Price Pressure Shorting Batteries

SAN JOSE, Calif.--According to new strategic research by Frost & Sullivan’s Transportation Group, a major reason for minimal product differentiation among American battery makers is that manufacturers have been unable to promote their own brands. On the other hand, private labels, such as those of mass merchandisers in the distribution channel, have grown significantly.

However, there are ample opportunities for battery manufacturers, as vehicle sales in the U.S. continue on an upswing resulting from strong economic performance and aided by attractive consumer finance schemes. The average number of miles driven per year has also increased steadily, resulting in increased battery usage and thus higher battery replacement.

Driven by these factors, Frost & Sullivan expects the market to reach $2.66 billion in 2006, the end of the forecast period. Frost & Sullivan also forecasts the heavy vehicle battery aftermarket to outperform the light vehicle battery aftermarket.

“Demand for heavy vehicle batteries should grow at 3.3 percent due to higher shipments, whereas demand for light vehicle batteries will grow at 2.8 percent,” says Frost & Sullivan analyst Kavan Mukhtyar. “The impact of Business-to-Business (B2B) and Business-to-Consumer (B2C) E-commerce will also boost overall battery sales in the long run.”

The issue that holds the key to battery manufacturers’ fortunes in the market is customer account management. Consolidation has resulted in a concentrated group of distributors handling a large proportion of a manufacturer’s volume. If a manufacturer loses one major account to a competitor, then it loses substantial market share.

“Maintaining customer relations will be crucial over the forecast period, until new technologies such as the 42-volt and dual systems, are fully implemented and help manufacturers counter the bargaining power of the distribution channels,” says Mukhtyar.

For more information, contact http://transportation.frost.com.