Electric Cars/Bus :: Call it a Disruption?


(rvetri) #81

I have a different view… Currently Maruti has a 50% market share in
cars… And they buy batteries from exide and amararaja… When they start
making Li batteries themselves, is it good for exide and Amara Raja… It
will actually reduce their sales… We need to remember EVs are not going to
add demand… They will eat into ICE demand… IMV - it is going to be a big
negative…


(phreak) #82

@rvetri - Maruti currently uses Fiat engines. It is not their area of competence. The 1.3 MJD which is considered the Indian national engine as it powers the Swift, Ciaz, S-Cross, Brezza, Ritz etc etc. is something they buy from Fiat. Similar thing could happen for EVs where they procure the battery packs from vendors.


(rvetri) #83

Maruti is already starting a Li Battery plant in India…


(biju john) #84

Although iam invested in amararaja and exide, i think the auto manufacturers would try to manufacture the batteries on their own. At present the cost of battery could be around 1% of the car’s cost and so it makes sense to outsource, but when it forms 50% of the cost it makes sense to develop one inhouse. I think Maruti is developing a diesel engine to replace the 1.3 MJD. As i understand there will be a lead acid battery also to power the auxiliaries, which is exide/amaras forte. However given their network they could still cater to replacement market and some kind of system where they could supply a charged battery in replacement for the discharged one.I also read in the report forwarded earlier that Bosch is going to enter the EV space through their listed entity. If that is true it could be a good bet


(azardeen) #85

Even if auto companies built their own batteries, the challenge is to produce high quality batteries at low cost. What will happen if a local battery manufacturer is able to produce better quality batteries at cheaper price. Won’t it make sense to outsource? Also I think some new pure play electric vehicle companies will emerge as electric vehicle looks lot simpler to design than ICE vehicles. These companies would outsource the batteries as they can’t invest in battery tech.

So I think the battery manufacturers will survive the EV disruption and even benefit from it.


([email protected]) #86

Hi Madhav

Thanks for the article and the information looks very useful.
The key take away from the white paper published in my opinion is as follows

Following polymers would be in demand to play the EV-Plastic play

Polypropylene (32%), polyurethane (17%) and polyvinyl chloride (16%) are the top 3
polymers being used in the automotive sector. ABS and Polycarbonates are the other major
plastics being used in automobiles

Do we have any listed players in that space who manufacture these polymers (like BEPL for ABS) on whom we can bet the EV-Plastic play, I am hunting as well :slight_smile:

Thanks,
Pandi


(rvetri) #87

What will happen to the existing Capex done on building Lead acid
batteries. Will it not become a drag on Amara and Exide. And Maruti Suzuki
is going for world class collaboration for batteries. Whichever way we
think, Amara and Exide looks like going to have a tough time…


(Vijay) #88

Maruti has planned to partner with the biggies and they have strategic sourcing. Small players cannot compete against them. If LG chem lithium battery pack for mobile (used in mi for example) is 700 and unbranded company charges 1000, which one will you buy? The quality and brand value is against Exide and Amaron.
To value these companies , it is safer to add terminal value after x years and compute the value.


(azardeen) #89

Big companies like Maruti can afford to invest. How about many other 2-wheeler, 3-wheeler and 4-wheeler companies and emerging pure play electric vehicle companies. I don’t think everyone will invest on batteries. I read somewhere that Exide got a trial order from Hero Electric for 2-wheeler lithium ion batteries. So I think there will be opportunities for Exide/Amararaja.


(Deepak Venkatesh) #90

Hi

Mahindra for their Reva actually imports its plastic I believe from Australia. Got this info from a classmate who has worked with them at some point of time. Would be keen to know where the players will source this from in India. Thanks.

Also yes Maruti’s 1.3L diesel is going to be discontinued. In their top most model till beginning of this year they even had a 1.6L diesel engine which they stopped due to poor demand. Though 1.3L was quite localised the 1.6L was perhaps completely imported. Maruti will make their own diesel engines by 2020. Check teambhp for more details. https://www.team-bhp.com/news/fiats-13l-multijet-diesel-engine-be-discontinued-2020

Regards
Deepak


(Vijay) #91

For one, the JV with Denso Toshiba and Suzuki will produce batteries for other OEMs too. Also remember that Exide and Amara raja don’t have any advantage over another JV or start up doing lithium battery manufacturing. Until Exide or Amaron can prove any strategic edge, they are mere story stocks.


(us121) #92

Just one more perspective…

So far rarely an automobile manufacturer has ventured into non-core production items. Or else they would have been manufacturing tyres (at least radial tyres), transmission, Gears and so on…
Therefore, there are many possibilities. Also will the auto engineering people like to go in very different field of engineering? Today they are probably pushed as they may not have much choice but at a later date they may as well divest. Many Many opportunities are there… It is time for remaining alert as the future unfolds! Believing in just one fact may be as good as discarding The Truth!


(Parag) #93

China has taken a massive lead in the EV vehicle sales. And as per the Economist video (above), China consumes 40% of EV sold globally (2016), and I am sure this number will be higher in the current year. Also, China has an ambitious target of selling more EV than combustion engine car by 2020, which is pretty much on the horizon. China being China, this goal could be well within their reach. Even if China delay in meeting the target by a couple of years, it would be a huge achievement. The Growth and widespread acceptance of EV have given China heard start in EV marketplace in the world. I am presuming that most of the component manufactures in China would be well placed now, not only to cater to present and future demand, but to supply parts to major car companies in the world.

