The Hindu Business Line : Auto parts the best biz, says Amara Raja honcho

THE feel good factor has positively rubbed off on the automotive batteries business, which is witnessing a boom, says Mr S. Ramachandra, Executive Vice-President, Amara Raja Batteries Ltd (ARBL).

"Automotive parts is the best business to be in," Mr Ramachandra told Business Line here, where he attended a function in which an ARBL franchisee outlet, third in the State, was opened.

In simple words, the feel good factor has done two things for ARBL. One, it has put out a large number of new vehicles on the roads, "because people just go out and buy new vehicles." The average life span of vehicles is coming down, but replacement cycle is also getting shortened.

"At least for sometime to come, you would see a huge market for new vehicles, and a huge market for anything that has got anything to do with automotive parts," Mr Ramachandra said.

The second thing the feel good factor does is that as the automotive part industry grows, and with that ARBL too, the company would be able to establish competitive strengths vis-à-vis the rest of the world.

The third thing is that the feel good factor makes people confident about the future. "When you feel confident, you tend to buy goods that are of aspirational value. You don't start quibbling about the price and you want to buy a good product. Since we are positioned to serve that very market - ARBL doesn't, for instance, produce conventional batteries — the overall sentiment helps us."

Replacement cycle getting shortened would mean the size of the replacement market, long-term, getting smaller for the same vehicle. For example, the number of times batteries getting changed would be fewer. "So, if earlier a vehicle was being kept for 20 years and the battery for 2 years, you get 10 batteries going through the entire life cycle of that vehicle - one OEM and 9 replacements. Now if a vehicle lasts 12 years and the average battery life lasts 3 years, we're not getting more than 3 replacement batteries coming out of that vehicle.

While that is there, the fact that the actual number of vehicles is so many more, you tend to benefit from that. The quality aspect is also better taken care of in the new generation vehicles. This also has significance, because, with the vehicle becoming older and older, it tends to be a drag on the owner. And he starts to be penny-pinching. At that point of time, he is willing to compromise the quality of the auto parts, safety and total maintenance. Which is not good for us," Mr Ramachandra explained.

On new additions to the auto OEM list, he said the company is already associated with almost all leading names. "We are talking to two three more and I am very hopeful that these would bear results soon. We are going to expand our OEM list very substantially."

On whether the volume-driven nature of business would mean ARBL training its focus on contract/third party manufacturing, he said there weren't many big private labels to look to. "We propose to extend our support to those brands with whom we're already associated with like Lucas, Bosch and AC Delco. Our own battery programme, called the Amaron Aftermarket programme, is set to become a very big part of our business."

`Automotives' tilt scales

AT ARBL, the ratio between automotive and industrial batteries was 60:40. When the company started from 3 years ago, it was virtually zero in favour of automotive. `Industrials' production has since come down and `automotives' grown phenomenally.

Among industrials, the UPS sector is growing at a phenomenal pace, at about 25 per cent per annum. "We're gaining enormously from this sector, where we have introduced a strong product. In general, communication and computation businesses are growing as well. But, specifically, telecom spending has been very, very poor," Mr Ramachandra said.

Elaborating, he said the telecom sector has had to contend with a lot of uncertainty arising from lawsuits and regulatory quibbles. "We've since seen consolidation in the industry, but we're not seeing investments."

The unified licensing policy has meant one thing in that people competing in the court and various tribunals will instead compete in the market. That's the way it should be. "There's consolidation happening in the sector, but the shake-out is not still complete. We would give another year for the scene to settle," Mr Ramachandra said.

Replying to specific queries, he said two-wheelers and three-wheelers were not in ARBL focus for now. "They are not strict no-no, because so long as it's automotive batteries that we are talking about, it's in the order of things that we have a go at them. It's just that at the moment, we don't have any concrete programmes."

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