The market is expected to remain buoyant throughout 2013 and the natural erosion of the unorganised sector will further help the organised segment
By Srabani Sen
Wednesday, December 12, 2012: The growth of the battery business in India continues, with the current year being a lot more robust compared to the previous two years—thanks to the unprecedented buoyancy in the power backup segment, the booming solar and telecom sectors, the growth in industrial automation and in exports. The slowdown in the Chinese battery industry, caused by environmental concerns, has resulted in India being now looked upon as the main battery producer in Asia. Therefore, demand for Indian batteries from importers worldwide has increased many times over. The battery industry has also got a boost with the import of lead and lead products from countries like China becoming difficult, following the imposition of duties on them.
According to estimates by industry pundits, the lead acid storage battery market 
grew by 20-25 per cent in 2011-12. Presently, the battery market in India is worth Rs 200 billion and is divided into organised and unorganised sectors, with each accounting for 45 per cent of the market, and imports making up 10 per cent. Compared to the previous year, the battery market did better in 2012, despite weak demand from Europe
Demand and growth drivers
The growth of the battery market is driven by not just the automotive sector but significantly by the telecom, railways, power and other industries, says Avnish Arora, vice president, HBL Power Systems Ltd. With several parts of the country being short of power, the use of inverters too has gone up significantly, and this is not going to come down soon. Banking, insurance and finance companies continue to be the largest segment for battery usage, followed by IT/ITeS and telecom. Other important users are the small office home office (SOHO) and manufacturing sectors. Growth in renewable energy, like solar and wind power, will drive additional demand for energy storage capacity. With the government promoting the solar energy sector, demand for batteries will take a quantum leap in the years ahead.
Besides these uses, newer product applications are emerging every day. Says Sunil Bhatnagar, director, marketing, Artheon Electronics Ltd, “Some other important applications of SMF batteries are in the traction sector, in material handling applications in food industries, in the pharmaceutical industry, textile industry, etc, where a clean environment is required in the manufacturing facility.” Adds Girish Arora, chairman and managing director, Base Corporation, “A shift from the unorganised to organised sector is also a key growth driver. Besides, the advent of VRLA applications amongst bulk users is building up the necessary demand. The telecom market is also picking up, with many new cellphone towers coming up in India. This will lead to a jump in the demand for batteries.”
As puts Avnish Arora, “The continuous growth in the battery market can be attributed to the growth in the inverter market, new business opportunities in non-grid areas, and the large-scale generation of renewable energy.”
Regions generating demand
Uttar Pradesh (UP) and Bihar had always been good markets for batteries. “This year, south India did not do well in power generation so a lot of demand for batteries came from Karnataka, Tamil Nadu and Andhra Pradesh,” informs Rajesh Gupta, director, Okaya Power Ltd. This year, demand from the east has also exceeded last year’s volumes. And the demand from the semi-urban and rural markets is growing across all the segments.
Organised vs. unorganised sector
India’s unorganised battery sector flourishes due to price competitive imports, and is beyond the scope of the government’s intervention. Some environmentally unacceptable recycling practices prevail in the unorganised sector, resulting in questionable quality and technology standards.
It is still a debatable point as to how much of the Indian battery market is controlled by the unorganised sector. According to Girish Arora, the unorganised sector is still an equal player, if not a dominant one. “Firms in the unorganised sector particularly dominate verticals like hybrid commercial vehicle, light commercial vehicle, jeep and tractor segments and are also strong in the inverter segment. The small capacity VRLA battery segment comprising the 6V4 Ah and 12V7 Ah models are serviced basically through imports by the unorganised players.”
Sunil Bhatnagar, however, believes that the unorganised sector is shrinking slowly due to the high standards of pollution control in India, and small companies cannot invest in effluent treatment plants. The battery market is also becoming competitive and margins are shrinking, making survival difficult for the unorganised players. “The growth in the unorganised sector is mainly because of the high value of imports by traders and direct equipment manufacturers, but small manufacturers are reducing in number,” he adds. Also, with the import of lead products becoming expensive, the unorganised sector will see a downslide.
Current trends
The battery market is witnessing increased competition which has lead to the expansion of the market, and as a result, customers get the benefit of superior products and services, as well as good value for their money. With the growth in several industrial sectors, the demand for batteries is increasing and most major companies dealing in batteries are growing too. “Battery manufacturers are doing everything possible to capitalise on the opportunities that the inverter segment is offering. Efficient logistics, competitive pricing, aggressive aftersales service and a good product, backed by a long warranty period are the focus,” says Girish Arora.
According to Kunwer Sachdev, managing director, Su-Kam Power Systems, the market is clearly shifting from the existing flat plate technology to tubular plate technology for longer power backup and longer life of the battery, which are required in the Indian environmental conditions.
According to Rajesh Gupta, batteries with higher Ah and higher warranty period are more in demand. Adds Sunil Bhatnagar, “The market for small lead acid batteries is currently growing as most of the CFL applications are now being shifted to LED products and this generates a requirement for small batteries.”
At the end of 2011, there was some shortage of small batteries for solar lanterns, CFLs, home UPS systems, etc, and by 2012, most companies in the battery segment were overbooked. A good demand was also seen for gel batteries for solar applications, though AGM VRLA batteries make up the major portion of this market.
As far as buying trends are concerned, consumers base their purchase decisions on various parameters like price, warranty, aftersales service, retailer recommendations, credibility of brands, etc. However, the retailer recommendation is the biggest influencer.
