This shift triggered a correction in shares of Tesla and another EV maker, Polestar.
Back in India, while EV adoption is gaining momentum in two- and three-wheelers, the lack of infrastructure and high costs have slowed progress in four-wheelers and heavy-duty vehicles.
As discussions around the future of electrification continue, fuelled by subsidy-related developments, a new trend in fuel is emerging.
India is planning to transition its long-haul trucks and heavy-duty vehicles to liquified natural gas (LNG). The goal is to have a third of the fleet running on LNG instead of diesel within five to seven years. This move aims to combat pollution, reduce reliance on diesel, and increase natural gas’s share in the energy mix from 6% to 15%.
But is this target achievable or just another lofty goal?
Other countries offer some optimism. China already has over 800,000 LNG trucks on its roads, while the US and Europe have around 15,000 each. In contrast, India is still at the early stages, with just 500 such trucks in operation.
Currently, it’s a classic chicken-and-egg dilemma. Large-scale adoption requires LNG filling stations, but those stations aren’t viable without a significant fleet of LNG trucks.
To address this, the government is setting up the first 50 LNG fuel stations along the Golden Quadrilateral, with plans to establish 1,000 by 2030. Companies in the oil and gas sector—Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd, Hindustan Petroleum Corp. Ltd, GAIL, Petronet LNG, Gujarat Gas, and their joint ventures/subsidiaries—will drive this side of the supply chain.
From a fleet owner’s perspective, the initial cost of an LNG truck is higher than that of a diesel truck. However, according to studies by policy think tank NITI Aayog, LNG offers a lower total cost of ownership when factoring in running costs.
There are additional advantages too. With a single LNG fill, a truck can cover up to 1,400 km, making it ideal for long-haul journeys. It also reduces driver fatigue thanks to less noise. And, of course, there are environmental, social, and governance (ESG) benefits.
Fleet operators like Delhivery, along with companies in the cement, chemical, mining, container, and steel industries, are already considering a shift to LNG trucks. To meet this demand, Tata Motors, Ashok Leyland, and Blue Energy have introduced LNG-powered trucks.
It’s estimated that 2,500 LNG trucks would justify the initial investment in 50 LNG stations. Blue Energy alone has already deployed 500 LNG-based heavy-duty trucks on Indian roads.
Among the key players in this evolving space is Inox India.
LNG requires storage and transportation at low temperatures, and Inox India is a leading global provider of customized cryogenic equipment like storage tanks, transport tanks, vaporizers, and regasification equipment. The company serves over 100 countries, with nearly 50% of its revenue coming from exports.
Inox India operates across three segments: industrial, LNG, and cryo-scientific (which includes satellite propulsion systems and launch facilities). In its latest order book of ₹11 billion, 23% of orders are for the LNG segment, which contributed 15% of its revenue in the last quarter.
The company is a key supplier for both PSUs setting up LNG fueling stations and truck manufacturers needing LNG fuel tanks. In fact, Inox India commands a 70-75% market share in LNG stations and has supplied over 60% of the tanks used in stationary and mobile LNG stations across India.
A substantial shift toward LNG could be a significant boost for Inox India, which is nearly debt-free, boasts an operating profit margin exceeding 20%, and has return ratios above 30%.
As always, this is not a stock recommendation. Readers are advised to conduct their own research before making any investment decisions.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
