Best Auto Sector Stocks to Buy in 2024

India’s auto industry bounced back strongly last year after demand and sales slumped during the peak period of the COVID-19 pandemic in 2021. Total vehicle sales during 2023 recorded an overall increase of 11% from 2022, with growth visible across all segments. Retail sales of two-wheelers grew by 9.5%, three-wheelers by 58.5%, cars and SUVs by 11%, tractors by 7%, buses and trucks by 8%, according to the industry body Federation of Automobile Dealers Associations.

The industry’s outlook for the coming year is also promising. Several companies are gearing up to launch new models, consumer sentiment is likely to remain positive, fuel prices are expected to remain steady, and interest rates are projected to fall. All these factors bode well for auto companies’ topline and bottomline and, as a result, their stocks.

5 Leading NIFTY Auto Stocks to Invest

What are Auto Stocks?

Auto sector stocks refer to shares of companies that manufacture and sell scooters, motorcycles, three-wheelers, cars, SUVs, buses and trucks, as well as the components that are used in making the vehicles. These components include everything from tyres to batteries and other parts. The auto industry is one of the largest manufacturing sectors in India, and is often used as a proxy for consumer demand in the broader economy. 

Top 10 Auto Sector Stocks to Invest in India

Here is a list of the top 10 Auto sector stocks for 2024:
    1. Maruti Suzuki India Ltd
    2. Mahindra & Mahindra
    3. Tata Motors
    4. Hero MotoCorp
    5. Bajaj Auto
    6. Eicher Motors
    7. MRF
    8. Samvardhana Motherson
    9. Bosch Ltd
   10. Sona BLW Precision Forgings

Overview of Best Auto Industry Stocks to Invest in India

India has a large number of automakers and auto-parts makers, though many of those are not publicly listed. Still, there are plenty of options to choose from among the top automobile stocks that trade in India. 
Here is a list of some of the best auto stocks in India. To be sure, the list is not exhaustive and investors should do their own research and due diligence before investing in any stock.

1. Maruti Suzuki India Ltd: Maruti is the local unit of Japan’s Suzuki Motor Corp. It began operating about 40 years ago and is now India’s biggest carmaker by number of vehicles sold. The company is the go-to brand for mass-market cars and is now upgrading its portfolio to sell more premium vehicles and SUVs in line with the changing demand patterns.

2. Mahindra & Mahindra: Part of the diversified conglomerate Mahindra Group, M&M sells India’s most well-known SUVs such as the Scorpio, Bolero and Thar. M&M is also India’s biggest tractor maker. 

3. Tata Motors: The company is India’s biggest commercial vehicle maker and the biggest carmaker by revenue if we take into account its British luxury brands Jaguar and Land Rover. In addition, Tata Motors has been first off the block in introducing electric cars and controls more than 80% share of India’s fast-growing four-wheeler EV market.

4. Hero MotoCorp: The company is India’s No. 1 maker of two-wheelers with a market share of more than 45% and is also one of the world’s largest two-wheeler manufacturers. Like Maruti, Hero MotoCorp is introducing more premium motorcycles to meet rising demand for more powerful and feature-rich bikes. 

5. Bajaj Auto: Pune-based Bajaj Auto is part of the Bajaj Group. One of India’s largest bike makers thanks to its popular Pulsar motorcycles, Bajaj Auto recently returned to the scooter segment with its Chetak e-scooter.  

6. Eicher Motors: The maker of the iconic Royal Enfield motorcycles, Eicher is the most dominant brand in the mid-sized segment of bikes with 350cc to 650cc engines. It has managed to hold on its market share over the years, though companies like Hero MotoCorp and Bajaj Auto are taking another crack at its core segment through new products. Eicher also makes commercial vehicles in a tie-up with Volvo.

7. MRF: Chennai-based MRF is India’s largest tyre maker. It makes tyres of all types of vehicles including cars and SUVs, motorcycles, buses, trucks, tractors and off-road vehicles. The company’s share price touched a record high of Rs 1.5 lakh apiece earlier in 2024.

8. Samvardhana Motherson: The company is India’s largest auto-component maker. It makes wiring harnesses, plastic components and rearview mirrors for passenger cars, among other products. The company was established in 1986 as a joint venture with the Sumitomo Group of Japan. Today, it operates over 350 facilities in 42 countries across North America, South America, Europe, South Africa, Middle East, Asia Pacific and Australia.

