Lead-acid batteries most successful example of circular economy…strong reason to continue innovating: Amara Raja Executive Director

Can you give a breakdown of sector-wise trends in demand?

With the 5G roll out, there is more frequent occurrence of towers in smaller cell formats. When the form factors are smaller, it’s being addressed largely with lithium-ion now, which we’re also supplying to our existing customers. We’re managing this transition in a way where we’re spreading our existing assets of technology and capacities – we are forerunners in terms of the lithium chemistries as well, so packs are being supplied to our existing customer partners. Whereas for the large cell towers, we’re still offering the replacement in lead-acid. Lithium-ion is coming into the 5G small cell sites.

Across UPS ranges, lead acid has been dominant and we’re not seeing a big move to lithium there. But for data centres, for the sake of a lower form factor for its business model, we’re seeing much more lithium. There is lead-acid in this space but we do know that largely things will be moving on to lithium or a more cost-effective technology in the long-term.

For railways and solar, we’re seeing a mix of lead and lithium. But for energy storage at the grid level, both lead and lithium aren’t meeting the criteria at the moment as the cost of solar is lower than fossil fuels but the blended cost of solar plus energy storage is not as competitive as fossil fuels.

What about the automotive sector?

Of course, EV is coming in rapidly in the two-wheeler segment because the cost of switching and total cost of ownership are just getting very competitive. We’re still seeing healthy growth in ICE two-wheelers. Over time, there will probably be some consolidation and cannibalism, but I think we’re well-placed to take advantage of both. A headwind for EVs may be considered a tailwind for lead-acid, but we’re well-positioned to make sure we realise value in all situations.

On the four-wheeler side, certain supply chain efficiencies have yet to be built within the country, and the initial cost of the four-wheeler is not competitive to address the bulk of the market right now. If we look at smaller SUVs and also the bulk of sedans, where most of the consumers are playing right now, EV is more of an aspirational purchase than it is for economics. We’ll see some moves in that direction, but we’re seeing a lot of hybridization within these different classes, which will allow for a better fuel economy and a better sense of ownership.

Lead-acid batteries also serve as an auxiliary power source away from the main traction battery in both hybrid vehicles and battery electric vehicles. There’s a need for having an auxiliary power source for critical safety functions like collision detectors, power steering, and ability to use the windows. These are all run off of a separate power source because in adverse conditions, the main battery may be turned off, perhaps thermal regulation or various failure modes, but these functions still need to go forward.

Does the entry of new players in the battery space, like Reliance Industries and Ola Electric, present any challenges or opportunities for legacy players?

There are definitely a host of challenges because before we had a handful of competitors, especially in India as it was largely a duopoly between us and Exide. But once we start looking at these new applications, whether it’s electric two-wheelers, automotive in general, stationary storage, etc., many more competitors are coming up within India and in the global ecosystem. That is also an opportunity for us to become competitive– we’re building some capabilities for the first time. We’re able to leverage existing customer relationships to become developmental partners. But largely, it resets the curve a little bit where a lot of people are competing with the same set of challenges. If you look at automotive, there’re players like Ola who are doing all the cell manufacturing and everything forward from that in-house. There are also others who are open to procure either cells or packs. We have to see how we can engage with different types of customers to capture and deliver as much value. Largely for industrial, we can provide what the customers are looking for. In some cases, the application is changing, but we can still participate. We have certain advantages for having customer ownership and maybe some initial disadvantages in being able to mature the technology to address it.

There’s increasing focus on circularity in building sustainable battery value chains. Where does lead-acid stand in this regard?

The lead-acid battery and its ecosystem is the most successful example of a circular economy– 99 per cent of a lead-acid battery is recyclable and can be brought back in as raw materials. For our own batteries, we’re looking at almost 80 per cent of the raw materials coming from recycled sources, which means that much less impact of mining and extraction. It’s unparalleled, not just across battery technologies but across all products universally. I think that itself is a strong reason to make sure we continue innovating on this technology, to make sure that there is better energy or power density depending on the application. In some applications where you don’t quite need the full performance of a lithium-ion battery and need something better than our existing lead acid technology, this will play a very crucial role where it’ll be more cost efficient, have a better environmental impact, and can really take things forward, at least in the medium-term.

A lot of lead-acid battery recycling is done by the informal sector in unsafe conditions, even with extended producer responsibility (EPR) rules in place. What could be the reason for that?

There has been some policy upgradation recently, especially with the new Battery Waste Management Rules, which bring in the whole concept of extended producer responsibility. But in this policy, everything is falling directly onto the manufacturer or the organised recyclers. There’s very little done to ensure that the end customer or the retailers are making sure that the battery scrap is coming back to the manufacturer. If you can create a closed-loop system, it actually pushes out the ability for the informal sector to capture these volumes and recycle them in environmentally not so sound methods. Policy needs to really step up here, but we can’t play a waiting game also. We’ve decided to set up our own recycling capacity of about 150,000 tons, roughly 35 to 40 per cent of our requirement, which is coming up shortly in Tamil Nadu. Our circular economy efforts are ongoing and becoming much more extensive over time. You mentioned the informal sector– this would either influence them to upgrade their capabilities or could possibly push them out due to lack of competitive nature.