India is committed to reducing its carbon footprint, and the government plans to have 30% of cars, and majority of the two- and three-wheelers in the EV category by 2030. This shift towards an EV-centric commute is going to witness greater momentum in 2022. One of the major considerations while predicting the EV industry’s future are the unique concerns, demographic needs, and economic scenario of the masses. Unlike the US or the European Nations, India’s electric mobility transition will be led by two- and three-wheelers since these types of vehicles are the mainstay of the last-mile connectivity and delivery across the country.
One of the biggest challenges faced by those looking to own these vehicles in the electric category is the high upfront cost and the frequent spending on batteries. In August 2021, the Government of India permitted the sale of electric two- and three-wheelers even without a factory-fitted battery. Considering how batteries cost up to 50% of an electric vehicle’s cost, the option of not having to buy vehicles pre-fitted with batteries brings down the EV cost to a level that is competitive to the conventional petrol-fuelled ICE two- and three-wheelers.
The approval to buy vehicles without batteries is rooted in the concept of battery swapping which will gain a lot of acceptance in 2022 and beyond, segregating the ownership of vehicles and the battery. However, the declaration has caused a lot of confusion among EV makers and potential buyers alike. This is due to the lack of clarity on whether a vehicle purchased without batteries would still be eligible for the same subsidies or not. Another concern is that the GST on batteries when purchased as a standalone item is 18% whereas that on EVs as a unit is only 5%. In 2022, we hope that the Union Budget will provide much-needed clarity on this aspect. It is expected that the GST on the purchase of batteries would be reduced or completely waived off.
A major development that the Indian EV market will witness in 2022 is the entry of several new vehicle models and manufacturers in the two- and three-wheeler categories. These two make up for the majority of the current as well as near-future EV requirements in India and come with detachable batteries. Unlike the four-wheeler private vehicles which are better suited to plug-in charging of the battery, the latter requires a system that offers them charging support at par with the conventional fossil fuel vehicles. This is where battery swapping services have come across as an ideal solution.
Realizing this need, several state governments across India have announced measures to support the establishment of battery swapping stations and infrastructure. The Delhi Government has gone ahead and announced steps such as equal distribution of EV subsidy between the vehicle owners and energy operators. It is also offering subsidized rental lease and full reimbursement of State Goods and Services Tax (SGST) on the purchase of sophisticated EV batteries.
Encouraged by these moves policies, various startups and even large enterprises such as Reliance, HONDA and BPCL are set to enter the battery swapping domain in 2022. This will lead to a much wider network of battery swapping stations as well as progress towards standardization of battery technology and service levels across the country. Battery swapping will help the EV users overcome range anxiety. Thus, we will see a greater integration of environment-friendly last-mile connectivity and delivery solutions in 2022.
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Author: Mr. Varun Goenka, Co-founder and CEO, Chargeup.
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