Top 5 Automobile Stocks to Buy

The Indian auto industry has been experiencing exponential growth post-pandemic and is  

expected to reach Rs. 16 trillion by 2026. India’s annual production of automobiles has already surpassed 22 million in FY22.

This growth has been driven by the middle class, which has been entering the two-wheelers segment, especially in Tier-II and III cities. The Indian auto industry has also been experiencing growth due to increased exports.

The Indian passenger car market is projected to grow at a 9% CAGR between 2022-27 and reach a value of US$ 54.84 billion by 2027. Furthermore, the electric vehicle (EV) market is estimated to reach Rs. 50,000 crores by 2025.

With such bright prospects on the anvil, it makes sense to allocate a portion of your portfolio to automobile sector stocks. Here’s a list of the best automobile stocks you can consider investing in.

List of Best Automobile Stocks

Here is an list of the best automobile stocks that you can buy along with an analysis of these automobiles’ share prices.

As of 20/09/2022

Maruti Suzuki India

Formerly known as Maruti Udyog, Maruti Suzuki, now taken over by the Japanese automaker, is engaged in the business of manufacturing automobiles. It was founded in 1981 and was government-owned till 2003. Today, Maruti holds a 44% share in the Indian passenger car market.

Maruti has a dominant hold in the entry-level segment and plans on regaining its lost market share by launching compact and mid-size SUVs. It also has plans to launch EVs in 2025. With the commodity prices simmering down, the gross margins of Maruti Suzuki are expected to improve further. 

Maruti hit a new 52-week high price of Rs. 9,430 on September 20, gaining 4%. The Maruti Suzuki share price is up 25% YTD and has accelerated 33% in the last year.

Track the share price of Maruti Suzuki on Angel One!

Eicher Motors

The parent company of Royal Enfield, Eicher Motors, enjoys a near monopoly in middleweight motorcycles. It makes its iconic motorcycles in Chennai and exports them globally. It also has a JV with the Volvo group, which is engaged in manufacturing fuel-efficient trucks and buses. 

Eicher Motors has been focusing on expanding its presence in Tier-II cities. Its growth is further being supported through its high-margin accessories business. The Eicher Motors share price touched a new 52-week high of Rs. 3,738.25 on September 20, thus joining the Rs. 1 trillion market cap club. This share has returned over 107% in the past 3 years and has soared almost 44% on a YTD basis.

Are you interested in investing in Eicher Motors? Check the share price of Eicher Motors on Angel One now.

Tata Motors

Established in 1945, Tata Motors, erstwhile TELCO, is a leading global automobile manufacturing company worth Rs. 1.5 lakh crores. It has an extensive portfolio of cars, SUVs, trucks, buses, and defence vehicles. Tata Motors’ principal subsidiaries include Jaguar Land Rover and Tata Daewoo. 

Tata Motors plans to go debt-free by 2024. It has also been consistently investing in the sunrise EV segment. Additionally, Tata Motors gained domestic PV market share in Q1FY23. The Tata Motors share price surged 45% and 226% in the past year and 3-year period, respectively.

Check out the share price of Tata Motors on Angel One before investing.

Mahindra & Mahindra (M&M)

Headquartered in Mumbai and founded in 1945, M&M, an automobile manufacturing company recently zipped past Tata Motors to become India’s 2nd most-valued automaker. The M&M share price touched an all-time high price of Rs. 1,338 last week.

M&M’s business is spread across various segments, including farm equipment, utility vehicles, IT, and financial services in India. It is the world’s largest tractor company based on volume. It plans to launch 23 new products by 2026. The M&M share price has gained nearly 55% YTD and has returned over 129% in the last 3 years. 

Want to invest in M&M? Check out the share price of M&M on Angel One.

Hero Motocorp

Formerly popular as Hero Honda, Hero MotoCorp is a leading Indian manufacturer of two-wheelers with a 37% market share, headquartered in New Delhi. It registered a robust double-digit growth of 35.7% in Q1FY23, where it sold 13.90 lakh units.

The Hero Motocorp share price is expected to improve with the softening of commodity prices, improvement in chip supply shortages, and pick-up in auto demand. This share returned 13% in 2022.

Keep an eye out on the share price of Hero Motocorp on Angel One. 

Factors to Consider Before Investing in Automobile Stocks

With the Indian auto industry on the road to recovery and with the festival season approaching, it makes sense to invest in automobile stocks, provided you have accounted for the following factors.

Cyclicality

The automobile sector is cyclical and ebbs and flows as per the economy’s growth cycle. So, avoid companies which have been unsuccessful at navigating downturns.

Growth Potential

With the world coming together to fight climate change, emphasis is being laid on developing electric engines to cut down on emissions. Avoid investing in auto companies which do not have a concrete plan in place for upgrading to the EV segment.

Financial Position

Equity investments, irrespective of the sector, should be made in companies with strong fundamentals. A company with a high debt burden or poor cash flow management should be avoided.

Conclusion

While the automotive sector is expected to see growth sprouts on the back of the festive season and EV product launches, it also faces headwinds from the soaring inflation rates, which could result in further interest rate hikes. This could make getting loans an expensive exercise, thus reducing demand for automobiles.

Hence, before investing in automobile shares, conduct adequate research and keep an eye out for any adverse news which could materially affect an automobile’s share price. And don’t forget to open your Demat account with Angel One for a smoother trading experience.

Also, India’s biggest automobile IPO of 2024! Hyundai’s IPO will open from October 15 to 17, 2024. Don’t miss your chance to be part of the automobile industry!

Disclaimer: This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory.