Replacement demand growth for automotive battery segment at 4-5%: Ambit Capital
MUMBAI: Investment advisory, Ambit Capital estimates current replacement demand growth for automotive battery segment at 4 per cent-5 per cent year-on-year, a figure significantly lower than the double-digit growth that the industry enjoyed until October, 2016, a month before the cash ban was put into effect.
Demand in the automotive battery segment in India has "largely recovered" from the lows that the industry touched post demonetisation as the automotive industry was significantly hit by the cash-ban. Rural demand, however, still remains impacted, the report said.
On the issue of acceleration of demand shift from the unorganised segment to the organised segment, based on interactions with dealers, Ambit said the feedback was rather mixed. While some believed that the unorganised segment was harder hit, others said that they will make a comeback soon. Also, dealers vouched for only a gradual shift to the organised segment post the implementation of GST as the "unorganised segment would be able to circumvent compliance if not strictly implement it."
Decline in growth in demand for automotive batteries has been compounded as top battery manufacturers in India- Exide and Amara Raja have taken a price hike of around 10 per cent in the aftermarket segment since November, 2016 to offset the increase in lead prices over the last eight months.
Drawing a correlation between weak Original Equipment (OE) sales over FY12-17 and replacement demand for automotive batteries over FY17-19, the investment advisory estimates replacement battery industry volumes to grow at 8 per cent CAGR over FY17-19 as compared to a growth forecast of 12 per cent CAGR between FY12-16.
Demand in the automotive battery segment in India has "largely recovered" from the lows that the industry touched post demonetisation as the automotive industry was significantly hit by the cash-ban. Rural demand, however, still remains impacted, the report said.
On the issue of acceleration of demand shift from the unorganised segment to the organised segment, based on interactions with dealers, Ambit said the feedback was rather mixed. While some believed that the unorganised segment was harder hit, others said that they will make a comeback soon. Also, dealers vouched for only a gradual shift to the organised segment post the implementation of GST as the "unorganised segment would be able to circumvent compliance if not strictly implement it."
Decline in growth in demand for automotive batteries has been compounded as top battery manufacturers in India- Exide and Amara Raja have taken a price hike of around 10 per cent in the aftermarket segment since November, 2016 to offset the increase in lead prices over the last eight months.
Drawing a correlation between weak Original Equipment (OE) sales over FY12-17 and replacement demand for automotive batteries over FY17-19, the investment advisory estimates replacement battery industry volumes to grow at 8 per cent CAGR over FY17-19 as compared to a growth forecast of 12 per cent CAGR between FY12-16.
