Battery market charges ahead

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The battery industry in India comprising automobile, sealed maintenance free (SMF), tubular and lead acid batteries­—is big and getting bigger year on year. It has been growing fast, at an annual rate of 25 per cent for the past four years, and is expected to keep growing by 25 per cent till 2015, according to Sunil Bhatnagar, director, sales and marketing, Artheon Electronics Ltd.

Presently, the battery market in India is worth Rs 100 billion, with the automotive battery segment accounting for over 65 per cent of the overall market value. While SMF valve regulated lead acid (VRLA) batteries have a share of 25-30 per cent, lead acid batteries dominate the market with a 70-75 per cent share. This growth is expected to continue in the future as well, due to the growth in the telecom sector and the government’s focus on infrastructure development and renewable energy. Moreover, industrial battery consumption is going up significantly with the boom in the economy

By Srabani Sen

Tuesday, February 01, 2011: Demand driven applications

The perception about batteries is changing fast, especially with industrial users realising that a battery is a critical link to ensure backup power. The growth is coming from not just the automotive segment but significantly from the industrial sectors—powered by usage in telecom, railways, power and other industrial applications. With several parts of the country short of power, the use of inverters too, has gone up significantly, and this trend will continue. Banking, insurance and finance companies continue to be the largest segment for battery usage, followed by IT/ITeS and telecom. Other important segments are the small office/home office (SOHO) segment and manufacturing sectors. Growth in renewable energy, like solar and wind power, will drive additional demand for storage capacity. With the government driving the solar energy sector, the demand for batteries will take a quantum leap in the years ahead.

Besides these application areas, newer product applications are emerging every day. According to Sunil Bhatnagar, with electric vehicles (e-bikes, solar rickshaws, buses and cars like the Reva) being introduced, the next decade will witness rapid advancements and a switchover to lithium-ion and fuel cell technologies. “SMF batteries are also widely used in automobiles. These are hassle free batteries and power e-bikes directly without any other fuel,” he says.

According to Kapil Sood, CEO, Amptek Batteries, today majority of the motorbikes come with button start facility which requires compact, high density battery, and it is fulfilled by SMF batteries. “E-bike, which are very popular in China and Europe, is finding its way in the Indian market as well and is being manufactured by major bicycle brands like Hero Cycles, Avon Cycles, Lohia Motors, BSA, etc. Indian government is further giving boost to this industry in the form of subsidy. E-Bikes also use SMF batteries,” he adds.

The other important applications of SMF batteries are in the traction sector for material handling applications in the food industry, in pharmaceuticals, textiles and other related industries, where clean environment is required in the manufacturing facility.

SMF vs conventional types

With the demand for batteries growing, buyers’ expectations are also increasing by the day. They are looking for advanced technologies that are green and clean. Customers are demanding batteries that require minimal maintenance, hence the trend is shifting towards SMF VRLA batteries. Today, SMF batteries are used in a host of applications—from small UPS systems to large systems deployed in huge industrial plants. At present, the largest user of SMF batteries is in the telecom industry, followed by UPS systems with solar applications, which are catching up slowly. “The inverter market, too, is shifting towards SMF batteries, owing to their lower pollution. We keep inverters in living rooms, which is quite dangerous. When we charge batteries in our homes, lead fumes can be fatal for our brain and kidney. Hence, people prefer to shift to SMF batteries,” says Kunwer Sachdev, managing director, Su-Kam Power Systems.

SMF batteries do not need maintenance and are pollution free. They, therefore, comply with the expectations of those customers who need to install batteries that require minimal or no maintenance, while being clean and ‘green’. “Nowadays, customers are becoming more aware and don’t mind spending a few hundred rupees more for SMF batteries. They know about the disadvantages and hazards of lead acid batteries,” says Kunwer Sachdev.

Despite SMF batteries becoming popular, the lead acid battery industry, which supports many facets of Indian industry, is booming. “This is despite the fact that lead, the basic raw material, has doubled in price. Also, thanks to the huge growth in the automotive sector, the demand for auto batteries is growing very rapidly. The stressed power sector and rejuvenated solar sector have combined to make the lead acid battery market a bright one,” says Nina Singh, director, Inphynyt Accumulators India Pvt Ltd. “Conventional lead acid batteries are here to stay in India for the next two decades. In fact, both the segments—SMF and conventional—will continue to grow together, at an equal pace,” she adds.

According to Abhinav Mahajan, business development manager, Integrated Batteries India Pvt Ltd, the Indian lead acid battery industry is poised to double within four years, given the current rate of growth of over 25 per cent per annum. “The automobile industry is expected to grow by more than 12 per cent annually in the next five years. This would mean that the demand for lead acid batteries will also grow,” he adds.

“Lead batteries are also used for cooling railway coaches and running the railways’ signalling system and communication exchanges. They keep telephone exchanges buzzing. Presently, the majority of the inverters run on lead acid batteries as in India, where power cuts are for long durations, only lead acid batteries can handle extreme temperature conditions,” informs Sunil Bhatnagar.

