Interview with Mr. Haroon CEO, Pakistan Accumulators Pvt. Ltd (Volta & Osaka Batteries manufacturer)
Company Background
We started with plastic manufacturing business in 1989 and in 1993 we launched the business of battery manufacturing by the name of Pakistan Accumulators. We are one of the few exporters of batteries in Pakistan. The two main brands of batteries we manufacture are Volta and Osaka. Initially our production capacity was very low but it has increased with the passage of time.
There are not many manufacturers in the battery industry of Pakistan. There was a company by the name of Chloride Pakistan and manufacturing batteries by the name of Exide. Second brand in Pakistan was Atlas Batteries which is in operation since 1967. Then there was this third brand in the market by the name of Automotive Battery in 1986 by Adamjee Group but later on it was acquired by Exide Pakistan. We are now the fourth player in the market and second largest company in the battery industry in terms of sale and production and the largest exporters of batteries.
We have eight regional offices in Rawalpindi,Peshawar,Faisalabad,Lahore,Multan,Karachi, Sukkur and Hyderabad. All these regional offices deal within their defined territories. We have a workforce of around 700 including the manpower in the manufacturing plant.
There are around 45 different types of batteries we manufacture varying in sizes and usage, with application in automobiles and other areas.
UPS Batteries
Initially, there was only load shedding in Karachi and in some areas of Sind but then it escalated to other cities which increased the demand of UPS (uninterrupted power supply). UPS actually is an inverter. It gives an alternate source of energy for limited time period. UPS cannot be used on a large scale because the amount of electricity it provides is very less. The batteries which are used in cars only provide the initial current to start the car whereas the batteries used in UPS store the electricity and are used when required. UPS batteries are feasible for areas which have 2 hours of light and then an hour of load shedding because it requires at least 120 minutes to store the electricity.
Reasons for Power Crisis
There are numerous factors behind the shortage of electricity. Mostly, during the summers the consumption of electricity increases because of increased usage of air conditioners and central cooling systems in offices. Another reason for the electricity shortage is due to the delay in the construction of dams. Government is purchasing electricity from Private Power Companies on high prices. Pakistan Electric Power Company (Pepco) is responsible for deciding the total percentage of electricity to be purchased from hydel sources and from private companies.
When the demand of electricity increases then most of the electricity is purchased from private companies leading to high prices. This causes Pepco to go into losses. Due to this, payments are not made on time to private power companies and hence Pepco does not meet the demand of the electricity. This is a continuous cycle which occurs every year especially in summers. Other reasons include line losses and theft of electricity.
In the above mentioned circumstances, UPS is a cheap alternate source of electricity. Pakistan Accumulators Company Pvt. Ltd. is manufacturing specially designed batteries for the usage of UPS only. These batteries have a longer life as compared to others.
UPS batteries have different ranges depending on their sizes and capacities. Apart from different sizes and capacities, there are also other factors which are kept in mind while manufacturing.
One significant factor taken into account is how environmental friendly is the design.
Our design of UPS batteries caters for filtration of sulphur fumes generated by the charging and discharging process of the battery unlike other normal batteries. These sulphur fumes can be hazardous for humans as many people have installed UPS in living rooms. The terminals are also changed in this battery to prevent current losses as compared to other batteries.
Apart from these batteries, we have also launched the first Maintenance Free Battery in Pakistan.
Effect of energy crisis on the Company
In terms of the sales volume, the energy crisis has definitely helped. On the other hand, during this time of recession, car manufacturing has also slowed down subsequently affecting the battery industry. The energy crisis also has influenced our manufacturing plant. Due to the shortage of electricity we have shifted to generators to run the manufacturing facility thereby increasing our cost.
Our sales have increased in comparison to last year because of increase in UPS demand. Nowadays the buying power of consumers have has also come down which is affecting our sales. The cost of small size UPS is at least Rs. 12000.
Investment Opportunities
We do a have dealership network spread across different regions of the country. This business consists mostly of experienced entrepreneurs. It is difficult for new investors to start this business as it requires technical knowledge and expertise.
We prefer only one dealer of each of our brand in one region. These days there are no proper battery dealers. Batteries can be commonly bought from auto spare part shops, workshops, gas stations, Metro cash & carry and MACRO. There is an immense competition.
Manufacturing Process
We have only one manufacturing plant. TheBatteryindustry is a process industry and many of the components are manufactured in-house. The main components of a battery are plates (negative and positive), separators and containers. We have a complete section (factory) for plastic manufacturing of the batteries. Similarly we have complete manufacturing sections for the plates and separators. If we were not doing this detail manufacturing process, we would have been unable to export our batteries to other countries.
Exports and Experience with other Markets
When we started exporting our batteries in other countries our competitors wereChina,Indonesia,ThailandandIndia. When we started producing the batteries to meet the international qualities and standards, our product cost was always higher than our competitors. With the passage of time, we vertically integrated our manufacturing process and reduced our cost and now we are exporting batteries to 15 countries. We have been receiving Merit Export awards consecutively for the past 4 years. We have also received best performance award and brand of the year awards. Last year our export was $9.5 million.
This business comes under the category of auto industry and I do not think that any other company is exporting on this level from Pakistan. We always wanted to match the exports with our imports so that our industry should not be a burden on foreign reserves.
Imported Raw Material
Some chemicals and molded materials are being imported from other countries because either they are not available or manufactured in Pakistan. Most of the material is being manufactured in our in-house facilities. We can say that 65% to 70% of the raw material of a battery comes from the local market and the rest is imported. Skills are required in this industry to reduce the costs and even in normal manufacturing process and we are short of skilled persons.
Profit Margins
If we talk about per unit profit, then the retailer’s profit margins are higher as compared to ours. The competition is so high these days that the dealers also pass on their profits to consumers. Dealers get discount of around 12% to 15% from us but they pass on 7% to 8% of that discount to consumer. In terms of profit percentage, retailers earn more profits than manufacturers. In volume however manufacturers are earning more.
Different Regions in terms of Sales Volume
Punjab has the highest proportion of sales volume of batteries and then comes Sind where Karachi is the biggest market. In NWFP, there are very low sales due to law and order situation. Similarly sales in Baluchistan are almost negligible because smuggled batteries are available there which come from Iran posing a threat for our business.
Comparison of Pakistan’s Battery Industry with other Countries
Business environment these days in Pakistan is not very good. Every day we are facing a new policy with a new environment. If we purchase new machinery, people are not willing to come to Pakistan for the installation of that machine. Unless the energy crises and the law and order situation in the country are eased out, business environment will not be reasonable for local as well as international investors. We are loosing the profit margins from the cost side. If we talk about the quality, we are better than most countries like China,India, Indonesia and Thailand who are our competitors in the international markets.
