To Charge Or To Swap: The Road Ahead For Electric Vehicles In India
THE INDIA EV STORY SO FAR
India is witnessing a sharp rise in EV adoption in recent times. FY2022 saw over 4.2 lakh EVs sold, a significant 230 per cent jump from 1.3 lakh units in FY2021. In FY2023 (YTD Nov), India has already clocked sales of over 7 lakh EVs and it is clear that there is no turning back now. On the investment front, Tata Motors completed the largest transaction in the EV segment raising USD 1 billion for its EV division from TPG and ADQ, while Ola Electric completed its USD 200 Mn round and Ashok Leyland raised an investment of USD 190 Mn. There is a clear rise in EV acceptability in the Indian market. The emergence of several EV OEMs and their increasing range of product offerings, rising petrol/diesel prices and falling Li-ion battery prices, and Government incentives for EVs are some of the key reasons driving this shift in consumer preference towards EVs.
Figure 1: EV penetration in India by 2030 – Arthur D. Little estimates & NITI Aayog target
A strong push by the government, in the form of favourable policies like FAME1 II and PLI2 scheme along with additional subsidies and incentives by several states, has been instrumental in providing impetus for EV adoption in the country. While the government can achieve its planned EV penetration target for 3-wheelers, for other vehicle categories it is expected to miss the aggressive targets set by the FAME Phase II policy.
DECODING INDIA’S EV INFRASTRUCTURE
Although a steep rise in EV adoption in India is anticipated, it would be highly dependent on the development of the e-mobility ecosystem, mainly the support infrastructure for batteries. Currently, the industry faces a dilemma regarding battery operations– “SWAPPING” or “CHARGING”?
For passenger vehicles and commercial vehicles, at present there are no offerings with swapping models in the Indian market and charging is the only option. Hence the question of Swapping vs. Charging is especially relevant for the 2-wheelers and 3-wheelers and the industry stands divided as shown in Figure 2.
Figure 2: Battery operating models
Key EV OEMs are setting up their own public charging stations. Ola Electric aims to set up a hypercharger network across the country which would recharge the full battery in 18 mins. Ather has its eyes set on setting up a charging station at every 4 km thereby providing their consumers greater accessibility to charging infrastructure. 4W OEMs like Tata Motors and MG are sticking to charging models. Meanwhile, emerging OEMs, such as Bounce, also offer battery-as-a-service (BaaS), where consumers can buy the vehicle without a battery, subscribe to its battery service, and swap the batteries at swapping stations of Bounce.
Given the preference of large OEMs towards battery charging, the charging model has become more prevalent in India in the last few years with the number of public charging stations reaching 4,305 in 2021. Beyond the exclusive charging network being built by OEMs, two major segments of charging point operators have evolved.
1. Large incumbents: Utility players are working on leveraging their technologies and infrastructure to provide a broad network of public charging stations. Tata Power has partnered with oil marketing companies like HPCL and Indian Oil to set up charging infrastructure at their petrol pumps, thereby leveraging the existing networks (power and petrol pump network). PSUs such as REIL (Rajasthan Electronics & Instruments Ltd) have partnered with Okaya Power to supply, install and commission charging stations across India.
2. Emerging start-ups: Several new players like Volttic and Kazam are focusing on neighborhood charging with AC chargers at parking lots of shopping malls, residential buildings, public parking places, etc., thereby providing consumers with greater accessibility to do a quick top-up charge. A few start-ups such as Log9 and EV Motors are developing rapid charging solutions which reduce the charging time to 15-30 mins. This may potentially address customers’ concerns about range anxiety and charging downtime, however these technologies are yet to be proven at scale.
Figure 3: Key players in Indian public charging ecosystem
Battery swapping is catching up with several start-ups that are emerging in the swapping station operation space, however, they are yet to achieve scale. Business models with varying levels of integration are emerging with Battery-as-a-Service (BaaS) offerings. Sun Mobility is manufacturing its own batteries and offers them on subscription at its own swapping stations. Bounce sells e-2W of its own brand and operates swapping stations by using third-party batteries. Pure-play swapping station operators such as BatterySmart and BatteryPool, have contracted with OEMs and battery manufacturers, and offer batteries to customers on a subscription model.
While the industry is trying to find the most efficient battery operating model, the government has taken a neutral stance by promoting both – charging and swapping. This creates equal playing field for both models and consequently provides consumers with greater options and convenience. The government has taken several steps to promote charging infrastructure under the FAME-II policy. To promote battery swapping, the government has permitted sale of EVs without batteries. The government is expected to introduce a battery swapping policy in FY2023. The policy aims to create a framework for greater interoperability of batteries while safeguarding the innovation potential of ecosystem players and addressing consumer concerns. Through this policy, government wants to stipulate the minimum technical and operational requirements for battery swapping ecosystems, highlight the possible ways in which government agencies and PSUs can provide financial support, and promote innovation in swapping business models.
