The Indian automotive battery market is projected to grow at a CAGR of approximately 13 per cent during 2013-18, in value terms. APF drives through the current automotive batteries market in India to find out the current trends and growth prospects in the coming years.

As the Indian automotive industry aspires to be figured among the top five in the world by early next decade, many of its allied industries are reaping rich dividends. Moreover, major government measures such as National Automotive Testing and R&D Infrastructure Project (NATRiP), Focus Market Scheme (FMS) and Automotive Mission Plan (AMP) 2006-16 are giving a huge fillip to the sales of passenger cars and commercial vehicles in the country, resulting in the burgeoning demand for automotive batteries, which can be divided into OE market and aftermarket segments. Automotive batteries are SLI (Start, Light, and Ignition) batteries, though they are expected to fuel a greater number of functions including in-vehicle entertainment systems, power steering, power locking, power window systems, etc. Moreover, there have been some audacious attempts by some of the leading manufacturers trying to alter the perception of the battery as a mere commodity to the battery as a brand.

Historically, the Indian automotive battery market was OE-driven and the market had a monopoly of Exide Industries Ltd in the organised segment supported by many manufacturers from the unorganised segment especially in the light, medium and heavy commercial vehicle segment. The replacement market has a sizeable small player component – as this was traditionally in the realm of the small scale sector. These players have hence been able to offer new/reconditioned unbranded or lesser known batteries at attractive rates. Once, the Kolkata-based company cornered nearly 100 per cent of the domestic automobile market. But eventually, the market dynamics changed in the late 1990s with the entry of battery manufacturers like Amara Raja Batteries Ltd (ARBL) (JV with Johnson Controls Inc USA) and Tudor India Ltd (the Indian arm of Exide Technologies). The market became more hyper competitive with other players like Base Corporation, Bosch India, Su-Kam, Delphi, Amco etc, diversifying into the automotive battery market.

Unlike other countries where lithium-ion is omnipresent, lead-acid batteries are the most widely used battery in the market, including valve-regulated lead-acid (VRLA), absorbed glass material (AGM), and gel batteries. The companies have primitively used the ‘flooded cell’ type, indicating liquid electrolyte, which is typically inexpensive and long-lasting, but requires more maintenance and can spill or leak. With the evolution of the market, there are other alternatives like VRLA batteries, also called ‘sealed’ batteries.

Industry observers claim that the total Indian storage battery market is estimated at $500 million in value terms with the automotive battery segment contributing 60-65 per cent of the overall market value. In terms of volumes, the overall consumption of automotive batteries could be around 6.5 million units with the OE segment comprising around 1.2-1.3 million units per annum. Therefore, the aftermarket vertical is attractive for all the players with its sheer size and is lucrative due to better pricing and credit realisation. According to industry analysts, the Indian automotive battery market is projected to grow at a CAGR of approximately 13 per cent during 2013-18, in value terms. That makes it worth $500 in the next few years if the growth momentum is sustained.

“The domestic battery market is being dominated by two-wheelers and passenger cars with a cumulative market share of around 75 per cent, Exide Industries and Amara Raja Batteries being the major supplier in the country. In 2014, around 40 per cent of the batteries are supplied to the OEMs in the country and the rest is being sold in the aftermarket,” observes Karan Chechi, Research Director, TechSci Research.

“The sector has been sluggish over the last three years but we saw improvement in the aftermarket this year with a slight dip in margins due to stiffer competition. Service costs have been increasing and so is customer expectation from quality, pricing being the weaker driver as compared to warranty and quality, which is a good sign for organised players, and the shift in trend we see in the unorganised market,” avers Aditya Arora, Chief Operating Officer, Base Corporation. The battery and inverter maker Base Corporation is eyeing over 30 per cent rise in turnover this financial year to Rs 1,500 crore on the back of enhanced exports and domestic market expansion. The Bengaluru-based company has also set a target of capturing at least 10 per cent market share by 2020 with a turnover of Rs 3,000 crore.

Current scenario

Even though the growth prospects are huge, the past couple of years have been topsy-turvy in the automotive sector. This has been reflected in the performance of the country’s battery market. Because of the slowdown in the economy, there has been a drop in HCV and LCV segment sales, followed by passenger vehicles and two-wheelers. However, post the new government at the helm of affairs and investor-friendly policies, there has been a slight uptick in overall volumes. Even though this has not offset the downtrend in battery sales, it has helped soften the blow.

