Despite being one of the most populated countries, most cities and towns in India are practically run by auto-rickshaws a weird contrast as it seats only 4. This is because they form one of the cheapest and accessible modes of transport thanks to Indian roads for a huge portion of the population here. The various forms in which we can see the three-wheelers on the road are either as a public mode of transportation or as a carrier of goods. In this article, we take a closer look at the three-wheeler industry in India and the Best Stocks in Three-Wheeler Industry. Keep Reading to find out!
The Indian three-wheeler industry- an overview
India is the largest producer of three-wheelers in the world. But just like some sectors of the economy, India’s three-wheeler market have been very badly impacted by the Covid-19 pandemic. There is a major structural shift in the mode of transportation from shared to personal vehicles.
India three-wheeler market is segmented based on vehicle type, fuel type (ICE), battery capacity (Electric) and region( rural and urban). Based on vehicle type, the market can be categorized into passenger carrier & load carrier. The three-wheeler market is dominated by the passenger carrier segment, followed by the load carrier segment.
Despite all the challenges of 2020, India had the fifth-largest auto market in the world. A total of 3.49 million units combined were sold in the passenger and commercial vehicles categories. It was the seventh-largest manufacturer of commercial vehicles in 2019.
Data for the past four years shows that domestic sales of three-wheelers were in FY18 at 6.36 lakh units in FY19 (7.01 lakh), in FY20 (6.37 lakh) and in FY21 (2.16 lakh). The compounded annual growth rate (CAGR) declined sharply by 30.2%. Overall, automobile export reached 4.77 million vehicles in FY20. The three-wheelers accounted for 10.5% of the total sales.
Best Stocks in Three-Wheeler Industry
Now that we have some basic understanding of the Three-Wheeler Industry and its potential let us have a look at the best stocks in Three-Wheeler Industry. They include:
Bajaj Auto Limited is an Indian multinational two-wheeler and three-wheeler manufacturing company. It manufactures motorcycles, scooters and auto rickshaws. Bajaj Auto is the world’s largest three-wheeler manufacturer and third-largest manufacturer of motorcycles. It is one of the best stocks in three-wheeler industry.
It is the world’s largest manufacturer of auto rickshaws and accounts for almost 84% of India’s three-wheeler exports. It offers an extensive product portfolio of vehicles compatible with all fuel types – Petrol, LPG, CNG, Diesel and for all categories – small, medium and big.
The company has the highest market capitalization among its competitors at Rs 95,486.78 Crore. The company has a Price to earnings ratio (P/E) of 21.86. This shows that the company is not overly valued. Adding to that, the company has zero debt. The company’s three-wheeler sales stood at 14,018 units in October 2021, up from 8,396 units retailed in October 2020.
Bajaj Auto has also started testing its first electric three-wheeler set to launch sometime in 2022. The company is also working on an electric version of the Qute quadricycle which Bajaj Auto had launched a few years ago.
Some of the popular three-wheeler models sold are Bajaj RE, Bajaj Maxima XWide, MaximaC and MaximaZ.
M&M is one of the largest vehicle manufacturers by production in India. Its subsidiary Mahindra Tractors is the largest manufacturer of tractors in the world by volume. It is a part of the Mahindra Group, an Indian conglomerate.
The retail sales of the three-wheelers of the company have increased from 526 units sold in October 2020 to 1,282 units last month. Its market share has increased from 2.34 per cent held in October 2020 to 3.28 per cent last month. The company has a high market capitalization of Rs 103,769 Cr.
Mahindra & Mahindra Ltd. has earned a net profit of Rs 2425 Crore in FY21, up from Rs 1685 in the same period the year before. The debt to equity ratio shows the ability of the company to meet its financing obligations. The ratio for FY21 is 1.43, lower than 1.56 in FY20. The decreasing trend can be attributed as a good sign. Also recently, the company’s promoter has unpledged 1.28% of their shares. Now the total pledge stands at 0.06%. The company’s PE stands at 48.70.
To foray into the EV space, M&M recently announced collaboration with Magenta, electric mobility solutions provider, to deploy 100 units of its electric three-wheeler, Treo Zor, in Bengaluru. It will be inducted into the delivery fleet of Magenta’s new e-mobility platform known as Electric Vehicle Enabled Transport (EVET).
Atul Auto manufactures three-wheelers under the brand name of ‘Atul’ also makes spare parts, components and related products. The company comes under the top 5 three-wheelers manufacturer in the world.
The company posted positive Year on Year growth for its three-wheelers which stood at 1,401 units in the past month, up from 883 units sold in October 2020. The market share also increased from 3.93 per cent to 3.59 per cent YoY. The financials of the company have positive signs like a very low debt and Zero promoters pledge.
However, even with this, the company reported a loss of rupees 10 crores in the fiscal year 2021. The reason can be the presence of the company only in the commercial vehicle sector as compared to its peers. The other reason is the effect of covid on the industry as a whole.
The company has its specific value for producing a complete range of commercial vehicles, including many fuel types such as Electric, Diesel, LPG, CNG and Petrol. The top models under this brand are Atul Shakti Cargo 3, Wheeler, GEM Cargo 3 Wheeler, Elite Cargo 3 Wheeler, Elite Plus 3 Wheeler and Gem Paxx 3 Wheeler.
TVS Motor Company (TVS) is an Indian multinational automotive company that manufactures motorcycles, scooters, and three-wheelers. It is the third-largest motorcycle company in India.
TVS Motor Co reported a YoY de-growth to the extent of 696 units in October 2021 down from 729 units retailed in October 2020. The revenue for the company in the FY21 which stood at Rs 19420 Cr, grew 3% up from 18849 Cr from the year before. The net profit was 615 Cr down from 655 Cr from the last fiscal.
The company has a high debt compared to its peers, which has significantly risen over the last five years. The debt to equity ratio of the company is concerning at 2.44. The valuation of the company also seems to be a little higher as the P/E ratio is around 46.77.
Earlier this year, the company announced an investment of Rs 1,000 crore in its EV business. It is readying a portfolio of two- and three-wheelers in the range of 5-25kW, all of which will be in the market within the next two years. CompaniesMarket Cap (₹ in Cr) Mahindra & Mahindra Limited103,769 Bajaj Auto Limited94,031 TVS Motor Company Limited32,220 Tempo Hanseat1,704 Atul Auto Limited,464 Scooters India Limited285
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Now that you have a general idea about the three-wheeler industry of India, you can take a careful decision about investing in the three-wheeler industry.
The Indian auto industry is expected to record strong growth in the coming years, post recovering from the effects of the COVID-19 pandemic. The demand for three-wheelers in our country is growing year by year. India three-wheeler market is expected to exhibit a CAGR of more than 15% by the year 2023.
Electric vehicles, especially two-wheelers and three-wheelers, are likely to witness positive sales in the upcoming year.
That’s all for this article on Best Stocks in Three-Wheeler Industry in India. Let us know in the comments what you think. Happy Investing!