Amara Raja to raise automotive battery capacity by 67% this fiscal

Amara Raja Batteries is ramping up its annual automotive battery production capacity by 67% to 10 million batteries during the current fiscal. The company currently has a capacity to produce 4.2 million four-wheeler batteries and 1.8 million two-wheeler batteries.

“We are increasing the capacity in a phased manner. The expansion is being carried out at our facility in Andhra Pradesh,” Ramana Prasad Alam, Amara Raja’s head (automotive batteries), told DNA Money.

“By the year-end we will have a capacity to produce about 5.6 million four-wheeler batteries and about 5 million two-wheeler batteries,” he said.

Amara Raja also manufactures industrial batteries primarily for the telecom and UPS sectors and derives about 40% of its revenues from the industrial battery segment and the remaining from automotive. Johnson Controls, the world’s largest battery manufacturer, holds 26% stake in the company and provides technical support. Though not foreseeing any capacity constraints for this year and the next year, the company is also in the process of creating facilities for the future requirements.

“We are confident of meeting the demand for this and the next year from our existing facility. However, we are also thinking of setting up a second facility. It would be a greenfield one. We are yet to finalise the details including the location,” he said.

The company believes that a slowdown in four-wheeler sales would not affect sales in the after-market segment much.

“There are indications of a slowdown going by the trends at the four-wheeler showrooms. But our focus is more on the after-market potential. For instance, when 5 million batteries were sold in the OEM route in 2010-11 by battery makers, the after-market demand was at about 11.5 million. This is expected to grow by 12-14%. So there would be no direct and immediate impact on sales in the after-market segment,” he said.

Similarly, the hype around the growth in the push-start two-wheelers sales too is not likely to come true when it translates into battery sales.

“The increase in two-wheeler sales need not necessarily translate into higher battery sales in the after-market segment. The number of batteries sold in the OEM route is equal to the number of batteries sold in the after-market segment. For instance, the batteries in kick-start two-wheelers are not regularly replaced like in the case of four-wheelers. The battery power for head lights or any such application in a kick-start two-wheeler is used only after ignition and not before that,” Alam said. The two-wheelers would definitely need better batteries and the growth would be visible only in 2-3 years.