The current pandemic has impacted all the industries existing today in the world. This impact is either positive or negative which is a completely different aspect; but what is the major thing that has to be really focused on right now is how do we tackle the new normal & this disruption which might lead to a different world which didn’t exist Pre-COVID? It is utmost important to give a firm ground of pre-COVID to your study of visualizing the possible future for the industry & its stakeholders as a whole as it might lead the way better in viewing what the businesses will look like & will they be enabled to generate adequate revenue & growth in holistic frame. One such industry which we will explore the future possibilities, opportunities & threats for is Power Backup. Looking at the past data we can understand that the major players of the batteries market performed fairly well during the 2008 financial crisis. One of the major reasons for that could be contributed to the fact that batteries are an essential part of our lives, as they have a limited life. The need for batteries to be replaced from time to time keeps the demand in the market constant.
So, what does this situation predict the possible behaviour of our stakeholders? Let us observe.
1. Customers
Short Term Impact: This pandemic has hit heavy on the pockets of Industries, Retails, Corporate’s and Residential’s all at once with equal pace. Due to the reduced revenues & purchasing power of all these segments, they are currently in the frame of saving & survival rather than spending on non- essential items. However, there is an increase in demand for quality and reliable power in critical infrastructure spaces like super-specialty hospitals, community clinics, government medicals, banks, disaster recovery centers, and data centers. This is driving the demand for backup solutions.
Long Term Impact: The demand for batteries has not fallen but has got postponed for the time being. There is a demand deferral & not a permanent downfall because of these simple reasons: Batteries are a primary commodity. Due to increased stay at Home time & less driving of vehicles, home batteries are overused while car batteries are under! This will boost up the demand for replacement in both the cases. Also, COVID-19 has created additional demand for batteries in a few sectors such as communication networks, data centers and healthcare facilities. There is a possibility of enhanced demand in these segments. Although there are disruptions in the supply chain, the surging demand can be met through as the companies have piled up inventory which is due to this sudden change in the environment & due to which, in the economy as well.
2. Suppliers
Short Term Impact: There can be a major fallout for the suppliers as there is a possibility that the companies already have piled up stocks of power backup products. Companies may wait for the clear visuals of demand in the market before placing orders of the same. However, this wait can be short term or medium term depending upon the stock at the storehouses & the demand against the stock available. Hence, it varies from company to company.
Long Term Impact: Looking at the brighter side, the suppliers too are in greater gains as the demand for power backup solutions are going to surge in the long term & eventually, the companies will need more products to sell & earn profit from them. Hence, it is a win- win situation for the manufacturers/companies & suppliers of power backup essentials!
3. Storage/ Warehouses:
The recent study shows that there could be a derail in the storage growth in 2020 amidst COVID-19 but still, it is going to be a record-breaking year with 1.6GWh deployed. Looking ahead to the next five years, the global energy storage industry is set to thrive due to opportunities presented by the energy transition.
4. Channel Partners:
Channel partners include C&F Agents, LFRs, Dealers and Distributors. They have a direct link with the end customers (except distributors & in some cases C&F agents too). Hence it is enough to understand that more or less, the change in their particular behaviour will be influenced by the changes in demand from the market (Residentials, Corporates, Industries and Retails).
Short Term Impact: Looking at the current situation holistically, due to sudden shut down of operations, sales & business; plenty of stock may have been laying in the warehouses/ stores. In such case, there is little possibility of your channel partners stuffing more of it at their place. As the demand collectively has been on a hold, it is difficult to expect a positive response from your channel partners for the near future.
Long Term Impact: However, Due to the direct link with the market, the channel partners too may resume & start placing orders if there are any. Batteries, as stated earlier are a primary commodity; a pivotal supporting factor for electricity storage & supply. In these times when along with food, shelter & clothing have a 4th element as necessity for human existence i.e. electricity, it is hard for the demand of batteries to not upscale!
Moving on, which segments would show a thumbs- up in terms of demand? Here you go!
Bonus:
There might be a slight surge in the frequency of power cuts just after the end of the slowdown. As it would be the time of summers in which most of the states face the issue of peak surplus and combined with the peak surplus the increased load of the industries starting again is going to increase the deficit, even more, leading to an increased shortage of power. And in turn, increased demand for inverters & batteries.
Author:
Shivangi Makhija, , A PGDM in Finance by education & a Business Analyst at J. Hirani has worked for Power Backup & Forex industries so far. She is a spontaneous & a wanderer at heart, yet focused & patient which makes her versatile in her own ways!
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