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Automobile stocks is a term that’s generally used to refer to companies that design, manufacture, market and sell automobiles like two-wheelers, three-wheelers, four-wheelers, passenger cars, commercial vehicles, tractors and trucks. The term may also be used to refer to companies that design, manufacture and supply automotive parts and components for a wide range of vehicles.
Automobile stocks are cyclical stocks, meaning that their performance is closely linked with the economic cycle and consumer spending patterns. The stocks in the sector generally tend to perform well during periods of economic growth since consumers often tend to have higher disposable income. During periods of economic downturns, on the other hand, the stocks’ performance may be affected.
The Indian automobile sector has seen robust growth and transformation in the past few years. According to the Economic Survey 2023, the automobile sector contributed to about 7.1% of the country’s overall GDP and about 49% of the country’s manufacturing GDP.
The sector is also evolving very rapidly with the success of both traditional and new-age automakers in bringing electric mobility solutions to the masses. The domestic electric vehicle (EV) market is expanding so quickly that the Economic Survey 2023 predicts that the compound annual growth rate (CAGR) will touch close to 49% between 2022 and 2030.
Despite challenges like infrastructure limitations, economic fluctuations, consumer demand and stringent emission norms, the industry’s trajectory is likely to be positive in the coming years fueled primarily by innovation and adaptability.
Based on the 5-year compound annual growth rate (CAGR), the following automobile stocks emerge as lucrative investment options in 2024.
| Stock Name | 5-Year CAGR | Net Profit Margin | Debt to Equity Ratio | EBITDA Margin | PE Ratio |
| Wardwizard Innovations & Mobility Limited | 59.23% | 3.70% | 16.26 | 8.04% | 235.36 |
| Tata Motors Limited | 34.91% | 0.68% | 254.97 | 10.82% | 124.20 |
| TVS Motor Company Limited | 30.30% | 4.14% | 378.62 | 12.96% | 71.92 |
| Bajaj Auto Limited | 21.09% | 15.88% | 0.42 | 21.40% | 33.10 |
| Mahindra and Mahindra Limited | 17.09% | 8.10% | 137.51 | 19.10% | 18.83 |
Note: Details as of January 19, 2024
Before you invest in any of the top automobile stocks in India in 2024, it’s essential to get a clear picture of the financials and key ratios pertaining to these stocks. Check out a brief overview of the companies behind these stocks and the key markers of their financial performance.
Incorporated in 1982, Wardwizard Innovations & Mobility Limited is an electric vehicle manufacturer based out of Vadodara, Gujarat. The company produces a range of electric scooters and motorcycles under the brand Joy e-bike and currently has 10 models in its portfolio across four segments. Wardwizard also has the distinction of being the first-ever listed entity with its core business in the electric vehicle segment.
Key Financial Insights
Founded in 1945, Tata Motors Limited is one of India’s largest automobile manufacturers. The company’s product portfolio is very comprehensive and extends from passenger to commercial vehicles.
Of late, Tata Motors has been investing heavily in electric mobility and is currently the largest player in the electric car segment in India. In addition to manufacturing vehicles under the Tata Motors brand, the company also has two luxury car brands – Jaguar and Land Rover under its belt.
Key Financial Insights
Incorporated in 1978, TVS Motor Company Limited is the third-largest two-wheeler manufacturer in India. The company’s product portfolio includes scooters, motorcycles, mopeds, electric two-wheelers and three-wheelers.
TVS Motors is one of the few automobile manufacturers to have a strong network of more than 4,000 dealers in the country. In addition to having a strong footprint within India, the company also has a major presence in Africa, South East Asia, Latin & Central America and the Middle East.
Key Financial Insights
Established in 1945, Bajaj Auto Limited is one of the largest two-wheeler manufacturers in the country. In addition to a comprehensive scooter and two-wheeler product portfolio, the company also manufactures and sells a wide range of three-wheelers.
Bajaj Auto Limited has the unique distinction of being India’s largest motorcycle exporter and has sold over 18 million in over 70 countries. The company also has a 49.9% stake in PTW Holding AG, which is the parent company of a global motorcycle brand – KTM.
Key Financial Insights
Incorporated in 1945, Mahindra and Mahindra Limited is another major home-grown manufacturer of passenger and commercial vehicles in India. Renowned for its prowess at manufacturing Sport Utility Vehicles (SUVs), the company has recently forayed into electric mobility with success.
Mahindra and Mahindra Limited has also expanded its reach to other regions like the Asia Pacific, Europe, Africa, the Americas and the Middle East. The company also has a 60% stake in Classic Legends, an entity that manufactures motorcycles under the Jawa and Yezdi brands.
Key Financial Insights
Reading about the top automobile stocks in India might have piqued your interest in investing in a few of them. However, you should consider the following factors before you make any major financial decisions.
As the automobile sector is cyclical, you need to thoroughly assess the current economic conditions and consumer sentiment before investing in stocks from the sector. The market conditions must be conducive since they have a major effect on vehicular demand.
The regulatory landscape of the automobile industry is ever-changing. As an investor, you must always stay on top of the latest government policies, emission standards and safety regulations concerning the industry.
Thoroughly analyse each automobile company’s competitiveness by looking into its market share, brand strength and its position in the industry. Also, examine the company’s position in emerging trends like electric mobility to gauge its future growth potential.
Financial performance is a major factor that you need to account for before investing in any automobile stock. Look into the company’s financial statements in detail; pay attention to its sales figures, debt levels and cash flow to ensure that it has enough funds to carry on with its operations.
Consumer preferences are another constantly changing factor that you need to stay abreast with. Keep an eye out for major changes in consumer demand like sudden preference for fuel-efficient or environment-friendly vehicles.
The bottom line is that if you are planning to diversify your investment portfolio across different sectors this year, these automobile stocks may be worthy additions to consider. That said, ensure that you conduct your own research and analysis before making any investment decisions. Ideally, you should only proceed if these investments align with your overall financial goals.
Some of the automobile stocks that seem to be on expert watchlists include Tata Motors, Bajaj Auto, Mahindra & Mahindra and TVS. You can also conduct your own research to identify the stocks that meet your preferred investment criteria.
Before you invest in auto stocks, you need to consider factors like government policies, the auto sector’s forecast, technological advancements, the shift to EVs and of course, the financial performance of the individual companies you’re interested in.
Yes, some stocks in the Indian auto sector can be a good choice for long-term investing. Typically, stocks with strong fundamentals and a potential for growth over the long term may be worth considering in this context.
The potential shift to electric vehicles (EVs) is a crucial trend that may disrupt the auto sector in the near future. Additionally, you also need to look into aspects like the emergence of alternative fuel technology, shared mobility, autonomous driving technology and the like.
The main ancillary sectors for the automobile industry include auto component manufacturing, tyre manufacturing, battery production, steel and plastics supply, software development and electronics.
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