India’s burgeoning electric vehicle (EV) industry couldn’t mine the 2022 Union Budget for many favourable policies except for one: a soon-to-be-implemented battery swapping system with interoperability standards to be introduced. While the automotive industry’s response to the budget was largely positive, a policy for battery swapping—the process of replacing out-of-charge batteries with charged ones, usually from a charging station or outlet— doesn’t provide the immediate benefits many EV makers were clamouring for.
Given that the central government is not in a position to provide the GST rebates and relaxations on import duties, it did the next best thing: target the existing gaps in the charging infrastructure issue while saving costs and alleviating consumer concerns surrounding the EV range. Modular, manual swapping stations take up less space than public charging stations – a business endeavour that continues to offer minimal profit and high investments.
Knowing that the EV market in India will grow from bottom-up, a policy designed to benefit only electric three-wheelers and two-wheelers seems prudent. Batteries are the most expensive and fastest depreciating component of an EV and establishing a swapping system could go a long way in alleviating costs, range and resource management concerns.
At present, 90 percent of India’s EV market is occupied by the e2w and e3w market, with the latter occupying the lion’s share. It’s clear then, that the swapping policy will first and foremost tackle the electric three-wheeler fleet segment, along with electric two-wheelers. At present four of the top-five e2w manufacturers offer removable batteries. Removable batteries, however, are not the same as swappable ones as they cannot be recharged at home but not replaced at a rapid rate, using a subscription service.
Who does it benefit?
Not carmakers for sure, since battery management systems, software and battery technology remain one of the most closely guarded secrets for all EV brands. Given how similar EV performance is likely to feel in the future, it's the EV’s range and software capabilities that’ll determine its success in the market.
Tesla, which continues to dominate the US EV market, succeeded not only because of an early mover advantage but because it created an indispensable ecosystem consisting of a large supercharger network and software which boasted of semi-autonomous capabilities and superior battery management. Tesla’s build quality has frequently come under criticism, with panel gaps and overall finish being touted as a weak point for the brand.
Despite this, its clear dominance in the EV space has remained unchanged. Simply put, car companies do not and will not share battery technology and forcing them to adhere to some standardised form of battery tech will work to their detriment. Especially those brands seeing India as a potential manufacturing destination.
The first in line to benefit from this scheme is the electric two and three-wheeler customer, who can lease or subscribe to a battery swapping service much like one does for domestic LPG. Then there are battery manufacturers, which will now work under a specific framework to adhere to interoperability standards. Sohinder Gill, Director General, Society of Manufacturers of Electric Vehicles (SMEV) said the policy “will benefit the whole segment, i.e E2W, E3W, EVs and buses”.
But the policy seems to be primarily targeted at electrifying fleets in the e-commerce delivery and three-wheeler transport service sectors as both have time constraints that even fast-charging stations cannot resolve. The government’s electrification target for commercial vehicles remains much higher at 70 percent than that of private cars which are expected to achieve 30 percent market penetration by 2030. The Delhi government has already announced that all ride aggregators and delivery services will have to adopt electric vehicles.
Makers of high-end EVs like Volvo Cars do not expect domestic charging to be an issue for their customers. With those concerns addressed, it’s the low-cost electric car market that’s left in the lurch, without an effective inter-city as well as intra-city charging ecosystem to rely on. Given that batteries comprise a major portion of the car’s total weight, swapping a car’s lithium-ion batteries would be considerably harder if not outrightly impossible.
What are the disadvantages of a battery swapping system?
The advantages to a battery swapping system are obvious – quick replenishment of battery charge, relief from domestic charging woes and lower upfront cost of EVs, given that battery leasing will replace battery ownership. But it’s the disadvantages that need closer examination.
A recent report from the International Energy Agency pointed at massive supply chain constraints in the EV business largely due to unregulated mining practices for limited materials that go into battery manufacturing. With a battery swapping system, there will effectively be far more batteries for the same amount of EVs on road, therefore putting a greater strain on a limited pool of resources. In recent times, prices for battery materials like lithium carbonate increased by 150 percent, YOY, graphite by 15 percent, and nickel by 25 percent, according to the IEA report.
There’s also the issue of swap batteries having lower range, given their disposable nature. The issue was highlighted by SUN Mobility Chairman and Co-founder Chetan Maini, a pioneering figure in the Indian EV industry who introduced the Reva to the world. “As the policy unfolds, it would be great to see the government addressing key points around how customers can access subsidies (currently available for EVs), range per charge criteria, given that swap batteries by definition are smaller and GST for swapping services in line with EVs”. At present, the GST on a separate battery is at 18 percent as opposed to on a battery sold with an EV, which attracts only 5 percent GST.
Key Players
The list of battery swapping solution providers in the country appears to be growing. Players like SUN Mobility already appear to be in the lead, having partnered up with Tata Power DDL, a joint venture of Tata Power and the Delhi government, to set up lithium-ion battery swapping stations in Delhi, last year.
Bounce Electric became the first electric two-wheeler to offer a battery swapping service model, stating its intent to install kiosks across city streets where customers could swap batteries. Before selling its scooters, Bounce had partnered up with NoBroker.com to extend its battery-swapping infrastructure in India across NoBroker locations in India.
Other brands like the New Delhi-based start-up Lithion Power are fast emerging as swapping solution providers for both electric 3Ws and 2Ws. Taiwanese electric two-wheeler manufacturer Gogoro, the only brand to have expanded across South Asian markets with its battery swapping platform, has partnered up with Hero MotoCorp. Hero will utilise Gogoro’s battery swapping technology for its upcoming e-scooters.
Honda Motor, the Japanese auto giant which presently has no EV offering in the country, has announced that it will start offering battery-swapping services to electric three-wheelers in Bengaluru, before expanding to other key cities across India. How these brands will adhere to the government’s interoperability standards, remains to be seen.
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