EV Battery Market Share To Be Dominated By Core Makers, Says Amara Raja
Amara Raja Corp. doesn't see core battery makers facing tough competition from original equipment manufacturers in the electric vehicle battery space.
Globally, since the beginning of the electric vehicle boom, OEMs have outsourced both cell and battery production to battery makers and the majority of the market share still rests with them. In China, currently, all battery requirements are outsourced to battery makers only and the management is not worried about the entry of other players in this space.
The company entered into a deal with GIB EnergyX Slovakia s.r.o., to make lithium-ion cells and establish a gigafactory in India. GIB EnergyX, a subsidiary of China's Gotion High-Tech Co., will licence Gotion's lithium iron phosphate technology for lithium-ion cells to Amara Raja Advanced Cell Technologies Pvt., a subsidiary of the listed entity.
Amara Raja's management also spoke about the access to strong intellectual property and Gotion's global supply chain for key raw materials the deal brings its way, at a concall on June 28.
While this partnership is non-exclusive, Amara Raja clarified that specific part numbers will be exclusive to it, based on requirements in the Indian market. These parts are going to be unique product offerings in India, according to the company. The products are fairly wide, encompassing complete portfolios that cover the bulk of the Indian market.
Transaction Structure And Key BenefitsÂ
The current transaction structure is unique as well, with Amara Raja choosing to route the transaction to Gotion's European entity, InoBat, rather than routing directly with the Chinese entity.
This bodes well in terms of security of supply of raw materials, with a chance to tie-up with the Chinese entity directly in the future as well. The agreement allows broad export rights and Amara Raja can sell the product worldwide as well, barring few exclusive regions pre-decided, as per the agreement.
The other key potential benefits from this transaction is that the partnership could help in faster offtake from customers as well.
Gotion already has customers in India and its supply to Tata Motors Ltd. affirm its tech credibility.
Margin Picture And CompetitionÂ
The company affirmed that margin of 11-12% would be possible at a scale of roughly 8-9 GW, banking on cost efficiency of its partner Gotion for the same. This is in a similar range of established players in China as well.
Currently, a key concern is the multilateral entry in the battery segment by carmakers and other original equipment manufacturers as well. Management highlighted that while competition is welcome from OEMs, the success rate has been low.
Interestingly, Volkswagen Group has equity stake in Gotion. Mahindra and Mahindra Ltd. has struck a partnership with Volkswagen for supply of parts for their electric vehicle, which has led to some questions by analysts on future potential opportunities with M&M as well as Tata Motors, to whom Gotion currently supplies EV batteries.
One of the challenges for Amara Raja will be forming partnerships with OEM makers for their batteries. Currently, Exide Industries Ltd. has already formed a partnership to supply EV batteries to Hyundai Motor India Ltd. and Kia Corp. in India. Amara Raja, too, is in conversation with all parties for the same.
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