Case study on maintinance free batteries in Pakistan
In spring each year, a festival Is held at the tomb of Shah Hussein in the city of Lahore. Devotees light earthen lamps at the start of the of festival. Lighting of lamps is a metaphor for killing the inner darkness in ourselves. On his first visit to Lahore (Pakistan), Ghana Human was impressed by the number of vehicles plying in the city.
His main interest was to see Lahore in color on the eve of “The festival of lamps”. He was happy to Join thousands of devotees, each eager to light a lamp at an old shrine.
After the festival, Ghana turned to his first observation about traffic flow and thought of Introducing maintenance free batteries. He already had such a plant at Shanghai, China and wondered how big the Pakistan Market would be In years to come. Would it justify setting up of an economic sized plant and at what place? In any Project Feasibility, the first step is to ascertain potential market.
It is not something very difficult and sometime only a literature review can give a fair idea about it. If past data is available, trends can be spotted.
Even if no data about the reduce at hand, “leading indicator approach” can be adopted for a preliminary stage. In this case, a method called “Time Series Analysis” would be used. The mall object would be to work out “Compound Annual Growth Rate”.
This Is an appropriate method for any situation where the growth has been gradual with no marked fluctuations. At present only traditional Batteries are used in Pakistan. These are known as “Wet or Flooded Batteries”. The manufacturers have long been in business and have recouped their investments many times over.
Further, they have refined production methods using cheap raw materials (re-cycled lead). This In turn has lowered their production costs.
They can, therefore, put up a tough resistance such as “price war” which does not auger well for the new technology. The battery-manufacturers, both units. Two units are expanding and would be operative In about a year and a half. Lacking tenet expansion plan Into consideration, ten Installed capacity would go up Day 25,000 units or to a total of 1. 225 million units.
The demand for batteries comes from two sources.
Demand from local car assemblers and from existing car users. The former is termed as “Original Equipment Manufacture Demand” or simply MEMO and he latter as “Replacement Demand”. It can be said as Derived Demand as it stems from (I) number of cars manufactured each years and (it) 50% of the old car registered as each car requires battery replacement once in two years. In addition, there are some UN-registered vehicles in the far off rural areas.
Roughly, they represent as 5% of demand generated by MEMO & Replacement.
Finding demand growth has now become easy. First, we would deduct number of newly assembled cars from total registered cars to find out the number of cars requiring replacement which would 50% of old cars since a battery lasts for two years. We would add back this figure to Completely Built-up Units (Cubs) or the new cars which come out of the production line with the requisite battery. This would give us total of MEMO and Replacement Demand.
We would add a 5% to account for UN-registered cars to have a grand total of demand. If we calculate CARR, it would be 1 1.
84%. Past data is available Upton year 2008. We are interested to find out demand in the year in which our project would start operations. Considering volume of work, logistics and giving some margin for delay, the project can be completed in two years. It means that operations can be started in 2010.
With a growth rate of 1 1. 84% and a demand of nearly 890,000 units, we can work out a projected demand of 1 in 2010.
We now concentrate on the supply side. As already stated, the present production capacity of all units in Pakistan, including small expansion, would be 1. 225 million. Comparing it to the projected demand leaves a very slim margin or “demand and supply gap” (around 21,000) which hardly Justifies any new unit.
(The minimum economic size unit in Pakistan is of 100,000 units). Should Mr.. Ghana dump all plans? No, he would be bringing a new technology. If he can out-smart the exiting conventional battery manufacturers, he would have a field day.
The new plant would require a minimum investment of five million US $. Apart from the present market conditions, an investor would look into the technological development on the way, such as: Lithium-ion batteries would be required for running plug-in-hybrid-electric vehicle. Such battery are four times powerful than lead-acid batteries. Nickel-cadmium and nickel-metal hydride batteries will also flood the market having twice as much power as conventional batteries. MIT is exploring Efficient Narrower Storage to Replace Car Batteries altogether.
Other types are (I) zinc air batteries, (it) solar batteries and (iii) lead-impregnated foam batteries. A FINAL NOTE: This is simple description of market analysis from an academic point of view. The data regarding Eatery production Ana car registration NAS Eden nonlinear Trot official websites and maybe old. For the sake of convenience, the present slump in the auto market has not been considered. The author is a Developmental Specialist with a very narrow knowledge of technology and econometrics.