Automotive Batteries Due Diligence

Navigator completed a pan-European market study for lead-acid automotive starter batteries, as part of a wider due diligence for a Ukrainian battery manufacturer. This project was implemented on behalf of the European Bank for Reconstruction and Development (EBRD), for a total loan investment of EUR 65 million.

 

This due diligence project occurred in the context of the long-term growth in automotive demand in Russia and Ukraine, set against the short-term decline in sales due to the 2008-2009 financial crisis. The CIS battery market has grown significantly since 1991. Primary demand for automotive batteries by automotive OEMs has been increasing as domestic manufature of automobiles rises. In 2008, Russian automotive output reached 1.79 million vehicles; Ukraine reached 0.42 million and Uzbekistan reached 0.21 million.

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The high rate of aftermarket and OEM growth, and the low vehicle density rate, indicates that steady growth in the vehicle parc and battery sales can be expected. Russia, with a parc of 32 million vehicles in 2007, has a density of 225 vehicles/’000 inhabitants. Ukraine, in contrast, has a density of only 168. This can be compared to Poland, with a vehicle density of 415, or Germany, with a density of 604.

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The Client

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Our client was an integrated automotive battery manufacturer located in the outskirts of Dnepropetrovsk, Ukraine. The company established in 2002 by an group of engineers with extensive experience in automotive battery manufacture as well as other manufacturing expertise.

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By 2009, the battery manufacturer was able to open two well-equipped factories operating at a high level of productivity by European standards. The first battery plant commissioned in 2006 with an annual sales capacity of 2 million starter batteries. The second plant was commissioned in November 2009, originally for industrial battery production. The high demand for automotive batteries meant that the plant is being used for automotive output at the present time.

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The plants are modern and well-designed. They comprise renovated facilities with newly-set reinforced floors, metal frame buildings and modern heating, ventilation and air conditioning (HVAC). The plants are based on closed-system use and treatment of water, sulphuric acid and lead, and integrate sensors and purification equipment on the shop floor. Equipment lines from SOVEMA, EIRICH, DIGATRON, CAM and BM were sourced and installed.

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The two plants together have a rated capacity of 7 million units per year, using a 60 Ah battery as a baseline planning unit. Actual ouptut is lower, since the firm produces higher-capacity batteries for range of other vehicles, such as sport utility vehicles (SUVs), light commercial vehicles (LCVs), heavy commercial vehicles (HCVs), etc.

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In 2009, the client approached the European Bank for Reconstruction and Development (EBRD) to apply for a loan for working capital and debt restructuring. Navigator Consulting Group was selected to implement the commercial due diligence, working alongside an experienced technical consultant and a financial consultant.

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European Car Battery Market Analysis

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Navigator Consulting implemented a detailed commercial due diligence and market demand forecast for the European OEM and aftermarket automotive battery sector. This included:

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• A detailed study of automotive battery supply and demand in the United Kingdom, France, Italy, Germany, Greece, Poland, Belarus, Russia, Ukraine and Kazakhstan;

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• A forecast of automotive parcs and battery demand from 2010-2017 in these countries;

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• A competitive analysis and market share analysis in the main markets of battery manufacturers in the former Soviet Union and Eastern Europe, including Akom, Tubor, Russkiye Akkumulyatory Group, Tyumen Battery Plant, Alkor, Polesskie Akumulyatory (Centra & Zubr brands); Ista, Istok, Aktex, Westa (Forse, Westa, Fireball, Docker, Vega), Kaynar, Erka, ZAP Snajdar, Johnson Controls, Bosch, Varta (Johnson Controls), Exide, FIAMM, Baeren, Moll, Kraft,

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• A review of alternative automotive battery technologies and the impact of gas-electric hybrids and all-electric vehicles;

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• Evaluation of corporate strategies and financial benchmarking of major battery manufacturers, including Johnson Controls, Bosch, Varta (Johnson Controls), Exide, FIAMM, Baeren, Moll, Kraft, and others in Ukraine, Russia and the wider region;

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• Retail price analysis and distribution mark-up audit of automotive starter batteries in the former Soviet Union.

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The project also included a detailed due diligence of our client’s operational capacity:

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• A detailed sales analysis of client sales and profitability;

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• An assessment of marketing and sales operations;

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• Price research and analysis for starter batteries in the CIS;

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• Battery production cost analysis, distribution margin analysis, and break-even analysis;

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• GDP and macroeconomic assessments of Russia, Ukraine and other countries;

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• Customer interviews with over 30 main distributors in Russia, Ukraine, Kazakhstan and Belarus.

 

The project was complete successfully in 2010. For further information on Navigator’s due diligence and forecasting services in the automotive sector, please contact us.

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