Simply put, battery swapping refers to the practice of exchanging a used or discharged battery in an electric vehicle for a charged one in a battery swapping station. Ideally, such stations would be equipped with a large number of standard batteries to complete this swap in a few minutes. A rigorous framework around swappable batteries and their use in electric vehicles is still in its early stages in China where it is being backed by government policy. The Indian Government has expressed a similar interest in battery swapping in a bid to reduce the country’s transport-related emissions and to boost its electric footprint.
Battery swapping makes sense for a country like India whose vehicle market is dominated by two and three-wheelers. These smaller vehicles account for a significant chunk of the country’s emissions. Given that lithium-ion batteries continue to remain elusive and expensive, it makes sense that policymakers are pushing for more cost-efficient solutions. This adds to the allure of swappable batteries for an emerging market like India which is struggling to meet its green promises.
Battery swapping could drastically improve the energy efficiency of automobiles while cutting down on the cost of commuting. Indian startups have already started exploring innovative solutions which are geared towards the local market. For instance, the technology platform Sheru enables autorickshaw drivers to swap batteries at retail stores or to pay for them as per their use. Similarly, Battery Smart recently raised $25 million in a funding round led by Tiger Global and is concentrating on quickly building a swapping network in collaboration with local battery manufacturers. Another promising initiative comes from Sun Mobility which has partnered with Amazon India to construct swapping stations at the latter’s warehouses in the state of Maharashtra.
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India’s Battery Swapping Policy
The value of swappable batteries for a country like India lies in the fact that they separate the price of the electric vehicle from its costliest part i.e. the battery in order to make it more attractive to the customer. As per Vahan data, registrations of electronic vehicles witnessed a 10% month-on-month growth in the country from 65,879 units in May 2022 to 72,416 units in June 2022. Indeed, a report by Mordor Intelligence suggests that the Indian electronic vehicle is expected to grow at a compound annual growth rate (CAGR) of 47.09% during 2022-2027. In order to accelerate this growth, the Indian government is likely to rely on building a battery swapping ecosystem in the country through the implementation of Battery as a Service (BaaS) business models. These would ensure lower upfront costs, minimal downtime, and lower space requirements.
Indeed, a battery swapping policy was part of the key announcements made by the Indian government as part of its budget for the financial year 2023. The draft of this policy was later published by the Niti Aayog, the governmental think-tank, in April 2022. Following the completion of the public consultation process, the nodal ministry is expected to give the final touches to its battery swapping policy shortly.
The goals of this policy include:
- promoting swappable batteries in order to delink battery costs from the upfront costs of purchasing electric vehicles in order to encourage the adoption of such automobiles
- offering flexibility to electric vehicle owners by offering battery swapping as a viable alternative to charging facilities
- establishing technical standards that would allow the interoperability of components in the battery swapping ecosystem without hampering market-led innovation
- leveraging policy to de-risk the battery swapping ecosystem in order to allow access to competitive financing
- encouraging partnerships amongst battery providers, battery original equipment manufacturers, and other relevant partners like insurance, financing etc. to encourage the growth of ecosystems that would be capable of delivering integrated services to end-users
- promoting better lifecycle management of batteries including maximizing their use during the usable lifetime and end-of-life battery recycling
What future for swappable batteries in India?
Despite being a progressive step, India’s national battery swapping policy will eventually need the support of local state governments and different financial stakeholders to ensure its successful implementation in smaller, denser, and more polluted second and third tier cities. Furthermore, much like China, state enterprises will need to get involved to ensure the successful implementation of battery swapping in India.
In the long run, the challenge for India will be to effectively adopt swappable batteries at a mass scale for four wheelers like cars. If similar initiatives are any indication, this might be easier said than done. Even giants like Tesla Inc. have abandoned battery swapping projects in the recent past. Other unsuccessful attempts include the Renault-Nissan alliance which had agreed to manufacture 100,000 electronic vehicles in line with the specifications of Better Place – a now defunct venture capital-backed firm which attempted to develop and sell battery charging and switching stations. The firm had launched its first station in Israel in 2011 and eventually ended up filing for bankruptcy in 2013.
In China, Nio Inc. has made significant capital investments in the sector. In the first quarter, the company installed over 960 battery swapping stations in 197 cities across the country. However, it is still battling operation-related losses because of rising depreciation and expenses. Nio’s outlook remains pessimistic for now as the company expects losses associated with swap stations to increase.
These grim failures might indeed be a warning for India as it eventually tries to transition to battery swapping for four-wheelers. Swappable batteries might effectively buy the country some time to get its act together on its environmental goals including broader decarbonisation and cleaner power generation. Furthermore, as batteries improve and deploy more efficient chemical processes, charging times will reduce and range will increase. In the long run, this is likely to have a negative impact on battery swapping as a model.