Budget 2024: Expectations from EV industry & top picks from automobile space

With the Union Budget 2024-25 presentation around the corner, brokerage Mehta Equities said the electric vehicle (EV) industry has high expectations from the most important financial event. The EV sector is hoping for some level of rate rationalisation to reduce interpretative issues and litigations, it stated.

"Automotive Component Manufacturers Association (ACMA) is seeking relaxations, including a uniform GST of 18 per cent on all auto parts, from the government in the upcoming Union Budget as this help remove an inverted duty structure that restricts working capital," the brokerage said.

"The industry expectation is that the government introduces more multiple initiatives like scrappage policy, performance-linked incentive (PLI) scheme for EVs and advanced technology components, expanding the Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India (FAME) II and PLI schemes and increasing the scope for start-ups and MSME, the vehicle scrappage policy, and more on the recent announcement of the PLI scheme for semi-conductors which are likely to be a big step in the right direction," it further stated.

From a stock-specific view, Mehta Equities has picked Maruti Suzuki India Ltd, Ashok Leyland Ltd and Bajaj Auto Ltd from the auto sector.

Separately, JM Financial said the Centre may announce incentives and subsidies to the agricultural sector that will support rural discretionary spending and benefit rural-focused two-wheelers (2Ws) and & entry-level four-wheeler original equipment manufacturers (4W OEMs). And, the domestic brokerage has given a positive stance for Mahindra & Mahindra (M&M) Ltd, Hero MotoCorp Ltd shares.

It also expected an increase in allocation to FAME-III subsidy. Ashok Leyland Ltd, Tata Motors Ltd, Hero Moto and Servotech Power Systems Ltd will be potential beneficiaries when the actual announcement happens.

In addition, JM Financial is anticipating a cut in CNG (compressed natural gas) excise duty. When that happens, stocks of Maruti Suzuki and Tata Motors are the likely winners.