'I have personally been very keen on investing in lithium ion battery technology for some time.'
Shally Seth Mohile reports.
Amara Raja Batteries, one of the largest lead acid battery manufacturers, is eyeing a bigger play in the energy and mobility business as it seeks to ride the opportunity of electric vehicles, advanced home energy solutions and other allied products and services.
It has charted a strategy of 'future-proofing' the business and repositioned itself as an 'energy and mobility' player.
This will include expanding the core lead acid batteries business and establishing a New Energy SBU (strategic business unit) that will encompass lithium cell and battery pack, electric vehicle chargers, energy storage systems, advanced home energy solutions and related products and services.
The company's board on Monday, June 14, also announced leadership changes at the firm.
After being at the helm for three-and-a-half decades, founder-chairman Ramachandra Galla, who turnjed 83 on June 10, is stepping down, passing on the baton to Jayadev Galla, who is also the Telugu Desam Party MP from Guntur.
The board has also inducted the next generation -- Harshavardhana Gourineni and Vikramadithya Gourineni, Jayadev Galla's sister Ramadevi Gourineni's children -- as executive directors, to actively drive the transition to 'energy and mobility', the company said.
The announcements by Amara Raja comes amid the thrust India's policy makers have been giving to electric mobility in its endeavour to reduce carbon emissions and reduce oil import bill.
With the objective of encouraging indigenous manufacturing and bring down the battery costs, which has been one of the biggest barriers in faster adoption of EVs, on 13 May, the government announced productivity linked incentive for manufacturing of the advanced chemistry cell at an estimated outlay of Rs 18,100 crore (Rs 181 billion).
The scheme is expected to draw large investments by domestic and global firms.
"I have personally been very keen on investing in lithium ion battery technology for some time. But we somehow felt the timing wasn't right," Jayadev Galla told Business Standard.
"Now that the government is taking up the PLI scheme we thought this was the right time," Galla added. "We will otherwise miss the bus."
The policy, pointed out, Vijayanand Samurdrala, president of New Energy, "gives a definitive direction to the EV industry" and offers an impetus for building a domestic supply chain for lithium and other advanced cell chemistries to serve the fast-growing EV and renewable energy sectors.
Amara Raja plans to invest in a bouquet of products and services to accelerate the transformation as an energy and mobility solutions provider.
According to Samurdala, given the thrust on electric mobility one has seen in various automotive segments, particularly the two and three wheelers, from the battery perspective, it is likely to generate a demand 80-100 gigawatt/hour by 2030 by which time the adoption rate in each of the categories will reach double digit.
Lithium-ion battery pack prices, which were above $1,100 per kilowatt-hour in 2010, fell by 89 per cent in real terms to $137/kWh in 2020.
By 2023, average prices are expected to close to $100/kWh, according to the forecast from research company BloombergNEF published in December.
Despite increase in lead price globally, reduction in lithium cost is posing a threat to the addressable market of lead acid batteries, both industrial and auto.
'There is no use of lead acid batteries in e-2W and e-3W as an auto component. As a result it will impact the lead acid battery makers,' said a June 5 note from Geojit Equity Research.
Galla is not worried. He clarified that even as the company is steering into newer businesses which are gravitated towards the lithium ion technology, the lead acid battery business is not taking a backseat any time soon.
On the contrary, the company plans to expand and tap into new segments and explore new markets and opportunities for the same.
He expects the demand for lead acid to remain strong in the foreseeable future on the back of a demand from automotive, industrial, telecom and new emerging segments like data centres.
Amara Raja supplies automotive batteries to various automakers in India and counts Ashok Leyland, Ford India, Honda, Hyundai, Mahindra & Mahindra, Maruti Suzuki, and Tata Motors as its key customers.
The company's Industrial and Automotive Batteries are exported to countries in the Indian Ocean Rim.
A few months ago, the company in line with the future demand of two wheeler and four wheeler inaugurated its 'Advance lithium Technology Research Hub' with a pilot plant facility for cell development project based on the technology transferred from ISRO.
The board approved an investment of Rs 350 crore to Rs 400 crore (Rs 3.5 billion to Rs 4 billion) to complete the third green field unit of automotive battery and other technology and maintenance capex.
The company has also announced capex of Rs 500 crore (Rs 5 billion) towards setting up a lead acid recycling plant of 1 lakh tonnes per annum capacity (Rs 280 crore/Rs 2.8 billion) and captive 280 MW solar power plant (Rs 220 crore/Rs 2.2 billion).