Can battery swapping power EVs for the long term in a cost-effective way?

Batteries can be charged away from swapping points, allowing more freedom in setting up swap facilities

The proposed battery swapping policy and interoperability standards for electric vehicles (EVs) announced by the finance minister in her Budget speech aims to address one of the biggest deterrents for EVs – the charging infrastructure. It is expected to reduce upfront costs and downtime and lead to a faster adoption of EVs. This is the first time that swapping as a technology solution for EVs has received recognition from policy makers. 

The draft policy currently under formulation, however, will need to take into consideration a host of issues, ranging from accountability regarding safety of EVs, customer experience and the business interest of EV manufacturers.

Battery swapping or battery-as-a-service allows EV owners to replace the discharged batteries with charged ones at the swap stations. This will address the problem of setting up charging stations and also reduce drivers' anxiety over the range their EVs can cover (known as range anxiety). Further, battery leasing can help EV owners save the cost of purchasing a battery. The service is less time-consuming, taking only a few minutes compared to charging at a battery station, which could take hours. It also requires minimum infrastructure. Batteries account for close to 60 per cent of the cost for an e-two-wheeler. 

 “The proposed policy will certainly reduce costs and the downtime and lead to faster adoption of EVs. At the same time, it’s set to increase the operational complexities,” said Harshvardhan Sharma, head of automotive retail consulting at Nomura. It will work as long as the EV-makers have one or two variants. But as the number of variants increases, it would become difficult to maintain standardisation, he explained.

Also, given the fact that the battery will be used by those operating in the commercial segment as well as by personal EV owners, customer experience and performance may be compromised, he pointed out.

Anil Giri Raju, co-founder and chief operating officer, Bounce Infinity, a seven-year-old start-up that will be launching an e-scooter next month with a swappable battery, said, “The customers have to like the solution being offered by those in the service of swapping batteries. The companies will otherwise go out of business in no time. As a company that has one million swaps, we haven’t come across any complaints.”

At present, Bounce has over 200 swap stations operational in Bengaluru. The company is now setting up close to 2,000 additional stations across six cities in India. It has also partnered with nobroker, Park+ residents welfare associations malls and petrol bunks to build a swapping infrastructure for a million scooters in the next 12 months. “All the batteries in our fleet use premium cells; they are guaranteed by battery suppliers and come with a back-to-back warranty,” Raju said.

The Centre is likely to finalise the policy within the next two months, Reuters reported. The policy is likely to focus on battery swap services for three-wheeled auto rickshaws and two-wheelers such as electric scooters and motorcycles. Under the policy, EV owners may get incentives of up to 20 per cent on the subscription or lease cost of the battery. The incentives will be over and above those given for buying clean vehicles, the report said.

The battery swapping policy will not only boost the confidence of people to move faster to EVs because it will address the range anxiety, but it will also help in strengthening the EV ecosystem in the country and bring a standardisation process for battery, said Nagesh Basavanhalli, group CEO and MD, Greaves Cotton, which sells an e-scooter under the Ampere brand and e-three-wheelers.

“We will have to watch the on-ground implementation and penetration of swapping solutions and interoperability between different solution providers to understand the full potential impact of the policy,” said Basavanhalli.

Chetan Maini, chairman of Sun Mobility, one of the first companies to develop battery-swapping technology in India, said 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 (as swap batteries, by definition, are smaller and with less range) and GST for swapping services in line with EVs. “It’s encouraging to see steps being taken on interoperability standards,” he said in a statement after the Budget. Sun Mobility’s battery swapping-powered EVs have travelled for over 13 million kilometres on Indian roads and this new policy is further going to accelerate its plans to onboard one million vehicles on its platform.

But not everyone thinks swapping batteries is a practical solution. “Battery swapping is not plausible given the high costs of the battery and other issues,” said an official at an automobile firm.  If a battery is the most expensive part of a vehicle, one would rather reduce the number of batteries and not vice-versa, he said pointing out that when one is swapping batteries, the number of batteries have to exceed the number of vehicles by some ratio as one will need one set to keep the vehicle running and a few sets for charging. Therefore, it’s not a capital-efficient solution, he said.

Even the policy think tank Niti Aayog believes that the limitations outweigh the benefits. It has flagged lack of standardisation among batteries, unsuitable battery pack design and a higher GST on separate batteries (18 per cent versus 5 per cent for EVs) as some of the prominent points. The need for a greater number of batteries to power the same number of EVs and slow adoption of charging by OEMs could be some other limitations.

Rajeev Singh, partner and automotive leader at Deloitte, pointed out that the technology solution comes with its own pros and cons. “It may hurt the OEMs (original equipment manufacturers) as the profit pool shrinks and moves to the battery service provider,” he said. When an EV-maker sells the model without a battery, the average selling price of the models will drop 40-45 per cent. 

Bounce’s Raju disagrees. Manufacturers will be able to sell a lot more than what they are selling now and will benefit from a bigger scale, he said. E-two-wheelers account for only 1 per cent of India's 2-3 million per annum market. This will grow at a rapid pace when prices drop and swapping becomes popular. Today, with all the subsidies, the price of an e-scooter is Rs 100,000-plus, and it is more expensive than a conventional engine-powered scooter, he said. For faster adoption, an e-scooter has to be cheaper than a conventional scooter.