Amara Raja Energy & Mobility Limited: Powering Ahead

Some Overview on Battery sector. Will delete it if sounds too basic for this thread

• For batteries, the industry heavily relies on the automotive market, with 70-80% of battery sales in this segment. The remaining sales are in the stationary & industrial segment.

• In the last FY, the auto industry grew by 12%,with companies like Exide and AmaRaja growing by 17-22% thanks to GST, organised share grew.

• Exide’s share in the OEM segment has increased from 45-50% to 55-60%, and in the two-wheeler segment, Amaraja has recently secured orders from Honda.

• Exide has approximately 95,000 dealers and sub-dealers, selling around 25 lakh units monthly.

• Increased demand in the telecom market due to more mobile phones and the rollout of 5G, leading to higher battery demand for transmission towers and a shift from lead acid to lithium-ion batteries.

• Demand projected to reach 150GWh by 2030, up from the current 50GWh. India primarily imports cells and assembles them, with cell manufacturing set to start by 2025 or 2026.

• Assembling battery packs in India for export to countries with differential peak and non-peak electricity rates is commercially viable. This is due to the substantial price difference between Indian and developed countries’ battery packs. Developed countries have not seen significant drops in battery pack prices. For instance, Tesla’s power walls cost around $700-$800 per kilowatt hour, compared to India’s $200-$300, making India’s market more competitive.

• Lead-Acid Batteries in Automotive Industry: Presently, 12-volt lead-acid batteries are the mainstay in IC engines in India, used for starting, lighting, and ignition. A shift to 48-volt systems, while beneficial in reducing wire thickness and heat, is hindered by high costs and the need for extensive redesigns. In contrast, electric vehicles are increasingly adopting 48-volt and higher systems, necessary for more power-intensive applications like cars and buses.

• Two-Wheelers generally use 2 kilowatt chargers and most charging occurs at home. There isn’t a significant issue with charging infrastructure for two-wheelers. Even those living in societies manage to charge their vehicles by extending cords or removing the battery (weighing around 10-12 kgs) for charging at home. Battery swapping or standalone charging effectively meets their needs.

• E-Rickshaws: Predominantly using lead-acid batteries, e-rickshaws in places like Delhi have developed informal charging stations. These vehicles are often parked and charged overnight for 10-12 hours and also charged during the day. The existing infrastructure adequately supports e-rickshaw charging.

  • Autos with fixed batteries typically charge at home or at e-rickshaw charging stations. However, for autos that run on swap batteries, there is a growing need for dedicated charging infrastructure. Implementation is ongoing, with partnerships forming between auto companies and charger manufacturers. Typically, 10 kilowatt chargers, not classified as fast chargers, are used for these vehicles.

• Telecom Sector Growth: Telecom sector is experiencing a surge due to the 5G rollout, requiring around five lakh lithium-ion batteries. This equates to 2.5 to 3 gigawatt-hours, valuing the market at about 2000 to 2500 crores. Telecom represents the largest growth area in the battery segment.

  • there’s a shift towards standardizing battery specifications for various applications. A key development is the adoption of a 5-kilowatt hour battery pack as a standard module. This module’s size varies based on the number of companies sharing a telecom tower:

• For a tower with 2operators, the battery requirement is about 14 kilowatt-hours.

• If there are 3companies using the same tower, the requirement increases to around 28 kilowatt-hours.

  • This modular approach allows flexibility in battery pack sizes, accommodating different needs based on the tower’s usage and the number of operators.

• Data Center: India has around 130 to 140 data centers, predominantly using lead-acid batteries. These batteries are usually replaced every three years, creating a market size of about 150 crores. New data centers are emerging, but growth in this segment is gradual, expected to increase by 10-15%.

  • Battery Requirements: Small to medium-sized data centers require 2.5 to 3.5 megawatt hour capacity, while large data centers need around 10 megawatt hour capacity. Lithium-ion batteries reduce these capacities by 30-40%.

