For robust reasons, India is moving rapidly towards a future powered by electric vehicles (EVs). These are not only environmentally-friendly but also cost-effective and energy-efficient, which could help curb the country’s dependence on foreign oil.
One of the biggest barriers to the widespread adoption of EVs, however, remains the lack of charging infrastructure in India and the overall time required to charge such batteries. This is where an EV battery swapping policy can make a significant difference.
Battery swapping refers to the process wherein depleted EV batteries are replaced with fully-charged ones at designated swapping stations. This process barely takes a few minutes, which is akin to refilling a petrol/diesel vehicle. With this process, EV owners can quickly replace batteries without waiting for hours for their vehicle’s battery to charge, making EVs a more practical choice for consumers.
Battery-Swapping Policy with the highest levels of safety standards will infuse confidence in consumer’s decision making thereby stoking demand whilst inducing infrastructure build-out by swapping operators – industry awaits the policy release and implementation
Battery swapping infrastructure creation requires similar treatment of incentivisation as received by the direct charging solution providers under the FAME-II policy. While the finance minister has laid strong emphasis on green growth in the Union Budget for FY2024 presented this February she had also announced the framing of the EV battery swapping policy in the Union Budget for FY2023 – however, the much-awaited battery swapping incentivisation policy is yet to be published, which has a huge potential to invite FDI into the battery swapping network infrastructure creation.
Thus, there is a pressing need for the government to announce the battery swapping incentive policy incorporating the inputs received through numerous industry-policy-maker consultations. The industry in this regard applauds Piyush Goyal’s decision to defer interoperability standards and hopes that the policy will reiterate this and not foist any standards; in line with the recent developments.
Providing a level playing field in terms of FAME II incentives and equal GST rates will help the nascent industry. Present-day incentives are provided to vehicles powered by direct charging, but not to vehicles enabled by battery swapping – this invariably creates a skewed market. As the creation of the enabling battery swapping infrastructure is capex-heavy suitable incentives will catalyse the EV adoption rates. This makes the level playing field even more pertinent.
Additional Issues and Implications
Another issue relates to the anomaly of 18% GST on batteries while it is only 5% on EVs. Keeping this in mind, industry stakeholders are eagerly awaiting the revised draft Battery Swapping Policy from the NITI Aayog, along with rationalised GST rates cleared by the GST Council.
Benefits of Industry Incentives
Despite ongoing constraints, demand for battery swapping has been picking up gradually, especially in use cases such as logistics and last-mile delivery. These verticals could boost the adoption of EVs in India. Nevertheless, having a vibrant Battery Swapping Policy in place could benefit the industry by curbing challenges such as the downtime for charging vehicles as well as the lack of space in urban zones for two- and three-wheelers. Without such a Policy being introduced at the earliest, investments from local and overseas entities could be adversely affected.
A vibrant Battery Swapping Policy could give a fillip to relevant infrastructure creation, turning battery swapping into a viable proposition for customers. As per industry estimates, the country will require a minimal investment of $100 billion and almost 4,50,000 swapping stations to address existing needs for both two- and three-wheelers.
Incentives and a stable policy are imperative since it is a capital-intensive industry. Although EVs have become relatively popular in urban zones, this is not the case in rural regions due to limited charging infrastructure. Unlike charging stations, battery-swapping stations are more cost-effective and easier to build.
Also, the high cost of batteries is one of the major reasons why EVs remain beyond the reach of most consumers. With a battery-swapping system, EV owners will save on the high costs of buying a new set of batteries at periodic intervals as they can simply exchange depleted batteries for fully-charged ones at swapping stations. Since this will reduce the initial cost of buying an EV, it would make electric vehicles more affordable to a large section of the populace.
Thanks to its multiple advantages, implementing a Battery Swapping Policy at the earliest could hasten the adoption of EVs. By addressing the various obstacles that stall a smooth transition to EVs, such a policy could act as a game-changer for the widespread use of electric vehicles, pan-India, thereby also meeting the country’s 2030 climate change goals.
