Founded in 1985, Amara Raja Batteries changed the way automobile batteries are bought and sold in India. In this interview to FE?s Malabika Sarkar, Ramana Prasad Alam, head, automotive battery division, Amara Raja Batteries, talks about the peculiar characteristics of the battery market in India and the company?s strategy to cater to the growing need for better technology and service at affordable prices.
Close to 40% of the local battery market is in the hands of the unorganised sector. How do you hope to correct the situation?
Till five years ago, more than 50% of the market was unorganised. Since then, with increased awareness among the users, especially among the mid- and high-end car owners, there has been a gradual shift towards branded products. This has led to a considerable increase for the organised sector among passenger cars, which as per reliable guesstimates is around 65% now.
But the unorganised sector among the tractor and truck owners in rural area remains a high 50%, even though the organised sector is making inroads. For instance, our PowerZone concept?a unique retail format for semi-urban and rural markets?has introduced technology at affordable prices to this price-sensitive market. We are confident that such initiatives will help change consumers? mindset.
The Indian car owner displays a remarkable apathy when it comes to replacement battery purchase, and prefers leaving this decision to the mechanic or service centre. How do you overcome consumer apathy?
It is not apathy but lower involvement in this product category than other categories such as car accessories. However, for a car owner the car battery is critical?being stranded is an issue of concern. Yet, the decision is generally left to the service centres. There is a noticeable change, however, with the increasing awareness of branded products that offer warranties and after-sales services.
Traditionally, auto batteries have been sold at auto-accessory shops, which, almost invariably, are cluttered, greasy and unapproachble. A spruced up distribution network may go a long in easing the situation. Your comment.
While a considerable number of batteries are sold at the kind of shops that you have mentioned, Amaron was the first company to have changed the landscape of battery retail and buying experience, when we sold batteries outside garages in car-accessory outlets. We also introduced the revolutionary PitStop, a battery shop to help customers understand batteries better. Today we have over 18,000 retailers, 190 franchisees and 600 PowerZone outlets. By the end of FY09, the network would span 20,000 retailers and 800 PowerZone outlets.
How have raw material prices in your industry moved over the past couple of years? In the backdrop of higher lead prices, has the company managed to comfortably pass on the increase in cost to the customers?
In January 2008, the price of lead, the key raw material, was $3,600 per tonne. By December 2008 the prices had swung down to $900 per tonne. Today, the prices are hovering at $1,600 per tonne. Fluctuation and volatility are a part of this market. As India is not a large producer of lead, the battery industry is dependent on imports. Hence, the industry is faced with forex fluctuation as well as changes in prices, posing a challenge. We address the fluctuations of prices and forex with a balanced approach towards long-term contracts and efficient stocking.