Added to this is the rapidly rising number of cars, trucks, submarines and army tanks across India. With lithium-ion cells still a long way from becoming mainstream, lead batteries are the predominant power source in vehicles.

In India, according to a recent report by Angel Broking Ltd, lead acid batteries form nearly a Rs 10 billion industry. Some industry estimates point out that with local battery brands flourishing across the country, that figure could even be as high as Rs 17-18 billion. “New standards for the manufacture and recycling of lead acid batteries have been established to ensure cleaner production. These standards will require battery manufacturers to address battery collection, transport, storage, recycling, and pollution control measures.” informs Abhinav Mahajan.

According to Nina Singh, lead acid batteries are still popular as they have a few advantages over SMF batteries. Flooded batteries can handle extreme temperature conditions much better than SMF batteries. In a country like India, no SMF battery can operate without the prescribed ambient working temperatures. Also, lead acid batteries can handle deep discharge conditions much better than SMF batteries. In India, batteries are ‘abused’ more than they are used! Picture this: a SOHO customer would spent thousands on buying a battery, but would place it in the most dingy place in the house/office. “To some extent, even battery companies are to blame. Instead of educating the customers, they use the customer’s lack of knowledge to their advantage. So, given the market scenario, where no substantial effort is made to make the battery user friendly, companies just outdo each other by promoting a technology,” adds Nina Singh.

However, Vikas Aggarwal, CEO, Computech Systems, feels that SMF batteries will take over from all other types by 2015, as the demand for green energy is rising. “At least 40-50 per cent of the market’s needs will be catered to by SMF batteries, not only because of the ‘green’ aspect but also since people are reluctant to keep adding water and batteries emit fumes that are bad for health.”

“As customers are now more health conscious, they don’t mind spending more for SMF batteries. So SMF battery market has a great potential. However, there are some applications like solar and invertors, where conventional batteries are still used, specially the tubular batteries as they still hold advantage in some specific applications compared to SMF batteries. Since tubular batteries contain more acid compared to SMF batteries, the former last much longer and have more service life,” adds Kapil Sood.

Demand and supply

So with the current huge hike in demand, is the demand-supply gap widening? While Amitansu Satpathi, director, Best Power Equipment, feels that there is a shortage in the supply of batteries, as the production base in India is quite small, Biju Bruno, managing director, GreenVision Technologies Pvt Ltd, believes the demand-supply gap does not exist any more in the industrial battery segment. He says, “On the contrary, there seems to be a glut in the industrial VRLA segment due to the steep downturn in demand in the telecom sector. However, demand from other segments like UPS systems and solar power is robust, but there is no supply gap. In the industrial flooded segment, especially tubular batteries, the demand is cyclical and in the period from March to May of every year there are shortages due to the spike in demand. However, with more players getting into manufacturing and the demand from the solar segment picking up exponentially, the demand-supply gap should get sorted out soon.” Sunil Bhatnagar is also of the opinion that presently, the demand and supply ratio is balanced. “However, the delivery period may extend to three to four months,” he says.

“The ratio between demand and supply keeps varying throughout the year, the gap being the widest in the summer when there is a huge consumption of electricity to combat the heat. When inverter sales go up, it increases the battery sales as well. A large requirement from the replacement market is another factor enhancing the demand. This gap is much less during the winter. We have been successful in meeting this gap because we customise products as per the domestic conditions, and we have a robust supply chain and a dynamic distribution network,” points out Rakesh Malhotra, founder and managing director, Luminous Power Technologies Pvt Ltd.

Part of the reason for the steep demand and short supply is the deficit in lead. Hindustan Zinc Ltd (HZL), the country’s only miner of lead, produces 85,000 tonnes a year out of the 400,000 tonnes consumed within the country, as per an industry estimate. According to a report by Brickwork Ratings, only a quarter of India’s lead requirement is met by HZL. More than half is retrieved from secondary smelting and the informal sector, and the balance is met by imports.

At present, the demand and supply gap is not being met through imports alone. The growth in demand is also resulting in the scaling up of existing facilities and the building of new plants to minimise the gap. Artheon is scaling up its manufacturing from 1 million amphere/hour to 2.5 million amphere/hour from March 2011 at its Nasik facility.

At present, SMF batteries are 20 per cent costlier than conventional lead acid batteries. However, through mass production, costs can be brought down. “SMF batteries require a different type of separator and plate content. Also, there are more manufacturing steps. At present, the separator is imported from countries like USA and Europe as the technology for separators is not well developed in India. Su-Kam is talking to people in India to develop separators in order to bring down the costs,” informs Kunwer Sachdev.

Manufacturing in India

India is an important market with a GDP growth of 8-9 per cent, year on year. With the rapid growth in the power and energy sector, India will see a big expansion in its manufacturing capacity. The existing battery players are also focusing on expansion. GreenVision Technologies, which was started in March 2008, had clocked a 300 per cent growth in its second year of operations. In 2009-10, the company expects to close with a 50 per cent growth over 2009-10 revenues. Artheon Electronics Ltd, which had started its battery business three years back, has grown by more than 50 per cent. Even Luminous, which started manufacturing batteries in 2006, has gained maximum advantage by adopting the latest technologies and developing state of the art manufacturing facilities. Since then, it has doubled the sales of its batteries, every financial year. “We are continuously increasing our manufacturing capabilities to combat the growing demand for batteries. Luminous has recently come up with its new, state of the art, tubular battery facility in Gagret, Himachal Pradesh, which has a production capacity of 60,000 batteries per month,” informs Rakesh Malhotra. “We manufacture all kinds of batteries, ranging from VRLA, traction, solar, forklift, deep cycle, and tubular for automotive and railway applications. We have a total manufacturing capacity of 2.5 million batteries per year,” he adds.

