Automotive sector and rise in aftermarket sales are some of the factors leading to surge in demand for lead acid batteries in India, says Karan Chechi.
Lead acid battery market in India can be broadly divided into two categories: SLI lead acid batteries and stationary lead acid batteries. Lead acid batteries are used in a large number of products and equipment such automobiles, telecommunication towers, railway traction etc. As of 2016, the market size of India lead acid battery was pegged at $ 4.47 billion and is expected to grow at a CAGR of 8.36%, in value terms, during 2017-2022.
The major factors fueling the demand for lead acid batteries in the country include: growing automotive market, new solar projects, smart city projects and expansion of telecommunication infrastructure. As of 2016, around 20.47 million vehicles were sold in India, and the number is anticipated to reach 30.92 million by 2022. SLI batteries, which are made up of lead acid, are primarily used in such vehicles. There are mainly three major types of lead acid batteries - SLI lead acid batteries, stationary lead acid batteries and motive/traction batteries.
Auto sector driving demand for SLI lead acid batteries
SLI lead acid batteries are primarily used in automobiles such as passenger vehicles, commercial vehicles, tractors, two wheelers, etc. Expanding automobile sales have aided the growth of SLI lead Acid batteries. Two wheelers are among the largest user of SLI batteries. As per the Society of India Automobile Manufacturers, the domestic sales of two wheelers in the country stood at around 16.46 million units, which is expected to grow at a rapid pace over the forecast period. This is expected to spur the growth of SLI batteries during 2017-2022. Also, a significant demand for SLI lead acid batteries would come from replacement of lead acid batteries from existing vehicles.
Over the past few years, India has witnessed a tremendous growth in per capita income thereby resulting in more disposable income in the hands of its citizens. As a result, there has been a sharp increase in the sales of automobiles, particularly of the two and four-wheeler variety. During 2015-2016, around 20.47 million automobiles were sold in India. The growing sales of automobiles in the country would boost the demand for SLI lead acid batteries over the forecast period.
Telecom fostering demand for stationary lead acid batteries
Stationary lead acid batteries are being used primarily in the telecommunication industry, UPS backups, railway traction (substations), solar projects etc. Increasing foreign direct investments, implementation of supportive norms by the government aimed at strengthening telecom infrastructure and increasing 4G penetration are intensifying demand for telecom towers and hence also boosting sales of batteries in telecom sector in India.
The Indian government is also aiming to transform the Indian railways by constructing new railway lines and developing dedicated freight corridors across the nation in a bid to further facilitate the movement of goods. The development of new railway networks would surge the demand for stationary lead acid batteries used in railway traction. India, under its National Solar Mission, is leading one of the largest solar capacity addition programs in the world. The country aims to have a installed solar power capacity of 100GW by the end of 2022, This would pave the way for the growth of lead acid battery market used in solar power projects.
Electric vehicles: The demand boosters of future
Traction batteries are mainly used in electric vehicles such electric cars, electric rickshaws, electric bikes, golf carts, etc. Electric rickshaws are the leading demand generators for traction batteries in India. The Indian government initiated the National Electric Mobility Mission which aims to bring 6 million electric vehicles on Indian roads by 2020. The program requires an outlay of $ 2,577.79 million for the promotion of electric vehicles in India.
Table 1 shows allocation of funds under Faster Adoption and Manufacturing of (Hybrid & Electric) Vehicles in India (FAME-India) Scheme during 2016-2017.
There has been renewed focus on improving the efficiency of lead acid batteries. With the advent of new technologies, Indian SLI battery manufacturers are continuously trying to increase their market share by offering technologically advanced products to customers. For this reason, they are emphasising on development of high quality batteries which are long-lasting and low-maintenance. Absorbent glass mat (AGM) technology of Exide Industries is one of the latest technologies introduced in India. This technology is efficient, offers optimal performance in extreme cycling applications, with both high-charge acceptance and partial state-of-charge operations.
Lead acetate battery manufacturers in India need to follow Indian Standards Code of Safety for Lead and its Compounds (IS 4312-1967) defined by Indian Standards Institution. The ISO 9001 specifies requirements that must be addressed by a company’s Quality Management System (QMS) for internal applications or certification. Thus, ISO 9001 focuses on effectiveness of QMS in a manufacturing plant. In battery manufacturing plants, ISO 9001:2008 certification gives an indicator of the company’s ability to meet customer requirement.
Exide Industries and Amara Raja Batteries Ltd dominated India battery market in 2016 and accounted for a value share of 45% during 2016. Unorganised players accounted for around 42.54% of India lead acid battery market during 2016. Unorganised battery manufacturers in India gain a competitive edge over major brands, as their products are 20-25% cheaper than branded batteries. However, the quality of raw materials used in the manufacturing of such batteries is of poor which reduces the life of these batteries.
Growing awareness among the consumers to opt for high quality batteries would result in paradigm shift in sales of unorganised batteries to organised batteries. Implementation of GST is likely to benefit organised sector battery makers like Exide Industries, Amara Raja, Luminous, SuKam.
Fluctuation in raw material prices and growing penetration of the lithium ion battery are the major challenges for the lead acid battery industry. The prices of raw materials are highly unstable and this eventually affects profitability of battery manufacturers. Lead accounts for 40% of the total raw material cost involved in manufacturing a single unit of a lead acid battery.
There has been growing shift towards other forms of batteries, particularly lithium ion batteries. Lithium ion batteries are environmentally friendly batteries and last longer than lead acid batteries. The decline in prices of lithium ion batteries has helped in increasing its consumption, as such batteries are used as substitute for lead acid batteries. This would pose a major challenge to the growth of lead acid battery market in the country.
Table 1: Allocation of funds under FAME-India scheme, 2016-2017 ($ million)
Source: Ministry of Environment
Karan Chechi is the Research Director of TechSci Research, which offers market research reports & custom research services for various industries. For more details, contact email@example.com