“The last few years have been a roller-coaster ride for players in the Indian lead-acid battery market. From being powered by a virtual monopoly, this market has witnessed a slew of new product introductions, technology innovations, the emergence of domestic competition, joint ventures, and corporate consolidations that have totally altered its landscape. With consolidation and growth being the maxim of most auto players today, we are seeing increased participation and partnership of battery manufacturers with auto players in creating battery solutions for new vehicle introductions,” adds Chechi.

Technology leads

With the advent of newer and more advanced technologies, the consumer is getting the best of both the worlds; a superior product at an affordable price. As a number of leading international auto giants have entered India and established their production bases, their demand for world-class batteries for their vehicles urged Indian battery manufacturers to tie up with international players or buy technology, so as to upgrade their offerings to meet the high standards expected.

Hogging the limelight for a decade is ARBL, which sells its automotive battery under the brand name ‘Amaron’ which is the country’s first zero maintenance-free automotive battery while the competitors had only maintenance-free batteries that needed topping up of distilled water. Eventually, all the leading manufacturers are also offering a similar product with focus shifting towards offering a technologically superior product. Interestingly, the Hyderabad-based firm is the only automotive battery supplier to the first micro hybrid technology application in India by Mahindra & Mahindra for its Scorpio SUV.

Even though the company refused to participate in this story, a highly placed source states, “Amaron was also the first to talk about what goes into making a great product. It spoke of having silver inside which is used as an alloy mix that actually increases the battery life and this was the first attempt by any battery manufacturer to educate the consumers. Others have been simply toeing the line.”

Similarly, other applications like electric and hybrid vehicles are likely to be driven by initiatives like FAME India Scheme (Faster Adoption and Manufacturing of Hybrid and Electric vehicles in India). Under this scheme, incentives are being rolled out for electric and hybrid vehicles. The long term target is to have 6-7 million electric vehicles on road by 2020. Innovative attempts in the domestic battery replacement market to de-commoditise batteries have already earned them rich dividends. Supplies to niches such as the electric vehicle segment could also offer interesting opportunities.

However, not many companies are gung-ho about it as Arora asserts, “Li-ion coming into the market would not affect lead-acid. This is primarily due to their diverse areas of fitment. Li-ion is used where cost is not a factor to gain portability, quick charging and deeper cycle life. In the case for SLI applications, customers would not pay 4X the cost for a job the lead-acid does efficiently. Also, the infrastructure needed to produce, service, collect, and reproduce batteries has majorly evolved for lead-acid. The similar infrastructure will need to be created for Li-ion, which is dependent on the existing battery manufacturers, without whom the technology may not see commercial widespread, nearly as close as lead-acid. This is going to be a fast growing market provided the environment supports the rapid adoption. It’s not only about the supply of batteries, Li-ion is has safety concerns, the metal lithium itself is rare, difficult to recycle and even more difficult to produce. These limitations may force researchers to continue looking for more efficient ways to power cars. Fuel cells and plasma batteries are yet to take shelf space that they deserve, but this is also because the adoption by users and technology, and the promotion from existing manufacturers is very slow in these untesting battery chemistries.”

However, baby steps have been taken in that direction as exemplified by the launch of Maruti Suzuki’s CIAZ hybrid heralds a new dimension to the battery technology in India. The new mild hybrid system, which incorporates an integrated starter generator (ISG), provides engine power assistance using the motor and achieves efficient power regeneration. The smart hybrid diesel car is a patented technology wherein the battery is local and the motor is also built locally. The battery is an advanced high capacity lead-acid battery made in collaboration with Furukawa and produced by Exide. The new variant is equipped with a larger capacity battery, integrated starter generator and start-stop technology that will allow the car to return better mileage.

Aftermarket, the next growth destination

Just like tyres, lubricants and lights, the replacement market is where the margins are high and as a logical progression, battery majors are now paying a lot of attention to this segment. Growth in the direct market is driven by automobile production in a concerned time frame and this is a difficult segment to service as each automobile manufacturer has different specifications for which the battery has to undertake mass customisation. Additionally, margins for battery manufacturers are usually thin in this segment due to the bargaining power of the auto majors. However, inherent advantages such as a steady source of production and revenue, and strong brand recall during battery replacement make this an attractive segment for battery manufacturers.

