Yes, EVs and Hybrids do require the lead acid battery as an auxiliary power source.
The only 2 exceptions are the Tesla Model S and Model X, who ditched the lead acid battery just last year. This was because they were getting too many complaints on battery discharging/ reliability in particularly these 2 models. Note that the Tesla Model 3 and Model Y still use the AGM lead acid battery.
Explaining this in short – it is the lead acid battery that provides primary power for low voltage systems used to wake the car, Bluetooth receiver, lights, Sentry Mode, door locks, windows, latches, actuators, etc. When car is awake and high voltage (HV) contactors are closed, 12v support is supplied by the HV battery pack. Only lead batteries hit all the cold cranking amps (CCA) performance necessary for starting, lighting, and ignition (SLI) applications. The lead acid battery is reliable and extremely cost efficient, and doesn’t require a BMS circuit board that a lithium ion low voltage battery would.
I understand that your original concern is about the terminal value of AREM’s legacy business. I honestly feel that the business should get a higher terminal value, because lead batteries should continue to be auxiliary power source for years to come. Now this technology is also going to move from Flooded Lead Acid Batteries to AGM (absorbed glass mat) or EFB (enhanced flooded batteries) to Lithium Ion 12V batteries over time.
The Clarios xEV Battery Portfolio illustrates the evolution we’ll see in this space –
So even though the main high voltage Li-on battery pack will see a lot of competition, here we have this niche, high margin business where operational leverage will continue to favour the incumbents clearly.
Plus now they have a wider export market, which is another big trigger for AREM. With Johnson Controls as a promoter-shareholder, they had restrictions over selling in many international markets, esp the western countries. AREM has a good foothold now in many SE Asian/ West Asian/ African markets, and the next big challenge is Europe and America. Industrial also continues to be a growing segment for them. AREM simply has to demonstrate that their terminal value should not be this discounted.
The way I see AREM is that this a long term play where we’re getting the legacy business cheap, plus the optionality of the new energy business, which makes it extremely attractive in this market. While it’s important to put a number to the terminal value of their legacy business, we have to understand that the potential upside will only come from the optionality, ie. what they can achieve in the new energy business.
| Subscribe To Our Free Newsletter |