DIGGING DEEPER INTO THE CHARGING V/S SWAPPING DEBATE
The dilemma between charging and swapping goes much deeper and various aspects such as cost and affordability, industry willingness, dynamics of EV ownership and customers’ emotional considerations need to be analyzed.
A closer look at the Total Cost of Ownership (TCO) for a user, shows that while the upfront cost is lower in the case of swapping, the recurring cost for battery subscription is higher. As per the estimates for an e-2W, the recurring cost of the swapping model catches up to reach the same level of TCO as the battery charging model in around 15 months of usage, and beyond that, swapping proves to be more expensive (refer to Figure 4). In a lifespan of 3 years for an e-2W, TCO for swapping is almost 30 per cent higher than charging, however, in case of charging, a new battery might be required at the end of 3 years, leading to a major expense for the vehicle owner.
Figure 4: Total Cost of Ownership (TCO) comparison
Battery swapping is advantageous in certain aspects considering that it minimizes the wait time for passengers and commercial riders alike. Battery swapping typically takes 3-5 minutes as compared to 5-8 hours of charging time. Riders doing last mile deliveries are able to complete higher deliveries and consequently generate higher revenue per vehicle. The separation of battery and vehicle significantly reduces the upfront cost of the vehicle, given that battery constitutes 40-50 per cent of the overall cost. Further, from an infrastructure standpoint, setting up a battery swapping station for 2/3-wheelers may require a much smaller area compared to a charging station, as there are no waiting queues expected.
On the flip side, ensuring interoperability and battery standardization is a key challenge. EV OEMs as well as battery manufacturers want to differentiate with their batteries by offering better vehicle performance, faster charging, advanced BMS and thermal management and longer battery life. Some of the players are spending loads of money in R&D for better cell chemistries and composition, and also developing differentiated BMS. Standardization of batteries for swapping models may turn batteries into a commodity, taking away a large share of value from OEMs and battery manufacturers. Additionally, in the battery swapping model, some legal complications may arise in case of any mishap as it would be difficult to assess responsibility among multiple stakeholders including battery manufacturers, OEMs and swapping stations.
In case of charging, a single charging point can charge batteries of several makes and configurations, which avoids the need for battery standardization. The setup costs and maintenance costs for charging stations are much lower than swapping stations, as there is no need to maintain an inventory of batteries. From the vehicle owner’s perspective, there is no need to worry about the quality of the battery as the vehicle contains the OEM’s battery and there is an enhanced sense of ownership of the complete vehicle, which is important in the Indian context. However, the long charging time and concerns about the availability of charging infrastructure have been one of the primary deterrents for customers in EV adoption, especially for commercial users.
As is evident, there is no clear winner. While swapping appeals to commercial users for the last mile delivery applications and cost-conscious individual consumers sensitive to upfront vehicle cost, charging is preferred by those who purchase an EV for EV’s sake, and by those who prefer owning a battery than renting one, for reasons all emotional.
Across the globe, battery swapping has met mixed outcomes and there are a few learnings. While the US has traditionally been dominated by Tesla, its premium EV models, and super chargers, China has witnessed the growth of EV models across all income sets supported by a good mix of swapping and charging infrastructure. Chinese consumers are more cost conscious than their American counterparts. The lower upfront vehicle cost due to a battery swapping model appeals to them. Additionally, the Chinese government has gone all out for battery swapping with heavy subsidies and setting standards for interoperability. Whereas in the US, the government has played it quiet and industry players who tried swapping models faced challenges with interoperability. Therefore, partnerships between multiple OEMs, battery manufacturers, and government intervention are crucial for the success of battery swapping.
WHAT DOES THE FUTURE HOLD?
Swapping will continue to appeal to commercial riders, especially 2W, 3W, and small commercial vehicles, as it provides higher vehicle uptime, enabling more deliveries and higher earnings revenues that compensate for the higher recurring costs for battery swap/subscription. In closed-loop use cases such as last-mile deliveries, intra-campus travels, and other area-specific transportation applications, where there is a limited requirement for wide-scale battery standardization and asset uptime/utilization is important, swapping is an effective model.
The charging model will be preferred by personal mobility as users look for vehicles of specific brands, higher range, higher top speed, and ownership of the full vehicle. These customers can plan for their travel and charge well in advance at their homes overnight, and typically have shorter daily travel requirements, where a single charge is sufficient.
For 4-Wheelers, buses, and larger commercial vehicles, charging seems to be a more practical solution, as swapping large batteries would need huge investments in swapping station infrastructure and battery inventory. In certain smaller 4-Wheelers, e.g. urban cars (2-seater), swapping may work with a combination of multiple smaller battery packs, however potential for such a segment seems to be limited in the Indian context.
In summary, the swapping model will work effectively in closed-loop use cases while the charging model will remain preferable and scalable for a broader range of use-cases like personal use in cities and long-distance travel. Eventually, with further advancements in battery technology, rapid charging solutions, enhanced battery range, and longer battery life, the charging model may get an edge over swapping across various use cases, provided, the government maintains a neutral stand promoting both charging and swapping.
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