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What are some big players in batteries whose stocks can be accumulated now

Here is my view on battery stocks in India.

Since you are looking to buy battery stocks, you are betting on the future of EVs. And there is a grave misconception going on in India. That Exide and Amara Raja will benefit from EVs as they are big manufactures of batteries. But this is wrong, these two stocks will be penny stocks if and when EVs become mainstream.

Firstly both Exide and Amara Raja are lead acid battery makes which is a very old technology compared to Lithium battery which is used in EVs.

There will be some who will say that these battery makers will make new plants to make Lithium batteries. But this is also not true. First Lithium battery will require capex which is not feasible by these smallcaps companies.

Secondly most manufactures will eventually make their own batteries for EVs(Tesla makes their own battery, Toyota Japan is also making their own battery plant). Since battery and electric motor are two most expensive and critical parts of an EV why would these manufactures source them from others. Right now ICE vehicles require a very small battery which is used for Ignition and some basic Electronics inside the car. So car makers source them from Exide and Amara Raja because it is a low cost item. Which will not be the case with EVs. No car maker would like to depend on a third party OEM for the most critical and expensive component of their cars. You might have heard that Amara Raja’s key technology supplier Johnson Controls sold their significant stake in the company to Amara Raja’s founder family in earlier 2019, they did this because they know the fate of this company.

Now from what I’ve learned so far is that

Suzuki Japan the parent company of Maruti is making a battery manufacturing plant in Gujarat. Since we cannot buy the stock of Suzuki Japan we will only have one option Maruti Suzuki.

While in case of Tata Motors they have assigned Tata Chemicals to manufactures Lithium batteries for future Tata and Jaguar cars. So IMHO Tata Chemicals can benefit big if this news turns out to be true.

Next M&M, I asked them about their battery plans in their AGM few months back. They told me that they will currently source battery from LG Chemicals. And right have no plans to make Lithium batteries.

Ashok Leyland has a subsidiary which manufactures electric buses in UK, about their battery plans I have no idea.

Than their is a smallcaps company called Himadri Speciality Chemicals, they claim to make some critical component required in Lithium batteries. Honestly I don’t have any knowledge what that component is and how profitable it is for them.

Others Auto companies are not listed companies in India.

So I can conclude that Exide and Amara Raja are negative as far as Lithium battery is concerned. Next Tata Chemicals is the only viable Lithium stock in Indian market but only if plans doesn’t change in future.

Lastly since you are bullish on EVs you can also look at a few Auto Ancillary stocks which will benefit from EVs, Bosch is one company that has most Technologies in EV space and has a significant head start compared to others. Motherson Sumi will also benefit from EVs as they are mostly into harnesses and electric components which would get more premium in EVs fetching them better margins. Tyre stocks can also be accumulated on corrections I like Good Year, Apollo, Ceat in the same order. Tyre stocks will be least affected by EVs.

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