The impact of the lockdown may be less harsh on battery makers, in spite of the expected 30-50% drop in domestic vehicle sales.
The collapse in demand from original equipment manufacturers (OEMs) is likely to be offset by an increase in replacement market sales once the lockdown ends.
The upshot: Exide Industries Ltd and Amara Raja Batteries Ltd, which enjoy a duopoly in the organized battery segment, will gain, as auto replacement sales account for 39-45% of their revenue and 55-70% of operating profits. “We envisage some demand surge led by battery discharge.
Also, companies have enough inventory (about 20-25 days’ raw material and finished goods) to cater to this immediate spurt in demand," said a report by Edelweiss Securities Ltd.