The automotive battery market in India is an arena of old standing players competing intensely with each other on all business fronts. The growing vehicle base along with increasing demand for better battery technology ensures the sector continues to perform well. One of the recent entrants in this space is power solutions provider Su-Kam, popularly known for domestic power solutions such as inverters. Entering this space and making a mark not only requires a significant amount of business might but also technical competence to fight it out with established players.
In order to understand the company's business strategy and the different approach towards technology in automotive batteries, we caught up with Samit Mitra, Senior Vice-President, Sales & Services, Su-Kam Power Systems Ltd.
The company has been in storage solutions for about a decade now, and the idea was to grow further. In doing so, the company wanted to ensure it moved to industries that are in some way related to its existing business. The automotive industry offered a direct fit, said Mitra while explaining the synergies between the two businesses.
The organised market for aftermarket batteries is sized at about 54 % of the total market, which is further dominated by two prominent players – Exide and Amara Raja. The small number of players in this segment prompted Su-Kam to make a foray into this segment. The result was the launch of a new battery range – Automate, aimed at the automotive market.
The products have been in the market for less than a year and the response so far has been positive, said Mitra. So much so, that the company is already the fourth largest player in the aftermarket automotive battery sector with a marketshare of about 6 %. Monthly sales account for about 11,000 to 12,000 batteries.
Su-Kam has taken a structured approach to the market, and has launched the product region-wise. Presently, it has footprint in the northern, southern and the western regions. It is undertaking extensive market feedback, improvising on its approach and spreading its reach. It should soon tap into the eastern market as well, said Mitra.
BUSINESS JOURNEY – SHORT YET FRUITFUL
Automate battery range started with one product and in a short span of time, it has grown to include four products. Starting off with just the passenger vehicle segment, Automate batteries are now being sold in the commercial vehicle and tractor segment too. Given the huge number of two-wheelers plying on the road, it was natural for us to ask Mitra about the company's absence in that segment. The company is getting its batteries ready for that segment as well, he said, and is presently carrying out testing. Market launch might take about three to four months from the time of this article's publication.
Talking further about segments, we were told that a larger part of the business is derived from the car segment as it was launched first. Truck batteries were launched recently and tractor batteries were launched in May 2013. The tractor segment however, has provided good traction for the company as not only have they got good business but a few undisclosed OEMs have already expressed their interest in Su-Kam batteries.
This signals a new side of business for the company, which could put it in the league of the big players in a short time. Elaborating on the OEM business plans, Mitra said that there are no immediate plans of getting into OE sales, as the company first wants to extensively test its product and gain consumer feedback across the country. As the plan is right now, Mitra thinks it would be about a year from now before the OEM business starts rolling.
Technology was always going to be a make-or-break factor for Su-Kam, given the competitive and mature state of the sector. Mitra said the market right now consists primarily of three types of batteries – 100 % calcium battery, calcium & antimony battery and a 100 % antimony battery. Su-Kam decided to enter the first two categories, as they weren't sure of the performance of antimony batteries in Indian conditions. Priced at par with competition, Su-Kam wanted to focus on offering better technology that provides value for a given price.
Mitra said the present technical spectrum in the Indian battery space doesn't have too many differentiators. Factors such as longevity and maintenance-free operation are a common offering from all players and consumers expect these by default, when in the market for a replacement. While Su-Kam continues to offer good performance in these areas, the focus area for them became cranking as it's a commonly faced problem in India. The target was to reduce the cranking time by almost half of what is offered by other batteries.
This problem is more evident in regions, which experience colder temperatures and the all-weather performance of the Automate batteries comes in handy here, said Mitra. These batteries have been tested in temperatures ranging from -40° C to 58° C, further proving the company's ability to get the technical aspect right.
The first step, of course, for developing any technology is to have the right people and Su-Kam recruited some of the most experienced people from the battery sector. As we write this article, the company is in discussions with an undisclosed European expert to further bolster its technology. As a result of the strong focus on technology development, Su-Kam has been able to deliver products at par with the industry without any foreign technical collaboration.
THE ROAD AHEAD
Less than 20 minutes into the discussion and it was clear that Su-Kam is in the market with a larger plan than present factors might suggest. Even though the company is confident of its own technical capabilities, it's open to technical partnerships if they serve a desired purpose. Beyond automotive batteries, the company is also looking at some applications of electric vehicles, such as golf carts and forklifts. Towards this the company has signed a technical partnership with Trojan Batteries from the US. The American company is a leader in the golf cart and fork lift applications and even though the technical collaboration is for the storage batteries, the company will look at extending it to electric vehicles too, said Mitra.
That said, he thinks the Indian market is still not ready for electric vehicles but as and when the segment makes for a lucrative business opportunity, Su-Kam will be ready with the technology. This alone is a strong indicator of the company's long-term plans to stay ready for opportunities that come along, regardless of how remote they may seem presently.
Sticking to the present automotive batteries, Mitra feels the present trend will see batteries becoming lighter and smaller as carmakers push for efficiency. The plates within the batteries hence will see a significant reduction in thickness without losing out on power storage capacity.
Talking of challenges within the sector, Mitra said that most companies in India till date do not have a full-scale battery R&D set-up. Su-Kam though, is soon going to establish its full-scale R&D centre in the NCR region, which should become operational in about a year from now. This centre will give Su-Kam enhanced product development capabilities, allowing it to further increase its range and customer base. The automotive batteries are presently being manufactured in one of the company's plants in Himachal Pradesh, which has an annual capacity of about one million.
Talking of mass adoption of new chemistries such as lithium-ion, Mitra said that OEMs will need to take a lead here. Presently, due to the price competition, they try and keep the cost of all replacement parts low. Unless the OEMs do not start giving a technology push, any add-ons from the aftermarket will find it hard to succeed.
The approach towards expansion will be methodical yet brisk as Su-Kam is already looking at claiming the third position in the market sometime next financial year. In annual volumes, this would translate into about 500,000 units. Going forward, Mitra expects the battery sector to continue growing at about 10 % or more CAGR through 2014-15, or maybe even beyond.
So, what is the reason for the optimism, despite a slowing economy? Mitra said replacement batteries aren't pleasure purchases and their replacement can't be pushed ahead as in the case of vehicles. The existing vehicle park is pretty large and the sector is expected to continue growing despite the present challenges. That should be enough to maintain the growth opportunities for the sector and the company.
TEXT : Arpit Mahendra