EV has less around 18 components, and I presume some of these parts will be EV specific. As China has taken a leading position in EV, it is not unthinkable that some of the Chines component manufactures will have global capacities to manufacture these parts at a lower price. It is not inconceivable that the global car manufacturers buy car parts items from Chines player rather than making them themselves or buying from Indian companies.

On the other hand, India is a bit slow to start with EV. The charging infrastructure is next to non-existent. The recent environment pollution in Delhi and other cities, might be shot in the arm of EV in India.

Maintenance Cost- One of the important fact (in my view) about EV is a lower maintenance cost. Due to few parts, EV has a negligible maintenance cost. On top of that, some of the EV’s are promised to run 1 million miles (e.g 10 lakh miles). In the recent EV launch for Trucks, Elon Musk has guaranteed that they will run 1 million miles. In the developed world, GM or Ford car run around 1.5 lakhs miles (that too optimistically) before being dumped.

So, EV has proven to be a low maintenance and much cheaper to run, making their cost of ownership lower the lifetime of a car. Once people realize it’s potential, the problem which we are citing like charging station will be taken care by itself as the law of economics will prevail “ Supply Creates it’s own demand”. People will demand charging infrastructure and companies will race to fulfil this demand.

Overall I think EV is approaching very fast. India could have started EV early, but it is better late than never. Maybe newer technologies (once again)will allow India to gain an advantage over its peers by using the proven technologies.

I also think that EV will be detrimental to most of the component manufacturing companies.

India, has decent sized auto component manufacture industry and if I check in the screener, I can see many of them are quoting at a PE upwards of 25. I think some of them would have a tough time once EV receives widespread acceptance. They will not only lose their Indian customer, but global car companies may not need their products.

On top of the that, if the market realized that future is cloudy or uncertain, it will push the PE downwards, as happened in IT & Pharma. So, they will have a double whammy of challenging future, coupled with a lower valuation. Additionally, it will be increasingly difficult for Auto component manufactures to sell EV parts in the international market due to Chinese companies inroad and proven track record.

Of course, there will be few winners, but overall, I think, the auto component sector as a whole will find it difficult to compete globally, losing an important part of the revenue. Some of these companies- particularly those which are closely associated with car manufacturing companies- may be a winner (in my view), but lot of the other will find the going tough.

I found this youtube video very interesting and the author (Tony Seb) is an expert in this filed. He is viewing EV as a major disruption and he has data to back up his claim.


(Baju) #94

As received:_ ( By the way do you have any specific one)
Electric Vehicle Battery Stocks that can become Multibaggers

MOIL — supplies manganese which is used to make aluminum, steel and also will be a key ingredient in EV batteries.

HBL Power Systems — makes batteries for the defence and industrial sectors. Has presence in USA, Middle East and Europe. Can easily handle lithium batteries and changes in technology. Everything looks cool about it except for the fact that its price is a bloody laggard.

Hindustan Copper — mines copper and nickel, which are used in batteries

Graphite India — Graphite is used in EV batteries, but this stock has appreciated way too much

Ashok Leyland — will make electric buses and batteries in collaboration with SUN Mobility. Maybe it will take over Sun Mobility and start making batteries

Other quality battery makers like Everready, Amara Raja and Panasonic too will jump in the fray.

Eon Electric, a small company, also makes Lithium Ion batteries along with mobile parts and optic fibre cable stuff. Please study it in depth before making any decision.

Hindalco, Vedanta, National Aluminum stocks have massive potential going forward irrespective of the fact whether Aluminum Batteries are made or not because aluminum is lightweight and will be used to make the car’s body.

HEG should do well too as it is into graphite electrodes (along with power and carbon), but its share price has jumped 3 times in the last 12 months.

Rain Industries, mines carbon which is used in making many electrical accessories for EVs.

Himadri Specialty Chemicals (suggested by Geordie Job Pottas, an independent equity researcher)

You may want to look at this languishing stock that has the potential to vroooom (but I’m unsure of the management) — Orient Abrasives, which is into mining metals for creating aluminum and many components for EVs


(Agarwala) #95

Just a random thought…
When Lithium batteries are produced in bulk, will they will become cheaper and will they replace polluting lead acid batteries in other uses also? This is just a line of thinking.


(Vijay) #96

Tesla already supplies home batteries and grid balance batteries.


(azardeen) #97

Telecom Tower companies already started moving towards lithium ion batteries. Being superior, lithium ion batteries will find its way into many applications where Lead acid batteries are used. But the cost will be a major factor. Lead acid batteries are much cheaper than lithium ion. Also if lithium supply can’t match with huge increase in demand, price will increase further.
In any case, I think leading lead acid battery manufactures will eventually produce lithium ion batteries based on market demand.


(Agarwala) #98

I recall analogue to digital transformation about 15 years ago. It was a major disruption in many spheres. This change in vehicle preferences and batteries will have unimaginable consequences. As technology develops, it finds new uses and more directions.


(azardeen) #99

Regarding cheaper imports from china, the government may step in and put duties to support “Make in India”.


(rvetri) #100

Yes. I believe all the latest gadgets including smart phones use Li Ion
batteries now a days.