Ather Energy, M&M, Hyundai Motor shares: Nomura's top auto picks on rising EV penetration

Among suppliers, Nomura prefers Sonacoms because of its higher EV powertrain content. It said Exide Industries, which commissioned its nickel manganese cobalt cell plant in September 2026, could also benefit over the long term.

In its note on the automobile sector, Nomura said EV adoption in India had accelerated after the West Asia crisis. Petrol, diesel and compressed natural gas prices have risen by 8 per cent, 9 per cent and 13 per cent, respectively, since December 2025. However, increases of Rs 5-7 per litre may be required if oil prices remain at current levels.

Besides higher fuel prices, EV penetration has been supported by better product options and quality, policies adopted by state governments and the Union government, and shorter break-even periods for buyers.

According to Nomura's calculations, the break-even period for owning an electric scooter instead of an internal combustion engine scooter has declined to about 2.4 years. A two-wheeler buyer could recover about 100 per cent of the capital value of an EV in 8.8 years. This calculation assumes no resale value, which could provide an additional benefit.

For electric cars, break-even periods compared with petrol-powered sport utility vehicles have fallen to about three years for compact SUVs, 2.5 years for mid-sized SUVs and two years for large SUVs. Nomura said EV penetration had consequently risen rapidly at higher price points. BMW India receives about 30 per cent of its bookings from EVs, resulting in a waiting period of two to three months.

Nomura estimated that EV penetration in passenger vehicles rose to 7.9 per cent in September 2026 from 4 per cent in FY26. Penetration in two-wheelers increased to 11.6 per cent from 6.5 per cent over the same period.

Delhi, Telangana and Odisha led passenger vehicle adoption at 21.9 per cent, 21 per cent and 17 per cent, respectively. Odisha, Karnataka and Goa led electric two-wheeler adoption at 23 per cent, 19.3 per cent and 17.5 per cent, respectively.

EV penetration among scooters reached an estimated 25 per cent in September 2026, led by states including Madhya Pradesh, Odisha and Rajasthan. In the L5 three-wheeler category, penetration rose from 5 per cent in FY23 to more than 50 per cent over four years.

Nomura said the underlying data indicated that EV penetration was at an inflection point across segments. It added that light commercial vehicles could also record a marked increase in EV adoption.

India imports 89 per cent of its crude oil and 50 per cent of its gas, and Nomura expects the government's focus on electrification to continue. Non-fossil fuel sources account for more than 50 per cent of India's cumulative installed power capacity and 29 per cent of its power generation. The government aims to increase the share of non-fossil fuel sources in power generation to 50 per cent by 2030, which Nomura said would reduce the carbon footprint of EVs over time.

At a crude oil price of $103 a barrel and a normative retailer margin of Rs 4 per litre, fuel prices may need to be raised by about Rs 5-7 per litre, according to Nomura. This assumes a refining crack of $15 a barrel, compared with the current level of about $50 a barrel. The brokerage said any further increase in fuel prices would support EV adoption.

Nomura expects EV exposure to become an important factor for automobile companies in the second half of FY27 and FY28. It said the stock returns of original equipment manufacturers over the next few years were likely to depend on their level of EV penetration, with Ather Energy, Mahindra & Mahindra and Hyundai Motor India remaining its preferred picks and Tata Motors Passenger Vehicles also positioned to gain if adoption rises faster.