Amara Raja Energy & Mobility aims to lead India's EV battery market, investing in lithium-ion technology while maintaining growth in the lead-acid business. With plans for a 30 gigawatt-hour Giga factory and expansion into various EV segments, Chairman Jayadev Galla is targeting a 50-50 revenue split between new energy and traditional business.
22 Sep 2024 | 4778 Views | By Prerna Lidhoo
INDIA'S SECOND-LARGEST AUTOMOTIVE battery maker, Amara Raja Energy & Mobility, which, along with Exide, controls nearly 80% of the domestic automotive battery market, is now setting its sights on the lithium-ion segment. This move is a strategic leap, aimed at capitalising on the fast-growing electric vehicle market while also hedging ...
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INDIA'S SECOND-LARGEST AUTOMOTIVE battery maker, Amara Raja Energy & Mobility, which, along with Exide, controls nearly 80% of the domestic automotive battery market, is now setting its sights on the lithium-ion segment. This move is a strategic leap, aimed at capitalising on the fast-growing electric vehicle market while also hedging against the vulnerabilities in its core lead-acid battery business.
In Q1Y25, revenue from its lead-acid battery business saw a 15% year-on-year growth. Meanwhile, its li-ion-based new energy segment — focussed primarily on mobility and energy storage — outpaced expectations with a 20% year-on-year increase in revenue.
Autocar Professional spoke to Jayadev Galla, Chairman and MD of Amara Raja Energy & Mobility, on his EV growth outlook, expansion plans in the passenger vehicle segment, different battery technologies, and more.
You recently inaugurated your first gigafactory in Telangana for lithium cell and battery pack manufacturing. Can you share your expansion plans?
The battery pack assembly plant will be fully operational by 2025. The battery plant assembly will eventually have a 5 gigawatt hour capacity. Currently, we’ve installed about 1.5 gigawatt hour in phase I, and we'll gradually enhance the capacity as we keep adding additional lines as the demand grows. We already operate a pack assembly facility in Tirupati, which is approximately a 1 gigawatt-hour in its capacity. Now, we will have a bifurcation.
The Tirupati building [will focus on] more stationary battery packs for telecom, UPS, and other home energy applications, whereas the plant (in Divitipally, Mahabubnagar, Telangana) will be largely focussed on EV battery packs, electric vehicle battery packs, making cells for testing and qualification, and also small quantities of commercial supply and it should be completed by March next year. So, our Customer Qualification Plant (CQP) for cell manufacturing should be ready by April-June 2025.
We have an official approval to build a 16 gigawatt hour cell manufacturing capacity and we have an MOU with the government of Telangana to work with them on the support systems that they provide for large-scale investments in Telangana, and that's what is factored into this. As we look at the market and as the future requirements are concerned, the land is now good enough for us to take it up to 30 gigawatt hour. So, from 16 to 30 could potentially happen in the same place, depending upon the timing and the demand creation in the market.
You’ve also applied for Advanced chemistry cell (ACC) manufacturing under the PLI scheme. What’s the update on that?
The government has come out with the ACC PLI a couple of years ago, which was awarded up to 50 gigawatt-hour that was allocated, out of which 20 gigawatt-hour was resigned, as one of the parties did not meet the required qualifications. So, 30 gigawatt hour was awarded. Out of the balance 20 that was resigned, they went for a 10 gigawatt hour bidding, again in April earlier this year. We are among the seven bidders who bid in that round and now the technical evaluation has begun.
And we know we are qualified as far as the technical bid is concerned. The actual outcome is not officially published yet. They are under scrutiny. We will come to know who the winner is in the second round very shortly. And the balance 10 gigawatt hour is being allocated for stationary energy storage, which will be handed to the Ministry of Power. So, the last 10 gigawatt hour is likely to be bid out by the Ministry of Power, but exclusive for stationary energy storage.
Right now, you’re only catering to electric two and three-wheelers. Any plans to expand into the electric passenger vehicle segment?
Absolutely. Right now, the facility is for two- and three-wheelers. Today, we do not make four-wheeler or commercial vehicle packs, but we will eventually have the capability to supply even four-wheeler packs. Cells will be built for two-wheeler, three-wheeler, four-wheeler, station and energy storage, as well as residential energy storage. It's a complete range of services that will happen. The cell making is not customised for any specific application.
It will be available for a range of station and energy storage, and electric mobility. If you look at Tesla, they make cells for automotive vehicles for their cars. They also make a significant amount of cells and packs and systems for grid-connected energy storage systems, which also goes into residential energy. So, the building block of the lithium cell would be in different form factors and chemistries, but it can be applied to multiple end-user applications. And that's what we intend to do.
It will be a mega-scale plant capable of multi-chemistry and multi-form factor. Our current plan is that our first few lines would be commercialised by 2026. Afterwards, we can keep on expanding the capacity organically. We should be hitting 16 gigawatt-hour cell capacity and 5 gigawatt-hour battery capacity by 2029. It could be accelerated or it could be calibrated based on market demand.
What about commercial vehicles?
There's no vehicle segment, no application of battery that we will not attempt to be in. We will look at the market and where the real movement is right now. We will prioritise the resources accordingly. But eventually, we can put these batteries anywhere.
Globally, EV demand seems to be slowing. Do you see the adoption curve slowing in India as well? If you look at the global scenario, there are two very different stories going on right now. One is the Chinese story; one is the western story. The basic business models itself are very different.