9. Bosch Ltd: The component supplier is the local unit of German multinational engineering company Robert Bosch Gmbh. The group runs 12 companies in India, including the flagship Bosch Ltd. Bosch set up its manufacturing operation in India in 1951. Today, it runs 17 manufacturing sites and seven development and application centres.

10. Sona BLW Precision Forgings: The auto-parts maker operates under the Sona Comstar brand. It started as a joint venture with Japan’s Mitsubishi Metal in 1995 and renamed itself as Sona BLW in 2013. Over the years the company has set up several manufacturing facilities in India and other countries including China, the US, and Mexico.

Performance Overview of Top Auto Stocks

Overview of the Auto Sector Industry

India is the second-largest manufacturer of two-wheelers, the third-largest manufacturer of passenger cars and the largest manufacturer of three-wheelers in the world. No wonder, then, that the auto industry's performance is widely tracked and any changes in sales of trucks, buses, cars, three-wheelers, and scooters and bikes are widely reported.

The industry has dozens of original equipment manufacturers, hundreds of auto component suppliers and thousands of dealerships which eventually sell the products to end-customers. The large domestic market and strong growth over the years have also attracted several foreign automakers to India. 

In the passenger vehicle segment, South Korea’s Hyundai and Kia, Germany’s Volkswagen, BMW and Mercedes, France’s Renault and Japanese giants Suzuki, Toyota and Honda are the prominent names that compete with Indian automakers Tata Motors and Mahindra & Mahindra. Honda also has a strong presence in the two-wheeler space, where it competes with local companies such as Hero MotoCorp and Bajaj Auto. In coming years, several electric vehicles are also expected to list on stock exchanges. In fact, electric scooter maker Ola Electric has already started the process to go public.

The auto industry is also going through a transformation with increased focus on less-polluting vehicles, including hybrids and electric vehicles. This opens new areas of growth opportunities while also putting traditional models to test.

Why Invest in Auto Sector Stocks?

The auto industry is an important part of not just the Indian economy but also the global economy. It employs millions of people and contributes billions of dollars to the economies in terms of investments, production, exports and taxes. 
Investing in auto stocks, therefore, gives one exposure to a large and growing industry that is a critical part of our everyday life. As the industry continues to grow, it can offer investors a good option to benefit from that growth. 

In India, demand for cars, bikes and other automobiles is likely to remain strong in the short to medium term thanks to the growing economy. This will help manufacturers and component suppliers maintain their pace of growth. Many Indian component suppliers also cater to automakers outside India as they seek to diversify their businesses. Moreover, investing in auto sector stocks also helps investors diversify their portfolios. 

Factors to Consider Before Investing in Auto Sector Stocks in India

The Indian auto industry offers investors several opportunities to build their portfolios and benefit from the sector’s growth. However, just like investing in any other sector, one should thoroughly assess the performance and potential of the auto companies before putting their money to work. Here are some factors one should keep in mind.

Macroeconomic Conditions: Investors should evaluate how economic conditions affect the auto industry. The level and direction of interest rates, inflation, changes in tax structure are factors that can impact the performance of auto stocks.

Industry Trends: Investors should carefully assess the prevailing trends in the auto sector. These include changing demand patterns, rising sales of electric or hybrid vehicles, or the falling sales of diesel vehicles. These trends can help investors gain better understanding of the industry and select stocks that have the best chance of outperforming.

Financial performance: Like in any other industry, investing in the auto sector stocks also requires investors to check the financial performance of the companies. One should, therefore, look at revenue, profit, margins, debt levels, cash flow and unit sales data before committing capital to any stock. 

Valuation metrics: Investors should also look at companies’ balance sheet and check key ratios such as return on equity and return on assets, apart from a longer-term performance of the stock across market cycles. 

Regulatory norms: Any significant change in rules and regulations governing the auto sector could affect auto stocks. These regulations could be related to pollution emission norms, safety features in vehicles, use of fuel and other areas.

Conclusion

Given its size and the number of big players operating in the sector, investors can’t afford to ignore the auto industry when they build their stock portfolios. Indeed, several top auto stocks in India are attractive investment options. 
Nevertheless, investors should decide their asset allocation and then choose the best auto stocks to invest in after carefully analysing market trends, financial performance and other factors.