By Barnik Maitra, Fabian Sempf & Prathamesh Chaudhari
India is witnessing a sharp rise in EV adoption. FY22 saw over 420,000 EVs sold, a huge jump from 130,000 in FY21. India clocked monthly EV sales of 50,000 units for the first time in December 2021, across vehicle segments. Rising fuel prices for ICE vehicles, reduction in battery prices, new launches by OEMs, and a strong push by the government contributed to this growth.
While we anticipate a steep rise in EV adoption, the industry faces a dilemma regarding battery operations: “To swap or to charge?”
And the industry seems divided.
In two-wheelers, while OEMs such as Ola Electric and Ather offer fixed battery vehicles, others like Hero Electric and Okaya offer both charging and swapping options. Bounce, an emerging OEM, offers only a swapping option and plans to set up several swapping stations.
The four-wheeler segment prefers charging, due to operational complexities associated with swapping a large battery.
In the case of infrastructure providers, large players such as EESL, REIL and Tata Power are setting up fast-charging stations, while emerging ones like Volttic and Kazam are focusing on neighbourhood charging with AC chargers at shopping malls, parking lots, etc. The government is playing its part through favourable policies (Rs 1,000 crore allocated for 2,877 charging stations under the FAME-II scheme, PSUs are offering land to private players for charging stations at a concessional rate, some state governments are offering cost subsidies for charging stations, etc).
On the swapping side, players like Sun Mobility and Battery Smart are experimenting with battery subscription and pay-per-use BaaS models. As minimal idle time and better asset utilisation attract last-mile delivery players to the swapping model, the impending cost and interoperability considerations are concerning swapping providers. To support growth of swapping, the government has permitted the sale of EVs without batteries and plans to introduce a battery swapping policy to create a framework for greater interoperability while safeguarding the innovation potential of ecosystem players and addressing consumer concerns.
Charging versus swapping
Battery swapping: It reduces the upfront cost as the vehicle is sold without the battery, which constitutes 40-50% of total cost. It reduces range anxiety and vehicle downtime resulting in a positive impact on the earnings of commercial drivers. It minimises infrastructural needs, given the low space requirement, which is crucial in densely populated areas (the Sun Mobility Quick Interchange Station looks like two midsized washing machines welded together). The swapping model also demands lower battery size and range, thereby reducing the lithium requirements at the industry level. There are challenges around interoperability and battery standardisation, especially when industry players betting big on battery technology differentiation. There is a big liability debate in case of any mishap with a vehicle running on a swapping model.
Battery charging: It provides a sense of ownership to customers and quality perception for branded batteries. It enables the industry to remain competitive through differentiation of cell technology, battery configurations, thermal management, BMS, etc, as OEMs look to enhance their value proposition by offering better range, longer battery life and faster charging. Charging station operations are more cost-efficient with minimal operating and maintenance requirements.
But long time required for charging (6-8 hours for four-wheelers), range anxiety and concerns on availability of charging stations are key obstacles from a customer’s perspective. The space required for charging stations, mainly due to long waiting times, demands higher capital investment. With fast-charging solutions offering 15-30 minutes for complete charging of two-wheeler batteries, some of these concerns may get addressed.
Which is more economical?
Based on our calculations, while swapping promises lower upfront cost, the higher recurring cost catches up and beyond a point charging becomes more economical, as vehicle is used for a longer duration. For an e-scooter with an average daily running of 40 km, considering a charging cost of about Rs 300 per month and swapping cost of Rs 1,900 per month (including monthly subscription), beyond 15 months, the charging model turns out to be more economical for the user.
But we need to consider that swapping offers higher uptime throughout vehicle life and may be an attractive model for commercial users. Moreover, the charging model may require replacement of the battery after 3-4 years, due to degradation of performance, and will have cost implication for customers.
Where are we headed?
There is no clear winner. While swapping has a typical customer fan base of last-mile delivery players and cost-conscious consumers, charging is preferred by those who purchase an EV for EV’s sake and by those who prefer owning a battery to renting one, for reasons all emotional. The government seems to have taken a rather neutral stance, promoting both charging and swapping with incentives and subsidies.
In summary, the swapping model is expected to work only for two-wheelers and three-wheelers, and unlikely for four-wheelers. Swapping will be effective in closed-loop use cases such as last-mile delivery, intra-campus travel and other area-specific transportation applications, where there is limited requirement for wide-scale battery standardisation and asset uptime/utilisation is important. The charging model seems to be more suitable for individual users, who can plan for their travel and charge well in advance and charge even at their homes overnight, and typically have shorter daily travel requirements. Eventually, with advancements in battery technology, rapid charging solutions, enhanced battery range and longer battery life, the charging model may get an edge over swapping for various use cases.
Maitra is managing partner, Sempf is principal, Head of Automotive Practice, and Chaudhari is senior manager, Automotive Practice, ADL India