The Federation of Indian Chambers of Commerce and Industry (FICCI) has suggested the inclusion of the battery swapping model of charging under the Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) program that is currently under implementation across the country.

The Chamber has proposed the move adding that this would encourage the use of Electric Vehicles (EVs) in the two and three-wheeler category.

FICCI has already submitted a detailed position paper on battery swapping to the government, outlining various business models that are followed internationally, along with a letter to the Department of Heavy Industries.

In the paper, FICCI has mentioned that battery swapping should be supported under FAME-II to incentivize EVs, particularly the two and three-wheeler segment. The letter also added that the current guidelines are not clear for such models.  Elaborating on the FAME-II policy announced in March 2019, FICCI has observed that though the policy gives a generally positive direction towards demand subsidies and incentives for creating EV charging infrastructure, there is room for improvisation.

Supporting the adoption of battery swapping model, the paper states that in battery swapping, a fully charged lithium-ion battery replaces a depleted one at a swapping station in few minutes which in turn reduces the time to charge the electric vehicles.

Highlighting the need for clarification in FAME-II policy for including battery swapping, FICCI has said that it is important that the government recognizes battery swapping services are a critical part of the overall electrification of mobility push and there is a need to incentivize the infrastructure that will be required to set up such services.

It observed that the same incentives offered to set up EV charging stations could be extended to battery swapping services companies as well since they were not accounted for earlier.

In the position paper submitted to the government, FICCI has mentioned that the EV industry requires innovative business models such as the Gogoro – EV sales with the battery-swapping business model, EV sales with fast-charging (Kia), high-end EV sales with fast-charging (Tesla), and electric mobility services (Autolib).

One of the various benefits of battery swapping as a business model is that it allows various companies to focus on their core competencies. It will also prove extremely beneficial for electric utility companies which will be able to avoid high capex and upgrades for concentrated high-speed DC chargers, the paper explained.

However, there are key challenges to the business model as proposed by FICCI, which include standardization across original equipment manufacturers (OEMs) and vehicle types, ensuring availability, electricity availability when required.

The chamber has noted that OEMs are not likely to buy a battery and the battery purchase is done either by a third-party service or a fleet operator. Therefore, FICCI argues, the Fame II policy in its current form misses out on a big market booster mechanism such as battery swapping and it may not yield the required results in the long term.

For demand services, FICCI has recommended creating a framework to include other stakeholders for the receipt of demand incentives apart from OEMs who would prefer to sell vehicles with customized battery solutions and not be part of the battery swapping services. This could be either battery swapping services providers or fleet operators who are buying batteries.

The FICCI paper notes that this would further lead to a need for additional battery subsidization than the number of vehicles. This is because the number of batteries to the actual vehicles in battery swapping services would be 1:1.5 because there would be a set of batteries that would be charging at a station at any given time.

Battery manufacturers could also be directly subsidized instead of going through OEM’s or fleet operators, as the idea is to subsidize the battery cost. But the mechanisms to link with the correct intended application of the batteries need to be brought in, and it may be cumbersome, FICCI notes.

The success of this business model lies in the battery life of the swapped batteries, and therefore, lower battery life due to high battery degradation would create a significant threat to this business model.

However, there are other concerns too. It is an evolving business model, and there are new innovations every day and investments in one type of technology (for batteries or swapping stations) may be at risk once some players bring in newer, more efficient and cheaper options.

Mercom had reported earlier about the Ola Mobility Report which emphasized on how it makes good business sense to focus on developing EVs in the highest demand and utility sectors in the Indian vehicle market for two-wheelers and three-wheelers.  This report added that there is more compelling economics in choosing EVs over private cars for commercial and public transport systems.

Mercom had reported earlier about the Union Cabinet, chaired by Prime Minister Narendra Modi, approving the proposal for setting up a national mission on transformative mobility and battery storage initiatives.

Image credit: Afishbone [CC BY-SA 4.0]

Soumik is a staff reporter at Mercom India. Prior to joining Mercom, Soumik was a correspondent for UNI, New Delhi covering the Northeast region for seven years. He has also worked as an Asia Correspondent for Washington DC-based Hundred Reporters. He has contributed as a freelancer to several national and international digital publications with a focus on data-based investigative stories on environmental corruption, hydro power projects, energy transition and the circular economy. Soumik is an Economics graduate from Scottish Church College, Calcutta University.