Price trends
Lead constitutes about 60-70 per cent of the cost of batteries. Hence, the cost of batteries invariably depends on the cost of lead, which fluctuates drastically due to its non-availability and the premium to be paid to source it. This, to a great extent, increases the cost of batteries. Battery prices are, therefore, governed by lead prices at the London Metal Exchange (LME) and also by the dollar to rupee exchange rates. India has just one lead mine and hence most companies import lead. Therefore, the price of batteries fluctuated this year, along with fluctuations at LME. Special separators, cost of technology and manufacturing processes for batteries also add to production costs, which raise the overall price of batteries.
“There has been about 15-20 per cent increase in battery prices in the last 12 months. Taking positive cues from the global markets, lead prices today edged up by 0.10 per cent to Rs 109.40 per kg,” informs Kunwer Sachdev.
“Buyers generally compare prices of batteries manufactured in India with those made in China. In India, we do not have any AGM separator manufacturer, so this has to be imported. The ABS container also needs to be imported. So the Indian battery prices are generally 5-6 per cent higher than that of the Chinese products,” explains Sunil Bhatnagar. “But I would suggest that buyers should not just get lured by low price of the imported batteries, but should remember that Indian batteries comply with the specifications of the Bureau of Indian Standards (BIS). These products go through all the required tests,” he adds.
Till the government formulates proper norms on pricing of lead, Indian manufacturers will continue to suffer from the unfair advantages enjoyed by low cost batteries dumped by the Chinese manufacturers. Nowadays, importing and selling batteries is much cheaper than manufacturing them in India. However, with higher volumes, this problem can be overcome.
On the technology front
New technologies like Bi-Polar batteries and LiFePO4 are emerging globally. LiFePo4 batteries are available in the Indian market through imports but they are very expensive compared to lead acid batteries. Bi-Polar batteries, on the other hand, seem competitively priced, vis-a-vis lead acid batteries but they would be available in India only by 2014-15.
Despite the emergence of these new technologies, which are still at a very nascent stage, demand for tubular batteries is growing as government programmes require a five year warranty on batteries, and this warranty can be offered only with tubular batteries, say experts. “Lead acid batteries have been proven over decades and are the most cost effective batteries. In commercial use, it is difficult to replace lead acid batteries with new technologies,” says Sunil Bhatnagar.
Explaining further, Girish Arora says, “The technology platform continues to be dominated by ‘lead acid flooded’, but there is a considerable shift towards tubular plate batteries as far as power backup applications or deep discharge applications are concerned; and VRLA, as far as two-wheeler applications are concerned.”
Says Kunwer Sachdev, “The existing technologies like flat plate, tubular and VRLA technology are constantly being upgraded for true deep cycle application, higher energy density, higher efficiency and longer life (more number of charge/discharge cycles) of the batteries, ease of maintenance, etc.”
The technologies that are currently more in demand are normal lead acid batteries (also, known as flat plate flooded batteries), tubular flooded batteries, SMF VRLA batteries and tubular gel technology batteries.
Forecast for 2013
Battery manufacturers are banking on 2013 for better business than 2012. While industry analysts have already predicted that Amara Raja would do well next year, they are silent on Exide, as in the last couple of quarters, Exide disappointed the industry pundits. So the industry is waiting and watching the company’s moves.
Artheon is working strategically for a 50 per cent jump in sales in 2013—it is coming up with some new products like 100 Ah and 170 Ah front terminal batteries. Artheon will also launch 33 Ah and 40 Ah electric vehicle batteries.
According to Girish Arora, the market is expected to remain buoyant and the natural erosion of the unorganised sector will further help the organised segment. “We believe that 2013 will be a good year and, therefore, continue to invest in increasing capacities. Our Hosur project is a testimony of this belief.”
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Segments of the battery market
The battery industry in India comprises automobile batteries, SMF batteries, tubular batteries, and lead acid batteries. The battery market is dominated by the automotive battery segment, which makes up more than 65 per cent of the overall market. While sealed maintenance free valve regulated lead acid (SMF VRLA) batteries have a share of 25-30 per cent, lead acid batteries dominate the market with a 70-75 per cent share.
The lead acid battery market is highly fragmented with very few manufacturers in the organised segment. Most of these lead acid manufacturers have a strong presence in semi-urban and rural areas and cater to the replacement battery market.
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Battery makers face competition from replacement market
The battery replacement market in India is about 5 million units per annum. This unorganised sector continues to become bigger and is in competition with the organised battery makers. According to PINC Research, 2013 will be a good year for the battery replacement market as customers change batteries every three years.
“Battery makers in the organised sector are definitely under pressure as competition is mounting from the replacement market and volumes are shrinking due to cyclicality of the business. Companies that are already facing high input costs have not been able to pass the recent excise duty hike to consumers. Instead they are cutting prices to keep volumes up. However, price cuts would help in gaining market share, as the companies may shrink their margins further,” says Kunwer Sachdev.
Major companies like Exide have cut their price of batteries by 5-8 per cent in an attempt to gain a share of the replacement market and keep volumes up. However, industry pundits feel that though the price cut may help companies get back some market share, this reduction in product price may not have a positive impact on its financial performance. Another major player, Amara Raja, has not cut its price because it is already gaining market share.
Battery dealers also feel the heat of Exide cutting its prices, as their margins and incentives have also been cut.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine
