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Informist, Wednesday, Jul 24, 2024

 

--Amara Raja: Pact with Gotion to help expedite lithium cell project

--CONTEXT: Amara Raja President S Vijayanand's comments in interview

--Amara Raja: New energy R&D unit to be ready by March

--Amara Raja: Lithium-ion cell pilot unit to be ready by Apr-Jun FY26

--Amara Raja official: To begin work on gigafactory very soon

--Amara Raja: May complete phase I of gigafactory in 24-30 months

--Amara Raja: See gigafactory starting commercial ops in FY27

--Amara Raja: Phase-I of cell mfg unit to have 8-10 GWh capacity

--Amara Raja: Aim to reach 16 GWh capacity by 2031

--Amara Raja: See 12 bln rupees/yr capex for gigafactory next few yrs

--Amara Raja: May raise funds at appropriate time, if necessary

--Amara Raja: Investor interest in new energy operations high

--Amara Raja official: Confident of demand for e-vehicle batteries

--Amara Raja official: To focus on domestic e-vehicle market for now

--Amara Raja: Target 20% market share in e-vehicle battery by 2030

 

By Narayana Krishna
 

HYDERABAD – The technology partnership with China's Gotion Group will help battery maker Amara Raja Energy & Mobility Ltd expedite its 95-bln-rupee lithium-ion battery cell manufacturing project in Telangana. The pact with GIB EnergyX, a subsidiary of Gotion High-Tech Co Ltd, is likely to clear hurdles and strengthen Amara Raja with technology, supply chain, and service support, according to S. Vijayanand, president for new energy business.

 

"We don't have to reinvent everything because they have already done it elsewhere and I just need to adapt it for the Indian context," Vijayanand told Informist in an interview.

"There are four elements to this partnership. One is to provide the product technology. Two is to help establish the gigafactory, which means setting up the factory, equipment selection, installation commissioning, trials, ramp-up and everything. Third one is integration into their supply chain and the fourth one is technical support."

 

GIB EnergyX is located in Bratislava in Slovakia and its parent Gotion is one of the top five lithium battery makers in China.

 

Vijayanand, a veteran of the battery making industry, is now tasked with creation of a new energy ecosystem for Amara Raja, which includes research and innovation in new energy and manufacturing of lithium-ion battery cells.

 

He is also looking at making battery packs for various mobility applications and other products like charging infrastructure, portable chargers and products required for deployment of new energy in other industrial applications.

 

The rapid progress in electric vehicle penetration, favourable policy environment, and the company's legacy in battery business will likely drive the new energy business in coming years.

 

Amara Raja Energy, through its arm Amara Raja Advanced Cell Technologies Ltd, has signed a memorandum of understanding with the Telangana government to set up a 16 GWh lithium-ion cell manufacturing facility along with a 5 GWh battery cell assembly pack unit at Divitipally near Mahabubnagar. The company is also setting up a high-tech research lab near Hyderabad airport at a total estimated investment of 95 bln rupees.

 

Vijayanand said the real progress on the gigafactory project is evident as Amara Raja has signed the technology licensing agreement. Amara Raja has invested around 30 mln euros to pick up a 10% stake in Norway-based InoBat, where Gotion is also a partner.

 

"Since we are already a shareholder in InoBat and Gotion has joined as a shareholder, it is a natural partnership to work together to access technology for what we need in India," Vijayanand said.

 

He said lithium iron phosphate battery is likely to dominate in India, particularly for electric vehicles, due to its suitability for local conditions and safety.

 

"Gotion is one of the top three companies in the world on LFP (lithium iron phosphate battery) technology," he said. The partnership with Gotion is unlike the equity partnership Amara Raja has with Johnson Controls for lead-acid batteries.

 

"Johnson Controls had invested in equity. They were equity partners. With Gotion, we kept it as a licensing arrangement," he said. Gotion will receive an upfront fee plus royalties.

 

"Strategically, we will integrate into Gotion's supply chain and gradually localise it, as we can't depend on it indefinitely," he said.

 

"I don't have to immediately worry about raw materials because we can work closely with our technology partner," he said.

 

"Our factory construction requirements, our government regulations on environmental and construction, fire safety... I just have to apply the Indian context. It is 90% recreating the global facility," he said. Amara Raja has secured all necessary approvals for Phase-I of the gigafactory, he said.

