Amara Raja Eyes 'Right Price' For EV Batteries With GIB EnergyX Deal
Vikramadithya Gourineni, ED of new energy at the company, said the partnership is non-exclusive, and that he's 'not too concerned' about competing with other licensees.
For getting batteries at the right price, the right technology is going to be very critical, according to Vikramadithya Gourineni, executive director of new energy at Amara Raja Energy and Mobility Ltd.
The company’s recent deal with GIB EnergyX Slovakia s.r.o.—to make lithium-ion cells and establish a gigafactory in India—is a step in that direction, he said.
Technology transfer will take place in 2-2.5 years, he told NDTV Profit in an interview. The first phase, which involves designing and planning the production infrastructure and manufacturing the products, will take six to eight months.
Vikramadithya Gourineniexecutive director of new energy at Amara Raja Energy and Mobility Ltd. (Source: Official LinkedIn account)
By then, the company’s research and development team will set up its supply chain, after which the factories would start running in 12-18 months.
“It was quite aggressive being our first time and our first time in India really happening,” Gourineni said. “We'll definitely try and keep it closer to two years.”
On Partnership Exclusivity
Gourineni clarified that the partnership is non-exclusive, saying he wasn’t “too concerned” about competing with other licensees.
"I think once we have this technology in hand for the LFP (lithium iron phosphate) chemistry, there's no reason to look out,” he said. “I think it's quite a comprehensive product portfolio that we'll be bringing to India.”
Gourineni said the partnership will take the business-to-business (B2B) route, with after-sales services being largely driven by the original equipment makers, or OEMs.
“When localising the product, there's an advantage there that eventually the cost and quality can match imported products,” Gourineni said. “So, I don't think that we will be going and trying to compete with them there.”
Export Plans
Gourineni said the company will focus on the domestic market. “Indian demand itself is growing, and we're looking forward to getting into that market,” he said.
“I think the kind of project we're talking about is 16 to 20 Gigawatt per hour; it looks quite small when you’re looking at the type of installation base in China that’s announced in the US, in Europe," he said.
Gourineni predicts an “explosive” growth in the EV market. But mainstream adoption may take some time, he said.
"While demand for lead acid batteries in certain segments is flagging through exports, where ... we can still send our products at great pricing, great quality,” he said.
Watch the full conversation here:
Edited Excerpts From The Interview:
Vikramadithya Gourineni, executive director of new energy at Amara Raja Energy and Mobility, joins us right now on the show. They've announced a strategic technology collaboration with Gotion- InoBat batteries. Do tell us the significance of this development because obviously the street likes it at the onset.
Vikramadithya Gourineni: I just want to kind of comment on what the earlier gentleman was saying. I definitely think the future of storage is bright there. There is a little bit of concern about the pricing, but India being a country that has, you know, I don't think we're going to be slowing down on our renewable investments anytime soon. Getting batteries at the right price, the right technology is going to be very critical and it's something that I think is quite enabled with the kind of partnership that we've signed. The partnership we've signed with Gotion-InoBat, its European subsidiary of Gotion Hi-tech China. They are a top-five player in China and by LFP chemistry, one of the leaders, especially in technology. We believe that for all of our automotive stationary customers that are emerging, this is going to be a great move. It allows us to bring world class technology products to their doorsteps in India, and we're looking forward to collaborating deeply, not only in Cell making but also having access to the raw materials, that kind of pricing that your previous guests mentioned and being able to eventually secure some level of raw material security and pricing, so that we can have a successful projects here in India.
What are the kinds of timelines that you look for all of this, I mean, in terms of one, this to get consummated and two, you getting access to not just the cell technology, but the other things that you spoke about?
Vikramadithya Gourineni: So the technology transfer would begin immediately with the project governance charges in place and we're starting to exchange the information. Over the next three to four months we would be (examining) the Phase One plans, going through a detailed factory design, industrial design, which equipment we want to use, utility, everything the detailed project scoping, and then hopefully three to four month we'll be able to commence construction on the products for licensing Gotion and in the meantime, there's an entire effort to get our R&D team, our scientists to get the technology information, get the product information and get all the right things start setting up the supplier based supply chain. So over once we start construction and quarter from now best in class in China 12 to 16 months even they're able to get factories up and running. It was quite aggressive being our first time and first time in India really happening. We believe two to two and a half years for execution to getting to the startup of production is a reasonable target. Definitely try and keep it closer to two years.
From both ends, is this an exclusive partnership or could Gotion also do a tie if it's somebody else, or you also need or do a tie up with some other global major as well.
Vikramadithya Gourineni: The amendment is non-exclusive in nature. So that's something that, you know, we both sat down and agreed upon. I think the way that Amara Raja figures is I'm not too concerned about you know, competing with other licensees of my partner. The world is very large and there are a lot of other players that are there, like I said Gotion is in the top five in China, which means there’s other large players who are coming to India, who are importing to India. We didn't intend to be that there wasn't a deal breaker for us. Neither are they exclusive, exclusive with them. But for all intents and purposes, I think once we have this technology in hand for the LFP chemistry, there's no reason to look out. I think it's quite a comprehensive product portfolio that we'll be bringing to India. So we're just looking ahead for that.
