Following are some of the key numbers about the global and Indian battery industry and the expected evolution of both of them.
Global battery industry
In terms of revenue, the global battery industry was valued at $111.86 billion in the year 2021 and is projected to reach $423.90 billion by 2030, growing with a CAGR of 16.68% over the forecasting years of 2022 to 2030.
CAGR growth: 7%-9%. Global lead acid battery: $ 45.84 B USD in 2023 expected to grow at a CAGR of 5%.
Indian market size of lead acid batteries: $7.5 B USD
Key growth enablers of the global battery market:
· Increasing popularity of consumer electronics
· Lithium-ion batteries are among the most common types of high-capacity secondary batteries utilized in electronic devices such as laptops, mobile phones, computers, cameras, and others. This battery technology is highly popular as it is relatively affordable, offers high power density, and does not self-discharge quickly.
· The rising demand for consumer electronics across the globe is anticipated to increase the demand, as well as the adoption of different batteries for a range of consumer electronic devices. For instance, across sales categories of consumer electronics, computers (+34%), as well as TV sets (+12%), have grown relatively faster as compared to smartphones (+1%) in the last three years (2019-2021) worldwide. This is majorly due to COVID-19 restrictions, in addition to more time spent learning and working from home.
· Incentives for EV battery manufacturing
· Declining prices of batteries
· High demand for automotive applications especially from electric vehicles
Key growth restraining factors:
· Safety issues related to battery usage
The safety features of a battery are profoundly determined by the chemistry of the battery, its operating environment, and abuse tolerance.
· The internal failure of a battery, primarily a lithium-ion battery, is caused by the instability occurring in the electrochemical system. Therefore, understanding material properties, electrochemical reactions, and side reactions in the battery are fundamental for assessing its safety.
· Temperature and voltage are the two main factors that control battery reactions. Safety accidents are followed by continuous gas and heat generation, resulting in battery rupture and further ignition of combustible products.
· Volatility in raw material prices
· Issues related to battery recycling
Organized vs unorganized battery market
Organized companies sell branded batteries with warranties, while unorganized companies provide no warranty or after-sales, sell recycled batteries, and offer products at a 30-35% discount to branded ones. The Indian automotive replacement battery market is leading the lead-acid battery market.
The share of the unorganized segment in the replacement market has been gradually declining, but is still 40-50%.
Non-compliant manufacturers (those who evaded indirect taxes) enjoy a price advantage as high as >20%. While we are yet to see material change in compliance post GST implementation, cost of doing business is expected to increase for non-compliant players, as the government’s focus shifts towards higher compliance.
Impact of EVs
EVs not to displace lead-acid batteries; to create opportunity to manufacture lithium-ion batteries: Contrary to general perceptions, electric cars (EV) have a 12V lead acid battery (LAB) as auxiliary battery for SLI (starter, lighting and ignition) applications. Lead Acid Battery will remain relevant even in the EV world.
Localization of Li-ion batteries is the highest priority for OEMs to reduce cost of batteries and lower forex exposure. Given the criticality of the battery and scope of differentiation it offers, OEMs will manufacture EV batteries in-house. Lithium ion batteries could be a ~USD42b opportunity by 2030 (9x the automotive Lead Acid Battery opportunity). Based on this, the cell manufacturing opportunity would be ~USD15b.
Lead acid battery to remain for SLI applications in EVs
Contrary to general perceptions, electric cars have 12v Lead Acid Battery (LAB) as auxiliary battery for SLI (Starter, Lighting and Ignition) applications – similar to ICE engine powered car.
LAB is preferred for its ability to provide the high surge currents needed for an automobile’s starter motor, making them a reliable power source at an affordable cost.
Hence, LAB will continue to remain relevant even in the EV world, unless there is any significant change in technology.
However full electric 2W and 3W vehicles don’t operate on lead acid batteries, hence can risk existing lead acid batteries opportunities going ahead. 2Ws and 3Ws contribution to the Automotive battery segment at ~40%/~4% (including aftermarket demand).
A high-voltage lithium-ion propulsion battery typically replaces the internal combustion engine and provides power to generate the torque needed for directional movement. However, all EVs, including BEVs, require a low-voltage battery to work in tandem with the high-voltage battery to provide critical functionality during all stages of use – when the vehicle is driving, when the engine or high-voltage battery is off and when an emergency occurs. While the vehicle is in motion, the battery supports peak power demands that exceed the direct current to direct current (“DC/DC”) converter’s capabilities, such as power steering and seat heaters.
While the vehicle is at rest, the low-voltage battery provides power to engage the primary high-voltage battery, both during charging and to initiate driving. The low-voltage battery also supports key-off functions such as theft-protection, entertainment and connected-vehicle technologies such as over-the-air updates. Perhaps most importantly, when a failure occurs resulting in a loss of power from the high-voltage battery or DC/DC converter, the low-voltage battery supplies power to safety-critical systems, providing a crucial layer of redundancy necessary to ensure the vehicle can be safely navigated.
Advanced Battery technologies like AGM and EFB remain the preferred next-generation low-voltage solution by OEM customers and are currently specified into all powertrain configurations, including mild-hybrids, plug-in hybrids and BEVs. We believe the cost of our Advanced Batteries is approximately a quarter of that of low-voltage lithium-ion today. In low-voltage applications, AGM batteries provide a preferable alternative to lithium-ion, as they are able to handle the key-off and peak loads in electric vehicles, are inherently safe and have a superior cost structure. Based on IHS Markit projected electric vehicle platforms and production volumes through 2025, the vast majority of new vehicles will utilize lead battery technology for their low-voltage requirements. The superior performance of our products and our industry-leading AGM capacity position us well to capture additional market share in next-generation vehicle battery demand.
(IPO note of Clarios – largest battery company in the world)
Replacement demand
Replacement segment offers secular and profitable growth opportunity: The automotive replacement battery segment offers a secular and profitable growth opportunity, driven by (a) increasing penetration of automobiles driving expansion in automobile population, and (b) GST-led consolidation. The auto replacement segment enjoys the highest profitability due to (a) B2C nature of the business, (b) high pricing power with diffused customer base, and (c) low competitive intensity.
For comparison of the top 2 battery players in India – click here
