- Globally, EV adoption is driven by the involvement of the government and its policies, pushing ahead to develop its EV market and the industry.
- The dominance of 2-Ws and 3-Ws in India poses a unique landscape to be addressed for upscaling EV adoption and building a robust charging infrastructure.
- GOI in a recent notice allows sale and registration of 2WEVs & 3WEVs without a factory-fitted Battery
In a bid to strive for a thriving EV ecosystem in India, the Government of India (GOI) has now allowed sale and registration of electric 2-Ws and 3-Ws without factory-fitted batteries to drive down upfront purchase costs of EV. This order suffices the missing focus in the charging infrastructure segment for 2-Ws and 3-Ws which was not seen through the National policies of FAME. Coming at a time, when the nation has had a whiff of pure air and cleaner skies, the promotion of electric mobility is indeed a much-needed welcome move to tackle post-COVID pollution.
While the new notice creates a bundle of opportunities in the EV ecosystem, it also has its sets of challenges that need to be addressed for effective implementation. In what may reduce the cost of such vehicles and also encourage the use of swappable batteries, it will be good to understand its impact on adoption, performance, manufacturing, business model, and policy.
Adoption of EVs: Higher Upfront Cost
A major barrier to EV adoption in India has been its higher upfront cost even after government subsidies. The cost of batteries constitutes 30-40% of the vehicle cost which has led to an increase in EVs purchase cost. Indian consumers, being very price-sensitive, would shift to electric mobility only if they find it to be as cost-effective and convenient as the current system for ICE (Internal Combustion Engine) vehicles. This would greatly be achieved by separating the battery from EVs, thus reducing the vehicle purchase cost significantly.
Performance: Explore with Better Opportunities
Making EVs compatible with swappable batteries would also help promote battery swapping in these segments, through which EV owners can swap partially or completely discharged batteries with fully charged ones within a few minutes. Battery swapping is one of the most time-saving and easy charging methods. Not only will it eliminate the unnecessary waiting time encountered via plug-in charging, but it will also help in reduced size of batteries in vehicles, increased run time, and better utilisation of land, which with being scarce also has an exorbitant price attached to it.
Other benefits that can be achieved from this technique include enhancement of battery life, relatively lower costs of management and grid updating that can save a substantial amount of money. Fast charging and charging of batteries in high temperatures leads to degradation of the battery in due time. Considering the temperature extremes in India, swapped batteries can be charged via slow charging in a controlled environment to prolong the battery life resulting in longer service life and cost-sharing.
From a power grid perspective, battery swapping can provide dual benefits of power load balancing and integration of renewable energy sources in the grid. Batteries can be charged during off-peak periods of lower power demand helping the power grid with valley filling and also work as battery storage systems for the intake of solar and wind energy during day time. The adoption of this measure would also help electricity distribution companies (DISCOMs) in saving substantial money from grid updating.
MoRTH has allowed registration of electric vehicles without pre-fitted batteries. Read more: https://t.co/YbgI0U17eM pic.twitter.com/utWVhRcNqK
— MORTHINDIA (@MORTHIndia) August 12, 2020
From the view of EV owners, a Battery Swapping Station (BSS) provides a payable service to supply a fully charged battery like petrol stations providing fuel for ICE vehicles. And hence this technology can be of much benefit for the commercial vehicle fleet. However, heavy vehicles (4-Ws, buses, trucks) require the use of an automated robotic arm for handling large batteries and creates higher capital expenditure. And hence, the suitability of this technique for heavy vehicles is much debated over.
Manufacturing: Time to Adapt to the Change
The delinking of batteries from vehicles present umpteen opportunities, especially for the manufacturing sector. The bulk of electric 2-Ws and 3-Ws manufactured today come with detachable batteries that are not swappable by design. Connector design, vehicle chassis, battery form factor, battery vehicle-side socket, energy density, thermal runaway safety are major areas where immediate development is required from the vehicle and battery manufacturers.
Hence, it is the right time for the auto component industry to adapt to newer businesses in the EV supply chain to support the production of vehicles without batteries and go full steam with battery swapping service. Currently, a host of new entrants, both domestic and foreign, are working on creating an ecosystem of swappable batteries such as Sun Mobility, Gurgaon-based Exicom Power Solutions, and 22 Kymco, an alliance between startup Twenty Two Motors Pvt. Ltd and Taiwan’s Kymco Global (Livemint, 2020).
Although this initiative provides leapfrogging opportunities in the battery swapping segment, a major miss from it has been no discussion over the standardisation of battery pack and charging protocol. At present, the battery specifications and battery replacement systems of various vehicle companies for different vehicle segments are different which restricts the popularity of battery swapping modes and makes it an arduous task for energy operators.
