Auto Stocks in India

What are auto stocks?

Auto stocks are listed companies that make vehicles or the parts that go into them. The sector has two halves: the automobile makers (OEMs, or original equipment manufacturers) that build passenger cars, two-wheelers, three-wheelers, tractors and commercial vehicles, and the auto ancillary or auto component companies that supply them with engines, gears, tyres, batteries, lighting, seats and electronics.

India is one of the world's largest markets for two-wheelers and passenger vehicles, so the sector is a direct window into how much households and businesses are spending. Component makers also sell to the replacement market and export to global carmakers, which gives many of them a steadier stream of revenue than the vehicle makers.

What moves auto stocks

Monthly sales

Vehicle makers report the number of units they sold every month, usually on the first day of the next month. These numbers move the shares more than almost anything else between quarterly results.

Consumer demand and rural incomes

Two-wheeler and tractor sales depend heavily on rural India, so a good monsoon and higher farm incomes tend to lift them. Car sales follow urban incomes, consumer confidence and new model launches.

Interest rates

Most vehicles are bought on loans. When interest rates fall, EMIs get cheaper and demand usually improves; when they rise, the opposite happens.

Raw material costs

Steel, aluminium, rubber and precious metals are big costs. When commodity prices rise faster than companies can raise vehicle prices, profit margins shrink.

Electric vehicles and regulation

Emission norms such as BS-VI, safety rules and the shift to electric vehicles change what companies have to spend on and which products sell. Government incentives, including production-linked incentive (PLI) schemes, also shape the sector.

What to check before investing in auto stocks

Volume growth and market share

Is the company selling more units than last year, and is it gaining or losing share against rivals in its segments?

EBITDA margin

EBITDA is earnings before interest, tax, depreciation and amortisation - a measure of operating profit. The margin (EBITDA divided by revenue) shows how well the company handles cost pressure.

Product mix

Premium models, SUVs and exports usually earn more per vehicle than entry-level models. A shift in mix can raise profits even when volumes are flat.

Customer concentration (for component makers)

A component maker that depends on one or two vehicle makers for most of its sales is exposed to their fortunes. A broad customer base, replacement sales and exports spread that risk.

Risks to know

The auto sector is cyclical: sales rise and fall with the economy, so earnings can swing sharply from one year to the next. A company that is slow to adapt to electric vehicles can lose share, while one that invests heavily too early can burn cash. Supply problems - such as the semiconductor shortage that held back vehicle production after 2020 - can hit output even when demand is strong.

How to invest in auto stocks

1. 1

   Open a demat and trading account

   A demat account holds your shares electronically; a trading account lets you buy and sell them. With GoPocket you can open both online in a few minutes with your PAN, Aadhaar and bank details.

2. 2

   Add money

   Transfer funds to your trading account by UPI or net banking.

3. 3

   Research the company

   Pick a company from the list above and open its page to see its share price chart, financial performance and shareholding before you decide. Compare it with other auto stocks on business quality, debt, growth and valuation.

4. 4

   Place your order

   Search for the stock in the GoPocket app or web platform, choose the quantity, and place a delivery order to hold the shares in your demat account. A limit order lets you set the most you are willing to pay.

5. 5

   Track and review

   Follow the company's quarterly results and news. Spreading your money across several companies and sectors reduces the damage if one investment goes wrong.

Terms used on this page

LTP

Last traded price - the price at which the stock last changed hands. The figure below it is the change from the previous day's close.

Market cap

Market capitalisation: share price multiplied by the number of shares issued. It measures a company's size in the market and is shown here in rupees crore (1 crore = 1,00,00,000).

Cap band

Whether a company is large, mid, small or micro cap, based on its market capitalisation. Larger companies tend to be less volatile.

Sector and industry

The NSE groups companies into broad sectors (such as Financial Services) and narrower industries within them (such as Banks), based on what they mainly do.

Trading graph

How the share price has moved during the latest trading session, from the 9:15 open to the 3:30 close. The dashed line is the previous day's closing price.