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Top Auto Industry Stocks in India – Sector Market Size, Share Market, Present status, Future Prospects

  • Rudri Rawell
  • 01 Aug
  • 8 minutes

Every Indian at some point has had a dream to own a car. But the automobile sector in India is quite huge and includes many more segments rather than just being confined to cars. This industry is one of the major sectors of the economy and a huge employment generator.  The auto industry was facing a tough time even in the pre covid period for the past couple of years and the onset of covid had a major negative impact. However, the auto industry as a whole has recovered quite significantly in the post covid period. 

Given below are a few key details of the auto industry as a whole and the top stocks in this industry. 

Sector overview

  • The auto industry in India is the fourth largest in the world and accounts for approximately a 7% share of the GDP of the country. 
  • This industry is set to increase at a CAGR of 12.7% and reach about US$ 300 billion by the end of 2026. 
  • India is considered to be the top manufacturer of two-wheelers and the 4th largest car manufacturer. 

The auto industry is made up of 4 major segments namely, 

  1. Two-wheelers (motorcycles, geared and ungeared scooters)
  2. Three-wheelers
  3. Passenger vehicles (cars and utility vehicles) 
  4. Commercial vehicles (light, medium, and heavy)

Among these sectors, the two-wheelers and the passenger segment dominate the auto industry with approximately 80% and 14% of the total market share respectively. In the passenger car segment, the total sales are dominated by small and mid-sized cars. In recent years, the EV sector in the industry has seen a tremendous increase and has good growth potential in the future as well. The EV sales have shown a year-on-year increase of approximately 168% and the EV sector as a whole is expected to increase at a CAGR of 36% until 2026. The EV battery segment is also expected to increase at a CAGR of 30% in the same period. 

The auto sector in the country also enjoys a stronghold in the global heavy vehicles market as it is the largest tractor producer as well as second-largest bus manufacturer, and the third-largest heavy truck manufacturer in the world. 

Government initiatives

The government has taken many initiatives for the auto industry that will help in increasing the manufacture and sales of the industry as a whole as well as efforts towards increasing the exports. Some of the initiatives taken by the government include the following,

  1. The government had spent approximately US$117 million under the FAME-II Scheme to support the EV segment and has sanctioned more than 6000 electric buses for various state and city transportation. 
  2. The government has also launched a Vehicle Scrappage Policy that aims to gradually phase out the old polluting vehicles. This policy aims to achieve this objective in an environmentally safe manner.
  3. In September 2021, the government issued a notification relating to the PLI Scheme for the automobile industry and the auto components industry. The PLI Scheme is expected to help the sector by bringing investments of more than US$ 5.74 billion by 2026 and at the same time generate approximately 7.5 lakh jobs in the country.
  4. For the EV sector, the government has also introduced a battery swapping policy to make EVs more feasible for potential customers. 
  5. Under the Prime Minister’s Gati Shakti Plan, the Indian National Highways are set to be expanded by 25,000 km in 2022-23.
  6. The latest initiative of the government in February 2022 includes the plans to roll out Bharat NCAP. This initiative is set to introduce India’s own vehicle safety assessment program.

Investments 

The promising future of the auto industry in India has helped in attracting investments from various sources like the government, private sector as well as FDI. The permissible FDI In the auto industry is up to 100% from the automatic route. Among the total FDI investment in the country during the period of April 2020 to September 2021, approximately 5.81% was towards the auto industry. With the rising demand for the EV sector in India, it is estimated that the country will need an investment of approximately US$180 billion for vehicle production and setting up charging infrastructure by 2030. The various other investments in the auto industry are highlighted below.

  1. MoU between Electric Two-Wheeler company Ather Energy and Karnata electricity supply companies to set up 100 charging stations across the State.
  2. A strategic partnership between Tata Power and Apollo Tyres Limited to establish 150 public charging stations across the country. 
  3. An announcement by Hyundai in December 2021 to invest Rs. 4,000 crores in R&D in the country to launch 6 EVs by 2028.
  4. Viewing the growing demand in the EV segment, Indian Oil Corporation (IOC) and other public sector oil firms have announced the installation of 22,000 EV charging stations in the country over the next 3-5 years.
  5. The flow of investments in the EV segment reached new heights by increasing approximately 225% to reach US$444 million in 2021.
  6. The government also inaugurated Asia’s longest high-speed track and the fifth-largest in the world, NATRAX, in July 2021.

