The automobile (auto) sector is among the leading sectors in India, contributing around 49% to the country’s GDP purely considering auto manufacturing. The industry GDP stands at 26%, and the overall GDP is around 7.1%. Other key sectors, such as steel, iron, rubber, and the like, rely on automobile and auto parts for their production processes.
The auto sector also contributes 15% towards total tax collections and employs around 3.2 crore people in India. According to the 2021 statistics, the Indian auto sector is considered the fourth-largest auto market globally in terms of vehicle sales by volume, with two-wheelers being the dominant market segment. The sector is thus considered a significant growth driver for the Indian economy, with India anticipated to become one of the three leading automotive sectors worldwide by volume by 2026.
Investment in Auto Sector Stocks in India
The auto sector stocks are a good investment option. India has a huge population that relies mainly on cars and two-wheelers, in addition to public transport for commuting. As such, the sector has great potential. With online stock investing now the norm, you can easily check auto sector trends, compare prices quoted by competitor companies, and get a good bargain. However, the auto industry is highly cyclical, implying the industry functions positively during an economic boom and vice versa.
As an investor, you should look at auto sector stocks from a long-term perspective. However, the industry’s cyclical nature should be given due consideration to reduce losses when there is an economic downturn. You should also compare how companies respond to market volatility. Fundamentally strong companies are a good investment option as they come with a proven track record and financials supported by strategic management decisions.
Let us consider some key auto sector stocks in India for the long term.
Key Auto Sector Stocks in India
Based on market capitalization, the top auto stocks in India are
- Maruti Suzuki
Maruti Suzuki, a joint venture between Maruti and Suzuki, is the largest passenger car manufacturer in India. With high brand equity, Maruti Suzuki share price as of 12th June ‘22 is around Rs. 7,935. The company has regularly introduced process improvements, leading to better cost measures and flexible manufacturing methods. With strong financials, zero debt due to a strong cash flow, and a healthy dividend payout, the company’s stock is strongly placed in the auto sector.
- Tata Motors
Tata Motors share price as of 12th June ‘22 is around Rs. 428. The company has been in existence since 1945 and is going strong. Catering to diverse customer segments, the company manufactures passenger cars, trucks, sports cars, and other vehicles. Tata Motors has now forayed into the electric vehicle segment, indicating a strong growth potential for the company.
- Mahindra & Mahindra
Mahindra & Mahindra was founded in 1945 and is the largest specific vehicle segment producer in the country, including the largest tractor producer. The company anticipates significant growth, as it plans to manufacture electric vehicles. Also, with Mahindra & Mahindra share price trending around Rs. 1,036, it is a healthy stock to select.
Other key auto stocks include Bajaj Auto, Eicher Motors, HeroMotor Corp, etc., which offer good growth prospects in India.
The automotive market in India has huge potential due to new segments like electric vehicles gaining traction. You should, therefore, select auto stocks that suit your long-term investment vision.