Logistics

Battery firms see quick recharge when lockdown ends

G Balachandar Chennai | Updated on April 13, 2020

Replacement market offers respite even as auto OEMs stare at sales slowdown

Even as automotive and component players share an uncertain outlook, battery makers are likely to see a quick recovery and demand surge post lockdown.

The huge share of the replacement market for auto batteries is expected to help the companies recover faster than the other segments. Also, battery discharge issues are expected to lead to some demand surge.

While Covid-19 has wreaked havoc on the near-term demand for automotive batteries, the replacement business (about 43 per cent of sales) will ensure the sector’s speedy recovery post lockdown. However, OEM sales (11-13 per cent) are likely to be hit by the industry downturn and slower recovery.

“A demand surge in the post-lockdown period could be sector-specific instead of across the board,” Vijayanand S, CEO of Amara Raja Batteries, told BusinessLine. “For example, home inverter batteries and batteries used in taxis and commercial vehicles may see a surge in demand. Also, we are expecting pent-up demand for service support due to battery discharge issues.”

For Amara Raja, the automotive segment is expected to contribute 56 per cent of total revenues in FY20. Of this, the replacement segment may account for 43-44 per cent. Similarly, the auto segment will make up about 72 per cent of Exide Industries’ revenues in FY20 and the replacement segment is expected to account for about 39 per cent.

“We remain positive on automotive battery players led by a higher share of the replacement segment within sales and robust balance sheets,” said Shradha Sheth, an analyst at Edelweiss Securities Ltd.

Additional demand

Vijayanand said Covid-19 has created additional demand in a few sectors such as communication networks, data centres and healthcare facilities. There could be enhanced demand for energy storage solutions in these segments, he added.

However, within industrial segments, the demand slowdown in inverters and telecom will continue. Also, UPS and railway sales will pick up gradually based on industrial activity.

“The demand for batteries across other industrial segments is based on new projects, capacity expansion, economic activity etc. Hence the impact of Covid-19 on industrial batteries in the short and medium term will be subdued,” said Vijayanand.

He further said the company’s inventory pipeline is adequately stocked and the company’s sales and service teams are geared up to meet any surge in demand post lockdown.

Meanwhile, despite the lockdown restrictions, Amara Raja is currently delivering batteries for emergency services, said Vijayanand. It took special efforts to support critical service requirements in telecom networks, data centres and health care facilities, he added.

Published on April 13, 2020

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like