Best Automobile Stocks

In India, the automobile sector is one of the main pillars of the economy. Over 19 million people are directly and indirectly employed by this sector, which contributes to the national GDP by approximately 7.1%. Investing in automobile stocks can be a profitable opportunity for those looking to capitalise on the growth and innovation within the automotive industry. In this blog, understand what are automobile sector stocks in India, the factors to consider before investing, and their advantages and disadvantages. 
 

What are Automobile Stocks?

The automobile sector stocks represent companies that design, manufacture, market, and sell motor cars. The automobile sector stocks represent companies that design, manufacture, market, and sell motor cars. Vehicles, such as cars, trucks, buses, motorcycles, and electric vehicles, as well as companies involved in the supply chain, such as parts manufacturers and service providers, all come under the automobile sector stocks. An investor can benefit from the growth and profitability of the automobile industry by investing in automobile stocks.
 

List of Top Auto Stocks in India

Here is the list of top automobile sector stocks in India:

Disclaimer— All the information mentioned above is accurate as of 20th June 2024. However, it is important to conduct research before making any investment decisions in these stocks.
 

Overview of Best Automobile Stocks in India

The following is an overview of all the automobile sector stocks in India:

Maruti Suzuki India Ltd

Founded in 1981, Maruti Suzuki India Ltd (formerly Maruti Udyog Ltd) is India's largest passenger car company, accounting for over 50% of the domestic car market. The Company offers a full range of cars from entry-level Maruti Alto to stylish hatchback Ritz, A-star, Swift, Wagon R, Estillo and sedans DZire, SX4 and Sports Utility Vehicle, Grand Vitara. 

• The company has its reduced and is almost debt-free
• The company has been maintaining a healthy dividend payout of 36.3%
• The stock is trading at 4.47 times its book value
• The company has a return on equity of 12.4% over the last 3 years.

Bajaj Auto Ltd

Bajaj Auto Ltd (BAL) is one of the leading two & three wheeler manufacturers in India. The company is the largest exporter of two and three-wheelers in the country. Presently, it is engaged in the development, manufacturing, and distribution of automobiles such as motorcycles, commercial vehicles, electric two-wheelers, etc., and parts thereof.

• The company is almost debt-free.
• The company has been maintaining a healthy dividend payout of 53.4%

TATA MOTORS

Established in 1945, it is a part of the Tata Group, one of India's largest conglomerates.  Tata Motors Ltd., formerly known as Tata Engineering and Locomotive Company (TELCO) is a prominent Indian multinational automotive manufacturing company headquartered in Mumbai, Maharashtra, India.

• The company has reduced debt.
• The company has delivered good profit growth of 93.1% CAGR over the last 5 years
• Stock is trading at 3.84 times its book value
• The tax rate seems low

Mahindra and Mahindra Ltd

Ghulam Mohammad and the two Mahindra brothers, KC and JC Mahindra, formed it in 1945. In 1948, it changed its name to Mahindra & Mahindra. 

• The company has been maintaining a healthy dividend payout of 19.3%
• Stock is trading at 5.42 times its book value
• Promoter holding over the last quarter has decreased to 0.73%
• Promoter holding is down 18.6%

TVS MOTORS

TVS Motor Company Ltd was incorporated in the year 1992 and is engaged in manufacturing two-wheelers and their accessories; it currently manufactures a wide range of two-wheelers and three-wheelers. 

• The company has reduced debt.
• The company has delivered good profit growth of 19.0% CAGR over the last 5 years
• The company has been maintaining a healthy dividend payout of 21.3%
• The stock is trading 17.0 times its book value
• Promoter holding fell by 7.13% over the last 3 years

MRF Ltd

MRF Ltd was incorporated in the year 1960 and is the largest company in the Indian tyre industry with a market share of 29% in FY21, also it has been adjudged as No.6 amongst the top 10 strongest brands in the country. 

• Stock is trading at 3.23 times its book value
• The company has a return on equity of 7.61% over the last 3 years.

Samvardhana Motherson International Ltd

Samvardhana Motherson International Limited is a globally diversified manufacturer and a full system solutions provider to customers in automotive and other industries. The Company is a full system solutions provider and has a diversified product portfolio which includes electrical distribution systems, and fully assembled vehicle interior and exterior modules.

• The company has been maintaining a healthy dividend payout of 27.7%
• The stock is trading at 4.84 times its book value
• Promoters holding went down by 4.43% over the last quarter
• The company reported a low return on equity of 8.51% over last 3 years

Bosch Ltd

Bosch Ltd has a presence across automotive technology, industrial technology, consumer goods and energy and building technology. It manufactures and trades in products such as diesel and gasoline fuel injection systems, automotive aftermarket products, industrial equipment, electrical power tools, security systems, and industrial and consumer energy products and solutions.

• The company has reduced its debt and is almost debt-free
• The company has been maintaining a healthy dividend payout of 64.9%
• The stock is trading at 8.08 times its book value
• The company has a low return on equity of 13.7% over the last 3 years
   

Factors to Consider Before Investing in Automobile Stocks in India

Following are the factors you need to consider before investing in automobile sector stocks in India:

Financial Health

A company's financial health is determined by its revenue growth and profit margins. Debt levels can be risky, especially in capital-intensive industries like automobiles.

Market Conditions

India's economic health directly impacts the automobile industry, and with high GDP growth, consumer spending on vehicles will rise. Consumer trends, such as the shift toward electric vehicles (EVs) and SUVs, can impact specific companies differently.

Rules and Regulations

Stay updated about subsidies, tax incentives, and regulations regarding emissions and fuel efficiency because these can influence the automobile industry. 

Understanding Market Dynamics

It is important to understand the competitive position of the company because market dynamics can be affected by the presence of established players and newcomers. Having strong brand recognition and a loyal customer base is crucial. 
 

Advantages of Investing in Automobile Stocks

The following are the advantages of investing in automobile stocks: 

Diverse Product Range

A wide range of products are offered by automakers from luxury vehicles to economical cars, resulting in reduced market risk and appealing to a variety of consumer categories. Risks are diversified across different markets because many automobile industries operate internationally and benefit from developing nations' growth. 

Technological Advancements

Continuous innovation in the automobile industry like electric vehicles (EVs), autonomous driving, and connected car technology can create new revenue streams and growth opportunities. The companies that are leading with new technologies can gain a competitive edge and capture significant market share.

Correlation of Economic Growth 

During periods of economic growth, the industry of automobiles tends to increase in demand benefitting automotive companies. Higher disposable income typically boosts Auto sales and profits, resulting in higher consumer spending on vehicles.

Dividend Income

Investing in established automobile companies can provide investors with a steady stream of income. Long-term investors may benefit from an increase in dividend payouts as companies grow and become more profitable.
 

Conclusion
In conclusion, investing in automobile sector stocks presents a great opportunity for investors who are looking for particular sector growth and innovation. There are millions of people employed in the Indian automobile industry, and it contributes significantly to the Indian GDP growth. A thorough evaluation of the market conditions, regulatory environment, financial standing, and market dynamics of the companies is essential before investing in this industry. By using a stock market app you can stay updated on the latest market trends and make informed decisions.