Exide Industries (Exide) via its subsidiary EESL (Exide Energy Solutions) has signed an MoU with Hyundai Motors and Kia for their EV project. Exide is supposed to support for development, production and supply of battery cells. Exide has already invested over Rs. 2000 crore in EESL and is expected to commence its EV cell manufacturing project in CY25.
Exide Energy Industries Limited (EIL) has embarked on crucial manufacturing of Li-Ion cells through a technical collaboration with SVOLT, with a total capex outlay of approximately Rs. 6,000 crore for a 12-GWH capacity. This collaboration with the leading OEMs gives future revenue visibility from its EV cell project. The battery pack assembly business is enjoying a healthy order book (Rs 600-700 crore in FY23) with an execution timeline of 12-18 months.
We believe that lead acid and li-ion technologies would co-exist in the medium term and that Exide’s timely venture into the Li-ion manufacturing project would give it an early-mover advantage. We expect volumes to continue growing in the near term supported by a gradual revival in the market segment.
Adding OEMs for EV project.
Hyundai Motors and Kia have inked a memorandum of understanding (MoU) with Exide Energy Solutions, a subsidiary of Exide Industries, to localise EV battery production in India. The focus is on lithium-ion phosphate cells as part of the Korean OEM strategy to localize EV production. This partnership will cover the development, production, and supply of EV batteries. Exide Industries has already secured a technology collaboration allowing it to utilize SVOLT’s technology for lithium-ion cell manufacturing in India. Following the MoU, Hyundai-Kia Motors will start testing LFP batteries. Despite BEV penetration in the PV segment remaining less than 2%, the adoption curve has fallen short of expectations due to high upfront costs, insufficient charging infrastructure, and limited EV offerings by OEMs, with Tata Motors being an exception. Currently, Hyundai Motors imports its EV models Ioniq 5 and Kona in a CKD format, while Kia imports the EV6 as a CBU. Looking ahead, Hyundai and Kia aim to roll out mass-market EVs by CY2025-26E, which could bode well for Exide Industries in the medium term.
Li-ion project is on track.
Exide is among the pioneers making tangible strides in the emerging Li-Ion battery sector by delving into EV battery assembly operations in India. Alongside assembly operations, Exide Energy Industries Limited (EIL) has embarked on the crucial manufacturing of Li-Ion cells through a technical collaboration with SVOLT, with a total capex outlay of approximately Rs. 6,000 crore for a 12 GWH capacity. The first phase, targeting 6 GWH, is slated to be operational by CY25E, with a capex outlay of about ₹4,000 crore. With a focus on maintaining healthy margins and capital efficiency, this move is viewed as structurally positive for Exide. Unlike e-cars, e2Ws/e-3Ws do not rely on lead-acid batteries, affecting around 15–20% of lead-acid battery players’ revenue. Furthermore, the shift to lithium poses a risk to industrial batteries, accounting for approximately 26% of revenue. Nevertheless, Exide’s venture into Li-Ion technology is progressing well, with plans to kickstart revenue from battery pack assembly this year. The manufacturing of Li-Ion cells is also expected to commence in FY26.
The uptrend in existing business.
The automotive segment continues to see a recovery in demand, driven by both the replacement and OEM sectors. The Li-Ion project remains on schedule. With stable input costs and internal cost-saving measures, we anticipate healthy profitability in the near to medium term. Recent months have shown an uptick in demand across OEM and replacement markets in the automotive division. This increase is widespread, with most end-user markets indicating signs of a recovery. Replacement demand is gaining momentum from a low base in CY23, particularly in the PV segment, while two-wheelers are expected to catch up. The industrial division is benefiting from significant investments, particularly in sectors such as BFSI, Renewables, Telecom, and Infrastructure (such as Power and Railways), among others. This segment is outpacing growth in the automotive division.
Exide has recently entered a business relationship with Hyundai Motors and Kia for the development, production and supply of battery cells. Given Exide has already been working on a LiIon cell project, this association with marquee clients gives visibility on the probable capacity utilization of its upcoming project. While there is no major indication from the management, we foresee a few more tie-ups with OEMs in the coming period also. The automotive division has experienced a recent increase in demand from both OEM and replacement markets, with a widespread uptick across various end-user markets indicating a recovery in demand. While Exide has been investing in new-age technologies (Li-ion), it assumes that the Lead acid battery segment will also exist in future due to its advantage in certain segments. The management foresees new age technologies and lead-acid technology will co-exist in the future. We expect the company would continue to maintain its dominance in the lead acid battery segment led by its strong distribution network, given Exide has expanded its distribution network from 48,000 in FY20 to 95,000 in FY23. In addition, the company’s foray into lithium cell manufacturing holds strong prospects in the automotive segment, driven by the expected traction of hybrid and electric vehicles (EV) in India. we retain a Buy rating on the stock with a revised SOTP-based PT of Rs 477 on the expectation of continued recovery in replacement demand, improvement in EBITDA margin on steady RM costs and timely execution of its Li-ion cell project.
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