SMF battery technology is slightly intricate and requires a good technology partner. “This has been a major hindrance to manufacturing these batteries in India. It requires continuous R&D. Moreover, getting the pollution clearance for manufacturing SMF batteries is a tedious process,” informs Sunil Bhatnagar.

“With the rising production costs overseas, India is definitely a good destination if the right skills and the plate chemistry technologies can be mastered indigenously. The large, technically qualified, scientific workforce available in India can be used, provided the necessary productivity of our employees can be developed to the level of other major players worldwide. As far as the raw material is concerned, India will continue to be a net importer of lead, as our domestic production is too low and also the quality is not up to world standards. For SMF VRLA, the lead purity required is of the order of 99.9999 per cent. A major cost in battery production is the electricity cost in charging-discharging and the plate formation processes. Therefore, abundant and economical supply of electric power can be a constraint,” informs Praveen Kumar Sood, chairman, Regnant Energy Solutions.

The challenge for manufacturers in India largely centres around the availability of lead. “While lead is mined in India, our share of global production was only 1 per cent in lead with metal production of 454,000 MT in 2000. By 2016, the demand and supply gap for lead is estimated to be 164,2000 MT. This has led to a flourishing unorganised market for recycled lead, which is used by the unorganised sector to manufacture and sell batteries at low costs,” says Biju Bruno.

The government should give more incentives to the organised sector to invest in high efficiency, green battery technologies so that these can be manufactured at a lower cost. Vikas Aggarwal, is however, hopeful that by 2020 India will be self sufficient in meeting all its battery demands and may not require to import.

According to Rakesh Malhotra, these challenges can be met by achieving efficiency in production and ensuring that quality is not compromised. “Another challenge with batteries is that they can’t be stored for longer periods of time. The self discharge time of a battery is normally three months and requires bench charging after that. To combat this problem, we have facilitated recharging of such batteries at the distributor and dealer end, especially during the peak season,” he adds.

Cost factors

The high price of lead is a major factor affecting all battery manufacturers, besides other aspects like the special separators, the cost of technology and the intricate manufacturing processes required for VRLA batteries. The price of lead is dependent on the London Metal Exchange (LME). Hence, the demand for lead is met by recycling it from used batteries and also through imports.

Since lead constitutes about 60-70 per cent of the cost of the batteries, the price of batteries invariably depends on the cost of lead, which fluctuates drastically due to non-availability and the premium to be paid to source it, which, to a great extent increases the cost of batteries.

On the other hand, China has the advantage of producing lead in large quantities. It gets lead at a much cheaper rate and its labour costs are also much cheaper. So, it is in a position to produce the same product for nearly half the cost. Hence, more and more Chinese products are flooding the Indian market.

Till the government sets up proper norms related to the pricing of lead, the Indian manufacturers will suffer from the batteries dumped in our market by Chinese manufacturers. Nowa­days, importing and selling batteries is much cheaper than producing them in our country. However, with large volumes, this problem can be overcome.

Looking ahead

With the promising growth in the Indian battery market, players see it growing by 25 per cent YoY for the next few years. “Substantial growth in UPS and telecom sector will further boost the battery market,” says Parag Mehta, managing director, Evolute Solutions Pvt Ltd. “I see very good demand for SMF batteries as the corporate world is preferring SMF batteries due to safety concerns. Also, it has been made mandatory for the telecom companies to use SMF batteries. These factors account for a boost in the SMF battery market that is expected to grow at the rate of 30-35 per cent YoY in the coming few years. By 2015, it is expected to rise by 150 per cent, and we can expect the SMF battery market size to reach to about Rs 200 billion.

Considering the fact that battery innovations are a major factor in the development of new devices, battery market will always see a healthy growth in the coming years. “Though being a highly sophisticated product, today, batteries have become a commodity. However, customers demand low price products, which is a challenge for us,” says Manish Gupta, CEO, Lzen Electronics. “The demand is so huge that it is not possible to be met by Indian manufacturers and so large quantities of batteries are being imported under various brands from countries like China, Taiwan, etc,” informs Manish Gupta. “The potential in this market is huge, if the Indian manufacturers start meeting this demand,” he adds.

According to Manish Gupta, consumer education, better technology offered in batteries, upgradation as per international regulations and interface with durables of these batteries, better after sales service and extended warranty, upsurge in economy, and huge consumption will continue to push for a very high growth in the battery sector.

“The Indian battery industry will undergo significant change over the next decade as it adapts to the enormous economic and technological pressures of our rapidly changing world,” concludes Manish Gupta.

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine

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