THE STORAGE BATTERIES INDUSTRY

Amara Raja's share in the standby VRLA market is around 42% and continues to maintain its leadership position in this segment. In the automotive battery segment, 2000-01 is the first full year of operation for the company. We currently manufacture and market a limited range of batteries for the passenger (car, utility vehicle and light truck) segment. In the OE segment we have added on an exclusive supply relationship with Mahindra & Mahindra (Bolero) and for a portion of Ashok Leyland cargo vehicles. A few other relationships are being finalized shortly. This is in addition to the exclusive supply arrangements we have with Ford, General Motors (Opel diesel) and DaimlerChrysler (Mercedes Benz).

We estimate that on the basis of the supplies effected in all of 2000-01 we would end with an overall market share of around 3% of the total OEM market; we currently operate at a market share level of 6-7%.  In the replacement market, we had rolled out into different cities starting with Delhi. In our served market in the passenger segment hi-life batteries have garnered a share of over 8% overall with shares in the most mature markets exceeding 14%.

The market in both sectors is growing steadily.  In the industrial sector we were the first to introduce maintenance-free VRLA batteries.  Other manufacturers have followed suit and we believe increased competition has allowed for expansion of the market and resulted in the customer getting the benefit of superior products and services.  In fact, in the last few years, in sector after sector we have seen conventional industrial batteries yielding ground to the VRLA technology we pioneered.  The industrial sector caters to core utilities such as railways, telecom, power-generating stations, non-conventional energy sectors and process industries.  With growth in these sectors the demand for batteries will increase and we will grow our volumes as the category develops and expands.

Again in the automotive sector we pioneered the introduction of hi-life silver alloy batteries.  With premature failure and area of concern in high heat tropical environments as in India, this technology promises to enhance battery service-life substantially giving the customer more value for money.  We believe that the long-term prospects in the auto OE sector are bright and the after-market continues to enjoy robust growth.  Automotive OEMs are in a state of consolidation that will result in many new models of vehicles which will result in OEMs seeking out the best battery technology that we are in a position to derive benefit from.  In the after-market too we have adopted a differentiated approach that has thus far yielded strong and positive results which we expect to build on.  We are confident that as the customer realizes the long-term value of superior products and as he or she increasingly exercises informed choices we will stand to benefit from the same.

Growth rate in the automotive after-market and OEM sector is around 10-12% p.a.

Growth rate in the industrial sector is estimated at 15% p.a.

While traditionally the margins for industrial batteries are higher compared to the automotive batteries, the auto battery industry is a volume game.  Therefore both sectors are profitable, but on different parameters.  We believe strong, significant presence in both sectors is essential and necessary for long term profitable growth.

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