Future prospects

The auto industry had a brief setback in 2019 when the sector as a whole saw a plunge of approximately 19% in sales and the steepest fall was in the passenger cars segment which was up to 31%. However, the auto sector is set to increase up to approximately Rs.16 trillion to 18 trillion by 2026 and provide employment opportunities to skilled and unskilled labour as well as boost the SME industry. The glaring reality of this sector is also the fact that there is a lack of skilled manpower in the country to meet the demands of this sector. Also, the sector is facing many challenges on account of changes in regulations and emission norms (from Bharat Stage IV to Bharat Stage VI) and the rising cost to meet these changes which have led to many disruptions in the sector.

Top companies in the Auto Industry by market capitalization

After having a brief overview of the key details of the auto sector, the details of the top companies in this sector are given below. 

  1. Maruti Suzuki

The company was established as a joint venture between the Government of India and Suzuki Motors Corporation (SMC) in the year 1981 and became a subsidiary of SMC in 2002. The company is involved in the manufacture, purchase, and sale of motor vehicles and their components and parts. The key details of the company are tabled below.

CategoryDetails
Market Capitalization Rs. 2,30,835.99 crores
PE Ratio59.50
Return on Equity8.28 (March 21)
Debt Equity Ratio0.01 (March 21)
Promotor’s Holdings56.37%
Share priceRs. 7,634.75
Dividend Yield0.79%
  1. Tata Motors 

Tata Motors is a very well-known name in the auto industry and has a huge global presence. The company is part of the Tata group and offers a wide range of vehicles ranging from passenger cars, SUVs, trucks, buses, and defense vehicles. The key details of the company are tabled below.

CategoryDetails
Market Capitalization Rs. 1,54,652 crores
PE Ratio
Return on Equity-22.9 (March 21)
Debt Equity Ratio2.46 (March 21)
Promotor’s Holdings46.40%
Share priceRs. 432.85
Dividend Yield0.00%
  1. M & M 

Mahindra and Mahindra Limited is the third-largest company in terms of market capitalization. The company has its presence in many segments like 3-wheelers, 2-wheelers, passenger vehicles, commercial vehicles, tractors, and earthmovers. The key details of the company are tabled below.

CategoryDetails
Market Capitalization Rs. 1,14,466.95 crores
PE Ratio21.16
Return on Equity0.57 (March 21)
Debt Equity Ratio1.95 (March 21)
Promotor’s Holdings19.47%
Share priceRs. 921.35
Dividend Yield0.95%
  1. Bajaj Auto 

Bajaj Auto is part of the Bajaj Group and exports to 79 countries. The company has its presence in the manufacture of three-wheelers and two-wheelers. Bajaj Auto is the third largest manufacturer of motorcycles in the world and the second-largest in the country. The key details of the company are tabled below. 

CategoryDetails
Market Capitalization Rs. 1,04,881.08 crores
PE Ratio17.01
Return on Equity18.60 (March 21)
Debt Equity Ratio0.00 (March 21)
Promotor’s Holdings53.77%
Share priceRs. 3,623.45
Dividend Yield3.86%
  1. Eicher Motors 

This company was incorporated in 1982 and is part of the Eicher Group. The company is engaged in truck and bus operations, auto components as well as technical consulting services business. The key details of the company are tabled below. 

CategoryDetails
Market Capitalization Rs. 69,774.76 crores
PE Ratio43.76
Return on Equity12.37 (March 21)
Debt Equity Ratio0.01 (March 21)
Promotor’s Holdings49.21%
Share priceRs. 2,552.50
Dividend Yield0.67%

Conclusion

The auto sector of the country is one of the major sectors in the country and is a big employment generator. The various government initiatives and the influx of investments in this sector are providing a huge push in creating a big ecosystem for EVs that help the auto sector as a whole.

FAQs

What is the share of the auto sector in India’s exports?

The share of the auto sector in India’s exports is approximately 5%.

 What are the segments in the auto sector?

The various segments in the auto sector are the Two-wheelers, Three-wheelers, passenger vehicles, and commercial vehicles.

What is the share of the auto sector in the GDP of the country?

The share of the auto sector in the GDP of the country is approximately 7.1%.

What is the permissible FDI in the auto sector?

The permissible FDI in the auto sector is up to 100% through the automatic route.

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Rudri Rawell

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