Observing the immense business potential of battery manufacturing, many players are entering the domain. Significantly, many small and medium enterprises (SMEs) are also trying their luck in this promising and growing sector. However, one must do thorough research before setting up a battery manufacturing plant, particularly regarding the cost of establishing a manufacturing or assembling plant.
Tuesday, August 31, 2010: Investments required
The investment to be made to set up a battery plant depends on the capacity of the plant in terms of how many lakhs of ampere-hour batteries are to be produced. It also depends on the product mix. While setting up a battery plant, a company must calculate all the expenses including process layout, plant machinery selection and procurement, installation and commissioning of equipment, design and development of the entire range of products with unique features, design and development of all moulds and tools for different components and quality standards, and process parameters.
“Approximately, the cost of installing and implementing the machinery would be 10-15 per cent of the machinery cost, and the cost of maintaining these machines is normally 2-3 per cent of their cost, annually,” says Rajesh Gupta, director, Okaya Power Ltd.
According to S K Prabhu, principal consultant, Lead Technology, Navaress consultants “Investment plans vary depending on the volume of batteries to be produced. It can vary from $10,000 for a small scale battery manufacturing plant to above $100,000 for a medium scale plant. Moreover, the quality and type of battery also impact the cost.
Says Prabhu, “The cost of battery manufacture is much lower than importing batteries. Hence, small and medium scale battery players prefer setting up a plant, whereas large manufacturers go for imported batteries. To produce 2,000 batteries per month of 150 ampere-hour 12 volts batteries, an investment of about Rs 30 million is estimated. This includes certification from the Pollution Control Board (PCB), land, buildings and machinery.”
Anil Joshi, general manager, projects, Artheon Electronics, says, “ The amount to be invested depends entirely on the type of technology, plant capacity and desired level of automation. It can range anywhere between Rs 100-150 million to set up a basic manufacturing facility with a very limited product range. However, a good facility will cost anywhere between Rs 500 million to Rs1000 million.”
The manufacturing unit should be equipped with a strong integrated production system, with a wide range of rugged high speed automatic machines to achieve high levels of accuracy and consistency. Says D D Sharma, CEO, Fluid-o-Matic, a maker of battery manufacturing machinery, “We have solutions for all types of battery machines, starting from single entry level models to full assembly line of semi- automatic machines. Buying machinery is a long term investment, since all our machines have a 10 year lifespan. Apart from this, another benefit of buying machines locally is that one can be free of any worries about breakdowns and changing spare parts.”
Above all, maintaining and installing machines are quite economical and simple as they do not require any special platforms or base erection. Arora adds, “Like any other machinery, battery manufacturing machines require maintenance from time to time, due to wear and tear. Costs are nominal except for some critical spares, which are expensive. However, by adopting preventive maintenance practices, breakdowns can be reduced thereby keeping the overall maintenance costs low.”
“Before embarking on manufacturing batteries, it is imperative to study a proper project report to arrive at the total investments required and the profitability factors,” Prabhu points out. Besides this, one should budget for the cost of land, manpower, machinery, infrastructure like building, sheds, power, compressed air, raw and treated water, storage facilities, material handling equipment such as pallet trucks, fork lifts, EOT, cranes, licence fees and product testing equipment.
Land: Selection of land should be done with care. Ideally, a battery plant should be set up in special economic zone (SEZ) to avail government exemption from taxes. If the plant is an export oriented one, it should be close to a port.
Manpower: Though India is facing a scarcity of trained manpower, it is essential to have suitable funds to conduct monthly or quarterly training programmes. “While technology and R&D play an important role in battery manufacturing, investments should be made in hiring the right kind of resources. It is also viable to create a large pool of talent, conversant with the latest in the world of battery technology,” says Kapil Sood, CEO, Fusion Power Systems.
Getting a bank loan to start a battery manufacturing plant is quite hassle free. Indian banks give finance for complete projects. State and central government financial institutions extend credit for various requirements. Public and private sector financial institutions also finance new industries, says Arora.
Prabhu says, “Funds are available from banks to the extent of 75 per cent of the value of buildings and equipment. Finance is available for all types of battery manufacturing plants, both large and small scale. Moreover, private and public banks/ financial institutions will give loans to buy imported machinery.”
“Although we don’t sell our machines on credit to our customers, getting a loan from banks to buy battery manufacturing machinery is a simple process,” says Sharma.
Ways to reduce production costs
While manufacturing batteries, it is necessary to control the recurring costs. One can control it by operating units at their full capacities, thereby, reducing overheads and increasing the production output. “Moreover, attempts should be made to automate the production process in some of the critical areas/bottlenecks as this will help achieve higher volumes. At the same time, there will be manufacturing consistency, which, in turn, will help reduce rejections and failures,” advices Arora.
“Our production line is largely automated, so labour costs aren’t much of a concern. I would advice companies to invest more on automated machines rather than on manual machines,” signs off Sharma.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine