Electric vehicles are gaining popularity in India and across the globe. Still, their higher upfront cost compared to conventional vehicles and concerns about the availability of charging infrastructure are significant barriers to faster adoption.
Battery swapping promises to address both issues. It is an arrangement where the depleted battery of an electric vehicle is swapped with a fully charged one at a station for a fee. The procedure can be completed within minutes for light-duty vehicles such as electric two-wheelers.
Recognising this, Finance Minister Nirmala Sitharaman, in the budget speech in February, announced a battery-swapping policy. Niti Aayog on May 9 published a draft of the battery swapping policy for public consultation.
The policy aims to encourage the adoption of electric vehicles in India by lowering the overall cost. In the financial year 2020-’21, more than 80% of the motor vehicles sold in India were two-wheelers. Therefore, if battery swapping is to take off in India, it needs to work for the two-wheeler segment.
The International Council of Clean Transportation and Niti Aayog recently released a report, Battery Swapping for Electric Two-Wheelers – Policy Hinterlands, assessing different scenarios under which battery swapping might work for electric two-wheelers in India. It had three critical findings.
Cost comparison
The report looked at the five-year total cost of ownership of two-wheelers under three use cases: personal use, ride-hailing services such as Uber and Ola, and last-mile delivery services such as Swiggy and Zomato. The total cost of ownership of petrol two-wheelers is more expensive than electric two-wheelers that use either point charging or battery swapping.
The report analysed three price points for petrol, Rs 110 per litre, which is close to the current prevailing rate in Delhi (Rs 105.41 per litre as on May 17), Rs 90 and Rs 65. The findings were significant: at the current cost of petrol, two wheelers are the most expensive to run, even if the rates were to reduce to Rs 65 per litre.
The graphic shows that in terms of the total cost of ownership, petrol two-wheelers are more expensive than electric two-wheelers at various utilisation levels. Therefore, electric two-wheelers are cheaper than their petrol counterparts in terms of total cost of ownership competitiveness.
High utilisation
While electric two-wheelers may be cheaper than petrol, is battery swapping cheaper than point charging? This depends on the use of the vehicle. Most electric two-wheelers on the market have a maximum range of around 100 km per charge.
Once that range is exhausted, the batteries of these two-wheelers need to be recharged, and that would involve a consumer’s time and effort. The report identifies a threshold utilisation of 120 km per day, after which swapping becomes more economical than point charging.
Personal use two-wheelers do not typically have such high usage unlike those used for ride-hailing and last-mile delivery services. Such two-wheelers can be the first to move to battery swapping.
Financial incentive
The Faster Adoption and Manufacturing of Electric Vehicles, or Fame, scheme in India is intended to promote the demand for and supply of electric vehicles. The Department of Heavy Industries provides a purchase subsidy of Rs 15,000 per kilowatt hour for electric two-wheelers as part of the scheme.
However, the subsidy does not apply to vehicles sold without batteries because they are intended to operate under the battery-swapping mechanism. In addition, battery swapping operators cannot leverage financial support from states such as Delhi that provide incentives as a top-up to the Faster Adoption and Manufacturing of Electric Vehicles subsidy.
In the graphic above, if a Fame scheme-type subsidy is included for battery swapping, then at lower levels of daily usage, the subsidy makes a greater impact on total cost of ownership. This means that for personal, which is usually at a typical run of 40 km per day, there is a difference of 0.23 paise per km, which is quite significant.
The report found that the total cost of ownership can be brought down by almost 10% at a low utilisation level (less than 40 km per day) under a Delhi-like top-up subsidy structure.
The report also found that point charging is more affordable when traveling short and medium distances each day. However, issues such as the availability of electricity, proximity to electric vehicle charging facility, the cost of parking and others were not considered.
Once such matters are included, battery swapping would be much more affordable, even at lower utilisation levels. Therefore, including battery swapping in such schemes would support its uptake.
It is clear that electric two-wheelers are more cost-competitive than petrol models, even when petrol prices are low. Purely from an economic perspective, the future is electric in the two-wheeler segment, which will benefit customers. Zero tailpipe emission will be a significant health benefit for society at large.
On the question of point charging versus battery swapping, the answer will largely depend on the success of the initial battery swapping pilots that are rolled out as part of implementing the policy. It is safe to say that battery swapping can continue to play a complementary role in the near term and will not be replacing point charging.
Amit Bhatt is Managing Director (India) for the International Council on Clean Transportation. His Twitter handle is @amitbhatt4u.
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