 

There are three main elements to the Giga Corridor project, he said. "The first one is the e-positive energy labs, which is a research and innovation centre right next to the airport in GMR Aerocity. That construction is happening at a hectic pace. That facility should be operational before the end of this financial year (2024-25). The second element is to build a commercial pilot plant for cell making that will come up in Divitipally. That facility will be operational in Apr-Jun quarter of next financial year (2025-26)," he said.

 

The commercial pilot plant is capable of producing cells as required by the customer. "The flexibility of this facility is I can make any type of cell... any chemistry," he said.

 

"On parallel we will be starting the construction of our gigafactory. Since we signed the agreement a couple of weeks back, we are already in deep discussions on the entire technicalities associated with the manufacturing facilities, and we will be very soon starting the construction of the gigafactory," he said.

 

"It will take about 24 to 30 months to get the first gigafactory operationalised. So we are expecting that FY27 (2026-27) is when we will see the gigafactory reaching the commercial scale of operation," he said.

 

While the company is planning to have cylindrical and prismatic cells manufacturing units in the first phase, it is yet to decide what kind of battery cells to make. The company is in talks with customers to gauge requirements.

 

The Phase-I will have at least 8-10 GWh capacity which will be available by 2026-27 and Phase-II will expand that with additional product portfolio. The company should be able to achieve 16 GWh by 2031, he said.

 

"Right now Phase-2 is in conceptual stage and we will detail it out as we get more and more clarity from our customers," he said.

 

The company may go up to 24 GWh if required, but as of now, the board has approved capacity of 16 GWh and work is going on only for that, he said.

 

The current capacity that was planned by the company is sufficient in the Indian context, he said. Each GWh capacity will need an investment of $60 mln and the current capital expenditure plan of 95 bln rupees is sufficient to create 16 GWh capacity plant, he said.

 

Amara Raja envisages a capital expenditure of at least 12 bln rupees a year over next few years. For the current fiscal, the company expects spending 8-10 bln rupees more, as it has already spent 2.5 bln rupees.

 

Vijayanand said Amara Raja Energy, the parent company, will be able to generate initial phase of investment comfortably. The company has enough balance sheet strength to leverage to fund in future.

 

"But there will be a point of time where we have to be more prudent about our funding strategy and we would be going into the market for either debt or even have an equity strategy to be able to fund these projects," he said.

 

There is a lot of interest among investors and if all goes well funding will be needed only after 2026-27, he said. Vijayanand said the initial capacity of 8-10 GWh may not be sufficient to meet the demand, given the growth projections in the electric vehicles segment.

 

Vijayanand said the company will initially focus on domestic opportunities and consider overseas market at a later stage.

 

"We already have ongoing relationships with all the OEMs (original equipment manufacturers) because of our existing business... After this partnership announcement, a lot of OEMs are now more clear about our technology background and our implementation time because there is actually some clarity," he said.

 

Admitting that the new energy business is in its initial phase, Vijayanand said nobody is making big money at present in this business. "Everybody is in the initial stage of the curve. So I don't think there is anybody who is making significant money out of this. Whether the vehicle manufacturers or the component suppliers in this space. Because, we are at the initial stages. It's an investment phase right now," he said.

 

Amara Raja's packs and chargers business is reasonably profitable. In 2023-34, Amara Raja clocked around 5 bln rupees of sales via packs, chargers and other components related to electric vehicles. The company expects to double the number in the current fiscal, he said.

 

Customers like Piaggio are completely sourcing battery packs and other components for its electric three-wheelers, he said. Vijayanand is optimistic that the new energy business will become bigger. Though prediction of revenue is difficult, if the total demand is for 100-120 GWh capacity, Amara Raja aims to get at least 20% market share by 2030.

 

"This (lithium cell) business will become a dominant portion. That exact revenue mix I wouldn't be able to share in this point of time. But I can only give you one hint. If you were to buy a 20 lakh (2 mln rupees) car today the value of battery inside that... if you want to replace... that could be about 6,000-7,000 rupees. But the value of EV battery... will be 40-45% of the (cost of) the vehicle. So I am sure from a top line perspective this business will be significantly higher," he said.

 

Vijayanand said right now two key issues that vehicle manufacturers are trying to solve are the cost of vehicle and charging network. The public infrastructure for charging has not really developed in India but is not difficult to solve, he said. He said the vehicle has to travel at least 160-200 km per day to justify the current cost of ownership. This type of usage patterns is low in India, which is a key challenge to look at, he said.

 

On the National Stock Exchange, shares of Amara Raja today closed nearly 2% higher at 1,573.70 rupees.  End

 

US$1 = 83.71 rupees
 

Edited by Ashish Shirke

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