India's EV Revolution: The Game-Changing Promise Of Battery Swapping

Currently, if the battery is decoupled from the vehicle the GST rate is 18 per cent while along with the vehicle, the tax rate is 5 per cent. This asymmetrical structure of tax not only impacts the adoption of Swapping but also impacts the adoption of electric vehicles in general

Past two years have seen a steep uptrend in adoption of e vehicles- with the current penetration of electric vehicles in 2W segment being about 6%. If one just sees the scooter segment, that forms 33% of the two-wheeler base, the penetration of electric vehicles is more than 15%. However, this uptrend can be further accelerated by adoption of Battery Swapping in the commercial delivery space. The two most popular use cases where swapping has been of particular interest are e-rickshaws and commercial 2 wheelers. Both these cases demand high daily run in terms of kilometres travelled and in both cases the vehicle is used to earn a livelihood. If we see the global trends in battery swapping, the developing economies with a higher fraction of 2 and 3 wheelers hold a significant promise for battery swapping as these are densely populated, highly price sensitive markets.

There is often a debate of Swapping vs Fixed charging. However, both the ecosystems will co-exist in Indian scenario as we have almost 35% of our 2W vehicles and 100% of 3W vehicles being used for commercial purpose where Battery Swapping is an inevitability. Commercial applications demand long hauls and daily run requirement is between 100 to 150 Km on an average. This means a daily charging requirement of at least 2-3 hours which makes Swapping inevitable in commercial use cases. In personal usage the daily run is lesser than 40 Km on average, making fixed charging or night charging a useful option.

The economic viability of Battery Swapping for the end user is both in terms of reduction of upfront cost of migrating from ICE to EV and in the form of zero downtime translating into more daily earnings. Given that on an average the commercial rider makes 25-30 deliveries per day the gain for him translates to Rs. 150-180 per day. Including the swapping cost the net gain is Rs. 70 - Rs.90 per day which translates into an 8%-10% increase in monthly income.

Although the economic viability of Battery Swapping is unquestionable for the commercial segment there are two changes at Policy level that will further help the growth of this segment. Currently if the battery is decoupled from the vehicle the GST rate is 18% while along with the vehicle the tax rate is 5%. This asymmetrical structure of tax not only impacts the adoption of Swapping but also impacts the adoption of electric Vehicles in general as it increases the TCO for the end user, as more and more batteries run out of life and the after-market for batteries evolve. The second challenge is with respect to standardization- broadly meaning that the form factor of the batteries and the connectors should be the same across all the vehicle models used.

Although pure standardization is a difficult state to achieve, the problem is getting solved in a “Demand Backwards” manner. Most energy operators work with a finite set of commercial players and hence the problem of standardization is solvable at a finite, local scale. Also, as the industry scales and matures there will obviously be a decrease in the number of variations of form factors and this will obviously be a smaller problem to solve as the time goes by.

Another area where Policy could play a key role is in the sharing of FAME subsidy between Battery Swapping provider and the vehicle OEM. Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) Scheme Phase-II is being implemented by the Ministry of Heavy Industries for a period of five years commencing from 1st April,2019 as a demand incentive for the end users across vehicle segments. As of July 31 2023, more than 8.4 Lakh e-2W and 3W have been sold under this scheme. However, the scheme is not applicable when the vehicle and the battery is separated – which is the case with Battery Swapping. If the swappable batteries are also brought into the fold of FAME subsidy it will make the economics of swapping even better for the end user and will provide a significant boost to the acceleration in electrification in the last mile mobility space.

The EV landscape has changed a lot in the past few years and has the potential of helping India achieve its COP26 Goals. Although the energy mix (Coal vs Others) has dragged down the current rating of India in the Climate Action Tracker, there are positive moves around reduction of Vehicular emissions which are helping India achieve its goals. Few changes with respect to Battery Swapping at the Policy level can go a long way in accelerating the meeting of Net Zero Targets.

(The above-given article has been attributed to Hasan Ali, Co-founder, Esmito)

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