Nomura has designated Ather Energy Ltd, Mahindra & Mahindra Ltd (M&M), and Hyundai Motor India Ltd as its preferred investments within the Indian automotive sector, citing the country's rapidly increasing electric vehicle (EV) penetration. The brokerage anticipates that companies with significant EV exposure, competitive offerings, and established technology will experience faster growth than the overall industry in the latter half of FY27 and FY28.
According to Nomura, the adoption of EVs in India has accelerated, partly driven by a rise in fuel prices following the West Asia crisis, with petrol, diesel, and compressed natural gas costs increasing by 8%, 9%, and 13% respectively since December 2025. Beyond fuel costs, improved product options, enhanced quality, and supportive policies from both state and central governments have also fueled the shift. Buyers are now seeing shorter break-even periods for EV ownership.
Declining Break-Even Periods Boost EV Appeal
Nomura's analysis indicates a significant reduction in the break-even period for owning an electric scooter compared to an internal combustion engine (ICE) model, now standing at approximately 2.4 years. For electric cars, break-even periods against petrol-powered SUVs have also fallen: around three years for compact SUVs, 2.5 years for mid-sized SUVs, and two years for large SUVs. This financial advantage has particularly boosted EV penetration at higher price points, with BMW India, for instance, reporting that about 30% of its bookings are for EVs, leading to a two-to-three-month waiting period.
India's EV Penetration Reaches Inflection Point
The report highlights a substantial surge in EV adoption across various segments. Passenger vehicle EV penetration climbed to 7.9% in September 2026 from 4% in FY26. In the two-wheeler segment, it rose to 11.6% from 6.5% over the same period. Electric scooters alone saw an estimated 25% penetration in September 2026. The L5 three-wheeler category experienced a dramatic increase, moving from 5% penetration in FY23 to over 50% within four years.
Geographically, Delhi (21.9%), Telangana (21%), and Odisha (17%) led passenger vehicle EV adoption, while Odisha (23%), Karnataka (19.3%), and Goa (17.5%) were frontrunners for electric two-wheelers. Nomura suggests that these underlying trends indicate India's EV market is at an inflection point across all segments, with light commercial vehicles also poised for a marked increase in adoption.
Suppliers and Government Focus
Beyond vehicle manufacturers, Nomura also favors certain suppliers. Sonacoms is a preferred pick due to its high EV powertrain content. Exide Industries, which commissioned its nickel manganese cobalt cell plant in September 2026, is also expected to benefit in the long term.
Given India's reliance on crude oil imports (89%) and gas imports (50%), Nomura anticipates the government's strong focus on electrification will persist. The country's non-fossil fuel sources already account for over 50% of its installed power capacity, with a target to reach 50% of power generation from these sources by 2030, further reducing the carbon footprint of EVs over time.
Nomura concludes that EV exposure will become a crucial determinant for automobile companies' stock returns in the coming years, reinforcing its positive outlook on Ather Energy, Mahindra & Mahindra, and Hyundai Motor India, with Tata Motors Passenger Vehicles also positioned for gains if EV adoption continues its rapid trajectory.