The new rule by @MORTHIndia allowing #ElectricVehicles without #batteries has unraveled opportunities for new #opportunities in the 2WEVs and 3WEVs segments
Read this article by @kparveen79 on #NewBusiness #Performance #Policy #Manufacturing #Adoption https://t.co/NIA8hjpdlP pic.twitter.com/t1Us98fXOM
— Hari Shanker (@harishankerag) August 25, 2020
Standardization would lead to the battery swapping system becoming interoperable, with batteries universally compatible between various vehicle companies and types. For EV drivers, interoperability, or “e-roaming,” means that drivers would be able to swap their batteries at any station with a single identification or payment method and that all charging stations can communicate equally with vehicles. Through the coordination of the vehicle and battery manufacturers, the establishment of related standards for the manufacturing and operation of battery swapping should also be promoted by the government, with breakthroughs in key technical standards such as charging interfaces and standard battery boxes.
New Business Model for EVs
The sale of a vehicle without batteries has unraveled opportunities for new business models in the 2-Ws and 3-Ws segment apart from manufacturing opportunities. The “separation of vehicle and battery” cannot form a market advantage for any company on its own. Companies that would implement the “separation of vehicle and battery” would require higher capital and hence innovative collaboration among vehicle and battery companies can improve convenience, reduce costs, and jointly expand the EV market (Yang, et al., 2020).
One business model could be of leasing the batteries from Energy Operators. Energy operators can own the batteries and provide a charged battery, in exchange for a discharged one, as a service to EV owners at convenient BSSs. An EV owner can sign up with any Energy Operator and lease the charged battery from them (Jhunjhunwala & Kumar, 2019). It creates a pay-per-use model with similar experience to paying for petrol/diesel. Ample opportunities are also at the hand of tech start-ups which could integrate the Internet of Things (IoT) and make use of Machine Learning to build battery telematics for an interoperable, vehicle independent swapping infrastructure and thermal management of batteries. Some interesting business cases can develop out of these which can offset fixed battery manufacturing.
Policy for Faster Adoption of EVs
With the separation of vehicles and batteries in place, a major question arises whether any additions will be made by the Central Government for the provision of subsidy under this category under the national policy of FAME. Delhi has sweetened the spot already in its newly notified EV policy by providing a 50% subsidy to the vehicle owner and the Energy operator in case the vehicle is sold without a battery. Any subsidies by the Central Government made under this category would be an addition to lowering down costs further.
Apart from policies and rebates on the demand side, the government can also provide relief on the supply side and further lower down the upfront cost by reducing the GST for battery pack components and battery swapping services.
The insurance of vehicles without batteries also becomes a point of discussion. The Insurance Regulatory and Development Authority of India (IRDAI) had earlier notified the premium rates for private EV third-party liability insurance cover for the financial year 2019-20 at 15 percent discount compared to rates for general private cars of similar categories giving benefit to EV users (The Economic Times, 2019). After the implementation of the “separation of vehicle and battery”, the vehicle body is separated from the battery and they belong to different subjects, both of which require insurance. There is no separate insurance type for power battery parts with higher risk factors and higher costs and hence this should be incorporated now.
The Right Move Accelerating the Transition to Electric Mobility
India’s EV story in terms of charging infrastructure requires a combination of both batteries swapping for 2-Ws and 3-Ws and plug-in charging for heavy vehicles due to the complexity of swapping bigger batteries and the sheer amount of capital expenditure involved. The introduction of the “separation of vehicle and battery” by the government not only reduces the upfront purchase cost of vehicles but also solves the problem of range anxiety, long charging time, and inconvenience, provides new business opportunities.
By any measure, India’s EV aspirations are steep from what we stand today and have sparked remarkable interest and action in a policy, industry, and research arenas. This new initiative suffices the missing focus in the charging infrastructure segment for 2-Ws and 3-Ws which was not seen through the National policies of FAME but it has its own sets of hits and misses. While the government has embarked on a new journey to drive down EV costs, it would also need to look upon the finance and implementation aspects underlying this provision.
More benefits can be availed by the demand and supply side of the associated GST on battery charging/swapping services and on charging components is also reduced. Standardisation of charging hardware of BSS also remains a key barrier that requires significant attention to encourage large scale private investments in setting up swapping stations. Overall, the government has set its foot on the right pedal for accelerating the transition to electric mobility.
This article is co-authored by Anshika Singh, a postgraduate student, currently pursuing her Master’s degree in Planning (with specialization in Transport Planning) from the Department of Transport Planning at School of Planning and Architecture, Delhi. She has completed her graduation in planning from the School of Planning and Architecture, Delhi as well in 2019. Her areas of interest are climate change, sustainable transportation, green mobility, low-cost transportation, and further plans to work on projects that could make an impact in mitigating climate change.