If you look at the US market and. Therefore, the cost is very high as well. Generally, the cost is significantly higher than the IC engine version of the same vehicle. But that business model is facing some pressure now, in terms of volume growth.
But the Chinese model is very different. It's light mobility; two wheelers, three wheelers, small cars, affordable cars, and cars that are competitive with the IC engine vehicles as well. That's really taken off. And now we hear that in the Chinese market, for the first time, more than 50% of new cars sold are EVs and it's continuing to grow.
That's the model we believe is going to be successful in India, and we have planned around that type of a growth model. That's why we're focussing on two and three-wheelers first. It's going to take time even for two and three-wheelers to fully penetrate.
So, I don't think that it's any time soon that that's going to be completely electric. Electric vehicles will continue to penetrate those segments at least for five more years, if not longer than that. In four wheelers also, we've seen good traction with some of the smaller vehicles, whether it's Tata Nexon or Mahindra, which is planning to introduce a number of different vehicles in the near future. I think those vehicles are going to really take off.
We're going to see a very different scenario in India. The panic that we see in the West, the cancellation of plants, the postponement of plants because demand isn't keeping up with the estimated production dates, is because the difficulty that those companies have had trying to do it on their own without Chinese technology is also a learning experience for the whole world right now.
Every plant in the world, whether it's in Europe or U.S., after having burnt their fingers for many years and burning probably billions of dollars, finally have gone back to the Chinese for help on the product process, machinery, and the know-how on how to make these batteries. So, I think we've learned from all those mistakes and we're not repeating any of them. Our market is going to be more like China. We're pretty confident about that.
Solid-state batteries are being hailed as the future. Are companies over-investing in current technology?
If you see how long it's taken just to set up global-level capacities for these early-generation lithium-ion batteries, whether it's LFP (Lithium Iron Phosphate) or NCM (Nickel Manganese Cobalt), it's [taken] a decade or longer just to get to this capacity to meet the existing requirement. The demand will continue to grow in the current technology itself at least for the next five years.
If we have to graduate and move again to the next phase of solid-state or whatever it will be, it will take a decade or more to build those capacities. So, we'll be able to see what's happening in front of us and we have enough time to react and get on board with those trends and stagger our investments based on what's happening in the market. Yes, a lot more players are getting into it in India but we're in the race to be the first. There are a couple of people ahead of us, but we see them stumbling.
Five years hence, what do you expect the share of your new energy business to be in your portfolio?
If you say five years hence, we should be growing our current lead-acid battery business healthily by double-digits. So, that should take it from the current USD 1.2 billion to around USD 3 billion dollars. If international market demand and capacity expansion plans happen as expected, we might get closer to USD 3 billion. For the new energy business, we are at the very beginning stage. We are making investments. We have some market forecasts. If things turn out that way, we should be able to have at least 20% market share in cells.
The [market share in the] pack [business] would be much lower because there are a lot of pack builders in this country. If I telescopically look at the five years hence, we should get close to USD 2 billion on the new energy business alone, which could mean cells, packs, chargers, energy storage systems, etc.
That's the gamut of solutions that we would be offering under the new energy business. So, the end-to-end energy mobility and the subsidiaries put together could be close to a USD 5 billion dollar business. The potential going beyond five years would be a different story again, and it all depends on the path that the penetration of EVs takes.
If it really takes off, then the sky's the limit and the battery is 40% of the cost of a passenger car, in the case of EV. In the case of our lead-acid batteries, it's only 1-2%. So, the scope for the new energy business to significantly go beyond what our traditional business is quite significant if (EV) penetration takes place the way we expect. In about five years' time, if everything goes to plan, and if the market develops the way that it's expected to develop, we'll be at almost a 50-50 split between new energy and the lead-acid business.
Have you started scouting for new locations from a de-risking point of view?
Any business, as it eventually starts to grow big enough— be it from a board point of view, governance point of view, or risk assessment, they look at how they are de-risked across all categories. It appears to many that Amara Raja factories are too concentrated in a single location. So, if any black swan event takes place, we would be more vulnerable. So already, we are running an auto component shop in Tamil Nadu and started setting up a recycling plant there. I think it's not going to be unreasonable to see many new locations opening up even outside of the country.
Our next major expansion in lead-acid factories will be in North India because we have to have that geographical regional spread for logistics costs that will come down drastically. New Delhi is one of our largest markets. West India is also a very large market. If we have a factory closer to those markets, we have permanent savings on transportation costs.
We will be de-risking our locations, not only from political risk, but many other risks as well, and also from a regional logistics advantage point of view. We've been exploring various states, but we're not ready yet to make those expansions. Our current capacities and our current locations are sufficient.
Whatever we have invested in Andhra Pradesh, we're not planning to shift any of that. All of them are still running. When we need another 6 million units, that's when we'll be coming to North India. We're currently at 19 million. The next major expansion would add another 6 million. That’s where we feel economies of scale will really kick in.
We will need a significant boost in capacity and have to look at a new plant at a new location and we haven't reached that point yet. With the kind of growth we're seeing, both domestically and the significant offtake we're seeing from our international business operations, within the next two or three years, we'd have to look at some kind of capacity addition and geographic diversification.
And, of course, these expansions won't necessarily be limited to India given the offtake we're getting from the regions of Southeast Asia, Middle East Africa and North America. Right now, about 12-14% of our volumes on the automotive side are actually going to the international markets and we're growing at a CAGR of about 35-40%. It would make sense to potentially have some local capacities, to deal with those markets more directly and favourably.