Amara Raja To Expand Lead-Acid Battery Business Abroad Amid Lithium-Ion Shift

Amara Raja Batteries Ltd. will continue to invest and expand the legacy lead-acid battery business abroad, even as it diversifies into the manufacturing of green lithium-ion batteries. India's second largest lead-acid battery manufacturer is setting up a Lithium-ion facility in Mehbubnagar and an energy research and innovation centre in Hyderabad at an investment of Rs 9,500 crore. In the next five to seven years, the company plans to increase the international contribution towards total sales, from 13.3% at present to 50%, as it expands into newer geographies, Harshavardhana Gourineni, executive director and head of the lead-acid battery division at Amara Raja Batteries, told BQ Prime.Amara Raja produces 30 million units of lead-acid batteries per annum. Of these, 18 million units are for the domestic market and around 4 million units are sold abroad. "We aim to take the international contribution to 50% of the total sales as we expand into U.S., Latin America, Europe and Africa, apart from the existing markets of Asia Pacific and South-East Asia," Gourineni said..According to company officials, the lead-acid battery has still not become outdated as there is substantial demand for them not just in India but even in developed economies. "Investments in the auto and industrial batteries will continue to happen in the existing business. However, the growth rate would saturate towards the end of the decade. Maybe, the two-wheeler or three-wheeler segment will phase out faster compared to four-wheelers," Vikramadithya Gourineni, executive director of the new energy business at Amara Raja Batteries, said.The company is in talks with top-end brands such as Walmart and Amazon to manufacture white-label batteries that will be sold in the U.S. and other geographies. There is demand from the agriculture (tractors), industrial, and telecom (towers) sectors for the lead-acid batteries even in developed economies, Gourneni said. The demand is expected to continue for this decade before it tapers, he said..In May this year, Amara Raja announced plans to diversify into manufacturing of lithium-ion batteries by setting up a gigafactory in Mehbubnagar, Telangana. The new business would entail an investment of Rs 9,500 crore over the next 10 years, and will include a green energy innovation centre in Hyderabad.The first phase of expansion will include the R&D facility in Hyderabad, a pilot line for 2 GWhr cell manufacturing, and a pack manufacturing facility. Together, the three projects will require around Rs 2,000 crore of investment over the next two years, Vikramadithya said."The funding will be done through internal accruals as Amara Raja is a free cash flow company. We plan to stay a debt-free company for now," Vikramadithya said. "We are not sure if we will prefer the debt-free approach for the second and third phases, but it will depend a lot on smooth and successful completion of the first phase," Vikramadithya said.The lab facility at the innovation centre will perform the new energy R&D in the space of lithium, future chemistries, storage, and power electronics. Initially, the lab will be used for captive purposes, but will be opened for common purposes and outside participation at a later stage, Vikramadithya said. "We don't expect to become technology-independent immediately with the innovation centre. The domestic value addition, once the project gets commissioned, will be around 30% which will be scaled to 60% over the years, as lots of domestic companies in the space of carbon black, chemicals, and aluminum and copper are showing interest to participate in the EV value chain," he said."It will take 5-10 years before we become technology independent. Till then, we will have to grab whatever and wherever we get the technology from, including China." The company expects investments in the new energy business to grow faster. Amara Raja's contribution to the overall cost of the vehicle will grow with Lithiun-ion cells and packs, though the margin may not be optimum as compared with the existing lead-acid business, which has a tried-and-tested supply chain, he said. "Our focus initially would be to build the staying strength and later focus on margins," Vikramadithya said.The battery manufacturer said that lithium, being the smallest and most energy dense molecule, will continue to be used as the preferred option by developers despite the perceived lack of availability of the resource. Vikramadithya said that the government should also study the feasibility of other material sources such as aluminium and copper as alternatives with focus on their availability.

Amara Raja To Expand Lead-Acid Battery Business Abroad Amid Lithium-Ion Shift

Amara Raja plans to invest Rs 9,500 crore to set up a Lithium-ion facility in Mehbubnagar and an innovation centre in Hyderabad.

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Amara Raja To Expand Lead-Acid Battery Business Abroad Amid Lithium-Ion Shift

Amara Raja plans to invest Rs 9,500 crore to set up a Lithium-ion facility in Mehbubnagar and an innovation centre in Hyderabad.

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