Is battery swapping a viable model for India's long term e-mobility goals?

Key takeaways:

• As a part of the EV30@30 campaign and several accords, India has set for itself ambitious targets for electrification, which would need a well developed charging network
• Battery swapping is an alternative operating model that has been gaining traction in India
• Battery swapping offers many economic benefits to commercial vehicles such as 3W and cabs, by eliminating the opportunity cost associated with direct charging and reducing the total cost of ownership
• Advantages from the battery swapping model will diminish once battery technology leads to improvements in cost, charging time and range, which should be taken into account when formulating a strategy for deploying the charging network

The government of India has committed to achieve sales of more than 30% of all vehicles by electric vehicles (EV), while also unofficially announcing a target of 100% electrification. Realizing this goal will be difficult, with the biggest barrier being low adoption of EVs. Adoption in India has been slow because of a lack of adequate charging infrastructure and the high upfront cost of purchasing EVs.

While costs may come down with technology, setting up the nations charging infrastructure will need an effective deployment strategy and an eye towards the future. A well distributed and sustainable charging network is going to be key for India to achieve its electrification goals. Out of the many operating models, battery swapping has been gaining interest in the past few years as an alternate to direct charging. OEMs like Hero MotoCorp are undertaking alliances to set up swapping networks in cities.

But is a battery swapping network the right way to go? What benefits does it offer and how important should longevity of a model be?

A direct charging network uses a plug and charge mechanism, where the EV is connected to the charging station through a charging cable and an adapter. The battery gets charged from the electrical supply of the charging station. One major drawback of this is that the car must always be connected to the charging station, till the desired state of charge is reached. With the current charging speeds, this can be a long time.

A battery swapping network has swapping stations, where instead of charging the battery, it is swapped for a fully charged battery, in effect mimicking the refueling experience. But the battery must be modular for this model to work.

One potential result of a battery swapping model is be the increase in the adoption of EVs. A battery swapping network decouples the battery from the EV. Since the battery is one of the most expensive components of the EV, accounting for almost 40-50% of the EV cost, purchasing a vehicle without the battery reduces the upfront cost. In a value sensitive country like India, lower Total Cost of Ownership (TCO) and low upfront costs can really accelerate adoption.

The biggest advantages of battery swapping over a direct charging network are – Minimal charging time, low upfront costs, and saving on service and maintenance charges

A battery swap takes about 3 minutes, whereas even the fastest chargers today take from 30 minutes to an hour to completely charge the EV. The time for which a commercial vehicle operates during the day is important and the high charging time represents an opportunity cost.

An electric 3W that takes 3-4 hours to charge its battery during operation loses out on the earnings that could have been made in that time. These losses can add up significantly to the total cost of ownership. Further, by decoupling the ownership of the battery from the ownership of the EV, the cost of maintenance and replacement is saved. The three factors combined result in a much lower total cost of ownership of the EV.

Currently a battery swap costs anywhere between Rs. 130-300 per swap depending on the pricing scheme and the region. So, the power cost of charging through a direct charging network is significantly lower. Battery swapping regardless offers benefits by eliminating the opportunity cost of charging and the battery replacement and maintenance costs. But, this also limits the economic benefits battery swapping provides to private vehicle owners, with the biggest benefits for this class of consumers being time savings, range extension and flexibility in choosing battery plans.

What could undermine these benefits?

Most of the current commercial benefits of battery swapping are derived from the overall low cost of ownership, which is largely driven by the opportunity cost, the low upfront cost and the charging time. Therefore, any improvements in charging speeds, frequency of charge and the cost of battery should erode the advantages presented by battery swapping. The EV landscape evolves very fast. There are several batteries and charging technologies under development that can be charged, which can undermine the benefits presented by battery swapping.

As charging speeds increase and charging frequency declines, this opportunity cost will dwindle and charging EVs through direct charging stations will be much more economical. Charging speeds are limited by the ratings of the battery. There are several chargers that offer rates of more than 300 kW, but there aren’t many batteries that can accept these rates. Further, batteries that are capable of ultra-fast charging often have reduced battery life.  However, there are batteries being developed that can accept +300 kW of charging speeds, which could potentially be incorporated into cars by as early as 2024. As battery capacity increases, charging frequency will come down as well. These technological factors make the benefits offered by a battery swapping network redundant.

What also works against the long term viability of a battery swapping network is the constantly declining costs of batteries. Batteries are becoming cheaper and cheaper, so much that by 2025 EVs will achieve cost parity with IC vehicles. There are also concerns about disincentivized OEMs. When the cost of battery gets decoupled from cost of the EV, the OEMs lose out on potential streams of revenue. This means that unless BaaS providers come up with ways of sharing benefits with OEMs, there will always be a barrier for designing EVs with modular batteries.

The EV ecosystem in India is still evolving and requires an effective charging network in place for adoption to really take off. A battery swapping network would be beneficial in the short run and certainly provide the much needed push to adoption. But it runs the risk of falling off the path of technology evolution. We still need an effective strategy for deploying direct charging networks, to fulfill the envisioned scenario of full electrification.