However, the growth could not be robust as Kunwer Sachdev, Founder and Managing Director, Su-Kam, puts it, “With the introduction of sealed long-life (maintenance-free) batteries by these players in the OE and replacement market segments, there could be a drop in battery sales in the replacement market for relatively new vehicles. However, this market is still substantial, considering that the discerning Indian vehicle owner is today more quality and brand conscious and hence willing to pay the extra penny in order to be free from maintenance hassles. We are currently working on re-establishing our brand in terms of automotive industry segment as we faced a few hurdles previously. Therefore, we want to be prepared this time. We want to aim initially at the aftermarket as we do not want to aim at the OEM business right now until we establish a stronghold in the replacement market.”

Environmental concerns and going green

Lead, a major component of the lead-acid battery, has to be handled carefully, especially during smelting, disposal, and recycling. Based on environmental norms set in the late 90s, today only authorised plants are able to recycle lead. This has had an adverse effect on the unorganised market. As a result, battery manufacturers are taking rapid strides in protecting the environment. As Chechi affirms, “The automotive battery manufacturers and suppliers in India are focusing of development of eco-friendly alternative products and solutions in order to replace the use of conventional batteries. Most of the companies are carrying out research and innovation in order to come up with greener products. Lithium-ion batteries and ionic liquid based zinc polymer batteries are some of the green alternatives for conventional batteries.”

“The way we are going with solar, we are ensuring that our technology is as accurate as possible in terms of defining savings and environmental impacts. Even in the common mass products that we are developing, we are trying to integrate display features that are able to tell the customer what is the difference they have created in the environment and their house in terms of savings,” says Sachdev.

Likewise, Arora shares, “We have two of India’s largest and youngest plants that are completely zero discharge facilities. We are compliant with all pollution control norms at global standards and currently supply to globally renowned UPS manufacturers from these plants for their shipments across the world. This could not be possible if we were not investing largely into automation and recycling, unlike most other companies. We have our own smelting units and do our alloying in-house, which in turn helps us protect our technology and methodology used for battery manufacturing.”

Challenges

The menace of cheaper imports and dumping, which plagues the entire auto component industry, has not spared even the domestic battery making industry whether it is industrial or automotive. With the progressive dismantling of the import norms in 1999 and inclusion of batteries into the open general licence and the subsequent free-trade agreement with various countries, there is increased threat of cheap substitutes to the locally available batteries from players in Thailand, Bangladesh, China, Singapore, Taiwan, Japan, South Korea, etc. It is widely believed that some local players are importing batteries to cater to segments that are rendered infeasible for them to invest in manufacturing.

An automotive industry executive says on condition of anonymity, “Just like tyres, there are cheaper and substandard batteries that are sold in the replacement market where price sensitivity is critical. But with the Indian Government levying an anti-dumping duty on tyres and other auto components, things might be better for local players in the future.”

Looking ahead

From the aforementioned developments, it can be presumed that the consumers are becoming more informed to make intelligent comparisons among products to get a better bargain which in turn, has led to the erosion in the market share of the unorganised sector and cheaper imports. As technology continues to evolve and better itself, batteries continue to gain in reliability, strength and efficiency. Owing to increased domestic competition, Indian lead-acid battery manufacturers will be impelled to invest strongly in their product R&D, brand building, and competitive pricing, apart from streamlining their distribution network. Many players are believed to be actively leveraging on their tie-ups and international acquisitions to capitalise on these opportunities.

“Indian batteries require a higher design input due to the tropical climate, road conditions, power conditions and customer expectations. In exports, the technical requirements are vastly different. They prefer use-and-throw products where cost needs a greater advantage over life. Therefore, by investing in R&D, we would be able to offer niche products that propel us ahead of the low-price fiercely competitive segment,” notes Arora.

Industry players have also maintained that other areas they will continue to focus on is the export market as it would offer opportunities to offset low domestic demand and capacity under-utilisation, despite the fact that export returns may not be as high as domestic returns.

This trend was substantiated by Sachdev as he says, “We export to more than 70 countries and more than
20 per cent of our total turnover is generated from exports. Thus, export market is signifying the growth potential in much bigger ways than ever, especially due to more acceptances from foreign markets for newly developed products. Recently, we are exporting to Syria a lot since the crisis over there has had a huge power shortage, and our products are able to help out over there. It is a great feeling for us.”

“We have recently secured large export orders, with those in hand
will be be exporting nearly 20 per cent of our manufacturing capacity. These products are being used in American, European, African and Asian markets,” reveals Arora.