Exide plans expansion to protect turf

Exide Industries, the top lead acid battery maker, is going aggressive in protecting its turf by significantly expanding reach across the country this year as it battles uncertainties on the demand front particularly from the automotive sector and a volatile raw material scenario.

“Your company is presently operating from 204 locations and has plans to increase its presence in more than 250 cities within the next 18 months,” Exide told shareholders in its annual report for 2011-12.

The reason for guarding its dominant position in the automobile battery segment — four-wheelers and two-wheelers — has also been explained.

“Due to a buoyant automobile industry in India, new players are entering the battery business. Though competition is always beneficial for both the customer as well as the seller, at times it may lead to unfair trade practices and predatory pricing which may create severe pressure on margins,” the report said.

The move is concurrent with efforts to restructure dealers’ incentives in a bid to make them go for higher volumes and also to cut rivalries among them, as disclosed by the management in a recent conference call with analysts.

“Until recently, Exide dealers (typically exclusive) were free to sell to any sub-dealer (typically multi-brand). This resulted in competition among Exide dealers within a territory. In the last two months, dealers have been assigned specific sub-dealers and the company has entered into arrangements to directly incentivise the sub-dealers, thus minimising the internal competition,” Spark Capital said in a recent research report.

Exide had earlier reorganised its marketing and distribution set-up on the hub and spoke model, which helped it to reach out to customers in the Tier II and III cities and also provide better after-sales and warranty services.

Even as competition heats up in the automobile battery segment, where Exide is the clear market leader with 72% share in four-wheeler OEM and 71% share in the two-wheeler segment, subdued demand outlook remains worrisome though the company remains bullish on the long-term prospects.

“As per the current indications, the automobile industry is poised for challenging times with uncertainties on the demand side in coming months, which hopefully is only a short-term phenomenon. We believe the total automobile market is expected to grow by double digits annually for the next five years,” Exide chairman RG Kapadia said in his report.

The battery maker is bullish as India is gradually becoming a major manufacturing base for export of cars, utility vehicles and tractors.