• Solar Segment: The solar industry in India is projected to grow significantly, aiming to reach around 280 gigawatt-hours by 2030. Despite this expansion, the growth in the battery energy storage systems doesn’t mirror this increase proportionally. Currently, only about 20% of solar installations have energy storage systems. The large-scale adoption of battery storage in solar is constrained by factors like uniform power rates and the high cost of batteries, with lithium-ion batteries priced around USD130-140 per kilowatt-hour and lead-acid batteries at USD60-80. The market for solar-related batteries is expected to experience a more pronounced growth once battery costs reduce to more economical levels, potentially around usd80-90 per kilowatt-hour, which could lead to a surge in demand around 2027-2028.

  • Batteries are likely to be used in situations where there’s a real need, like providing power to remote villages or islands. In metro areas with fewer power outages, the necessity for battery packs is lower(at current prices).

• Railways Segment: The railway sector is shifting towards lithium-ion batteries, especially for metros, to provide power backup during outages.

Amara raja vs Exide:

• Lead-Acid Batteries: Amar Raja has traditionally been strong in the telecom sector with lead-acid batteries, while Exide was less prominent in this area.

• Lithium-Ion Batteries: Exide holds a competitive edge over Amar Raja in the lithium-ion battery segment. This advantage stems from Exide’s existing battery pack assembly unit in Paranthe, their in-house design team, and progress in cell manufacturing plants.

• Market Share and Strategy:

  • It’s premature to accurately assess market shares for Amar Raja and Exide in the lithium-ion sector. Exide recently secured a significant order (around 150 crores) from Indus, while Amar Raja has not received similar orders yet.

  • Amar Raja is focusing on small battery packs for 5G applications, catering to the need for frequent tower installations (every 250-300 meters). Exide targets larger battery packs essential for running independent sites, covering a major portion of the market.

• Amar Raja and Exide are major players in the telecom sector for battery installation, with other companies like Exicon and Narada also participating. Reliance has the highest number of cell towers equipped with lithium-ion batteries. The industry is shifting from older battery technologies to lithium-ion, specifically to LFP (Lithium Ferro Phosphate) due to its higher temperature tolerance.

• Exide’s Lithium-Ion Cell Capacity: The demand for these batteries is expected to be strong, not just in stationary applications but also in the automotive sector, which constitutes 80% of the market demand. Currently importing cells and focusing on battery pack design and development. With a projected market growth to 150 GWh by 2030, Exide’s planned 6 GWh capacity is expected to be easily filled, and they are already taking advance orders.

• lithium-ion battery market is dominated by several top Chinese firms, with S-Volts ranked around 7th or 8th. While the leading Chinese companies like BYD and CATL are not focusing on the Indian market due to its nascent stage and low cost, Excide choice of S-Volts as a partner may have been their best option available

• Top Chinese firms might consider the Indian market once it scales beyond a certain size. For instance, CATL has indicated interest in markets exceeding 10 GwH, a benchmark India is yet to reach. Indian companies, therefore, have to navigate a limited pool of potential partners, with a preference for non-Chinese companies offering technologies like NMC, given the limited scope and relevance of others like LTO in the Indian context.

On EPR Guidelines

• Extended Producer Responsibility guidelines, now applied to lithium-ion batteries as with lead-acid batteries, require manufacturers and importers to collect and recycle used batteries, shifting recycling responsibility from government to private sectors. Previously, only about 20% of lead from lead-acid batteries was recycled, with the rest going to the unorganized sector. Ineffective recycling of lithium-ion batteries risks losing valuable elements like cobalt, nickel, and magnesium. EPR ensures manufacturers and importers are responsible for material recovery, promoting recycling and waste reduction.

• Companies like Excide, which have their own recycling units, are facing a disparity between the demand and their recycling capacity; for instance, when the demand is at 100, the capacity is only at 20. Historically, the industry’s focus has primarily been on the sale of new batteries rather than on reverse logistics. This trend has been due to the high costs involved in reverse logistics, the challenges in collection, However, with the introduction of new regulations, there is an anticipated increase in the market share of organized players. These regulations are expected to establish proper pricing mechanisms, making it significantly easier for companies engaged in recycling to source and procure materials. This change is particularly important considering that lead constitutes about 90% of the cost of a lead-acid battery. Improved access to recycled materials is likely to reduce the costs of raw materials significantly.