What's the roadmap for what you do because I'm guessing this will not be necessarily just a B2C after sales product. You were looking at the entire market. How do you stitch up partnerships? Is this India based? Do you have access to other markets? Please tell us.
Vikramadithya Gorineni: So you're absolutely right. I think the existing variable we have is largely after-market driven. It's a completely different scenario in electric mobility. Mostly it's going to be B2B to the OEM, and any after sales service is also going to be largely driven through the OEM, much more complicated packs. In terms of how we engage with OEMs. I think we're very flexible and open minded. We see different models around the world. There are OEMs who have invested in their own cell-making independently. I don't think that's been a great success. I can't think of many great examples where it's been very successful. But there are cases where the joint ventures with the battery maker, technology licensing for the battery maker, it's not happening. In the United States, if you see recently Tesla, GM Ford and a bunch of OEMs are actually licensing technology from CATL who is the global leader.
In the case of Exide what you mentioned, that's more of just a supplier arrangement. I think we're open to anything if any OEM wants to have a deeper tie up with us. I think we're willing to engage in that conversation. As for the Indian market, of course, we already touched on the business model not really being after market driven. But in terms of exports, we have bought export rights as part of this arrangement. There are some mutually agreed and I think acceptable conditions in which exports are slightly curtailed, but if we look at the reality of it, I think there are some markets that we are quite strong in as Amara Raja in the Indian Ocean rim, with specific segmentation, especially stationary storage. We supply pretty much all tower, telecom companies in this region. We are quite strong and UPS and we are having a very strong portfolio in light electric mobility. So two-wheeler, three-wheeler where India is anyways, the largest market in the world. But there's a lot of synergy with Southeast Asia as well. But even then, I think the kind of project we're talking about is 16 to 20 Gigawatt/hr, it looks quite small when you're looking at the type of installation base in China that’s announced in the United States, in Europe. So I think we'll opportunistically pursue exports but largely we may not have that kind of skill to divert out of India because as it is the Indian capacity, Indian demand itself is growing, and we're looking forward to getting into that market.
I'm just trying to understand if that would be a strategy that you would pursue, go into the large Indian four-wheeler players and do some tie ups with them? Why would an OEM want to depend on only one player or one supplier?
Vikramadithya Gourineni: Like I said, different OEMs are pursuing different strategies, many of our customers who we started contacting ever since the news broke, you know, they're very optimistic about it. It's mostly just looking forward to supply arrangements. But ultimately, I think any OEM especially in a nascent market, like India, may not be as keen to tie up especially in an exclusive manner because they are taking a bet on technology. When localising the product, there's an advantage there that eventually the cost and quality can match imported products. So that's something we're looking to do. Ultimately, I think it's up to the different OEMs who have announced investments into their own Cell making as well. So I don't think that we will be going and trying to compete with them there.
Last couple of questions, really. One is there are various figures out there would love to understand how you guys in your business modelling, think of the growth of the industrial battery segment, or the overall battery segment, let's say, till the end of this decade, maybe a CAGR number, maybe post a couple of years when EVs become more mainstream than what they are right now. Any numbers out there?
Vikramadithya Gourineni: I'm not able to give you an exact number right now. I think overall, the battery market is growing. It's growing on both the legacy power trends as well as the new upcoming ones. I think that's the beauty of India as a market. We are a developing market, growing market and largely under penetrated as a vehicle market. So we do see that there's going to be a long runway still for legacy power trains and we'll continue to have similar growth numbers to what we have today. On the EV side, I think the growth is going to be a little bit more explosive. But it's going to take time to really see mainstream adoption, and probably where we'd like to see we are also trying to figure out is how high EV penetration will go organically and in some countries where policy is a more major driver to get it above a certain threshold. We need to see where India really wants to end up and on the stationary side while demand for lead acid batteries in certain segments is flagging through exports where you know,where we can still send our products at great pricing, great quality. There's still a robust demand for lead acid batteries and there's of course an export demand, bringing Lithium into different stationary applications. So it's something more we started doing at a Pack level. We do believe that energy storage is going to be a really significant market going forward and that's something on the roads, as well.
You mentioned a period of let's say two years or two-and-a-half years post which this factory comes on stream. What are the kinds of numbers that an investment of this nature and a manufacturing plant of this scale can generate? Maybe the kind of revenues that it can generate at full capacity, optimum capacity, that kind of margins that you could work with for a product like this? Can you share some details there?
Vikramadithya Gourineni: I will preface by saying that our overall investment quantum which we talked about in Telangana is 9,500 Crores.We still have some plan to kind of deploy that over the next five years. Only that we are recasting that number a bit because we are on board now and looking at the type of Cell portfolio we want to bring out. We do believe there is a lot of optimisation but they're going to be able to bring to the table, our Capex numbers are going to be largely optimised. Possible increase that we see even, you know a good healthy order book coming in, with better technology. With the initial plan investment numbers, we were looking at getting up to like two and a half billion USD kind of our revenue target. In terms of margin. I know, it's not the answer you want to hear. But even if I was to ask my partner what kind of margin profile they see, the supply chain being very, very dynamic in nature pricing, very dynamic. Sometimes the prices are dropping to the bottom. Sometimes they're rising, and they also have a hard time getting a very long term projection on the margin. I believe that I won't have that kind of clarity to give you today and next time we meet I hope to give you a little bit more.
