]
For example, what are some of the other
[973]
companies in which I have
already made an investment?
[975]
So I made an investment in Hero MOTOCORP.
[977]
Why have I made an investment
[979]
in Hero Moto Corp?
[980]
The reason is very simple,
that Hero MotoCorp is one of the leading
[983]
companies when it comes to
two wheeler manufacturing space.
[986]
So they have a massive distribution
system already in place.
[989]
And therefore I feel that when the EV market
[992]
starts to take off, Hero motocorp can
actually accelerate it's profitability.
[996]
Right.
[996]
So this is one trend based
investment that I have done.
[999]
Now,
[999]
if you look at Indian Oil Corporation Ltd
now, many of you will say that, hey,
[1003]
how is it EV? Now IOCL is actually going
to play a different role altogether.
[1007]
For example, the IOCL very recently,
[1009]
with Sun mobility, has launched
a battery swapping facility.
[1013]
Now, IOCL, as you might be aware that you
[1015]
might have seen a lot of petrol pumps
that IOCL owns and operates.
[1019]
Now, as the EV industry grows,
[1021]
it will require charging stations
it will require maintenance.
[1024]
So IOCL can get into that
business very easily.
[1027]
Therefore, I have made
investments in IOCL as well.
[1029]
So the easiest way for you,
[1030]
if you are a beginner and intermediate
user who cannot track their investment,
[1034]
is to just literally go
invest in this Small case.
[1037]
The reason is very simple again,
[1038]
that there is a rebalancing
that happens for this portfolio.
[1041]
So there will be experts who will look
[1043]
at this portfolio periodically and drop
and add some new stocks into it
[1047]
as per the market conditions.
I am a slightly advanced user,
[1050]
so I am picking individual
stocks as I have shown you.
[1053]
So the strategy B is that you can go
[1055]
and like me, you can keep on making
investments in the EV industry.
[1059]
So I hope that you enjoyed this video.
Please give it a thumbs up,
[1061]
that would indicate to me that you
enjoyed the content and you would want me
[1064]
to continue to make such
videos in the future.
[1066]
So let me know which other industry you
would want me to shoot a case study on.
[1070]
I'd be very happy to do it.
[1071]
And I will see you on the next video.
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