Electric cars have been around for centuries and by 1900, they accounted for more than a third of all automobiles on the streets. Battery swapping for electric vehicles is also not a new concept and to solve for limited range and lack of public charging infrastructure in Electric Vehicles (EVs), battery swapping was first proposed as early as 1896. It was also actually implemented by Hartford Electric Light Company through the GeVeCo battery service for electric trucks. The service ran between 1910 and 1924 and covered more than 6 million miles, before disappearing for nearly a century.
Fundamentally, battery swapping is just an opportunistic way of charging, as it reduces charge time.
So any user or use case that has high utilisation could benefit from battery swapping. The other potential benefit is that it can allow the OEM to reduce the size of the battery or even remove the cost of battery ownership altogether, thereby reducing the cost of the vehicle itself, as the battery can make up upto almost half the vehicle cost. In an extremely price sensitive country like India, this ability of battery swapping to lower the cost of an EV could make a substantial impact and the launch of the Bounce Infinity product with vehicles (without battery) starting at Rs.36,000 will be extremely interesting. However, on the other hand for a battery swapping network to work, the total number of batteries in the network would need to be 1.5x of the vehicles on the network and someone would need to make that additional investment.
Recent early attempts at battery swapping were made in developed countries and hence focused on cars. Better Place raised around $700mn and worked with the Renault Nissan alliance to launch its first station in Israel in 2011. It finally filed for bankruptcy in 2013 and its failure was attributed to many reasons including launching pilots in many geographies, but a critical reason was also the lack of a common battery standard across OEMs, which led to low utilisation on high capex to develop the infrastructure. Tesla also attempted battery swapping before finally giving up on it due to the lack of usage by its customers.
A critical factor in the success of any energy distribution business including battery swapping is the amount of energy throughput per sq ft and hence technology and utilisation is critical.
What failed in America is getting a second chance in China, as its more centralised planning system is attempting to bring common industry standards via the official swappable EV battery standard and safety guidelines to be implemented soon. This has encouraged 4W focused battery swapping to make a comeback with companies such as Nio, Geeley, SAIC, GAC and BAIC working on solutions. The Government's initiative in China is aimed at mainly reducing the cost of the vehicle and driving adoption. However, in our view, the key challenges may remain and adoption may be limited to mainly EV taxis and LCV fleets in the short run.
Battery swapping is much better suited to light electric vehicles due to smaller battery sizes, which minimises the additional capex on batteries and also reduces the need for expensive automation required for larger battery swapping operations. Historically, in both China and India, two-wheeler’s (2Ws) and three-wheeler’s (3Ws) were using lead acid batteries and hence again swapping was challenging given the weight of lead acid batteries, which can be 4 times that of lithium ion packs for the same energy storage.
As light electric vehicles in India switch to lithium ion batteries, swapping becomes a viable alternative for high utilisation, non hub and spoke, commercial usage models.
India is uniquely positioned, as it is primarily a light electric vehicle market, where volumes have started to grow and the pandemic induced acceleration in digitisation has led to a spurt in home deliveries. In India, we see 2 major use cases, where battery swapping can work and hence, AdvantEdge’s investments in these spaces in ElecTorq and Sheru.
The 2W market consists of vehicles either exclusively used for private transportation or those vehicles that are also used for commercial purposes. In the exclusive private electric 2W market, we see a relatively weaker use case for battery swapping, due to enough range capacity in existing vehicles and ease of home charging. The battery as a service model being adopted by players like Bounce, solves for reducing the upfront vehicle cost and can be expected to drive adoption, but whether the user will pay a 15-30% premium on the energy being used, is a question that still remains to be answered.
Gig worker focused commercial 2Ws targeting criss-cross hyperlocal use cases have an extremely strong product-market fit for battery swapping in India.
The Majority of gig delivery workers start their career on Swiggy/Zomato with the view that this is a stop-gap gig before they move on to better things. Hence, we see Yulu vehicles being driven all over Bangalore and Delhi by this segment. Battery swapping for this category is a compelling value proposition due to longer range requirement (80+ kms daily, which is more than any entry level electric 2Ws), the possibility to reduce or eliminate upfront battery cost and also the ability to manage the ecosystem better with placement of swapping stations. Fast charging as a solution can also be interesting for this segment, however, it is better suited to a hub and spoke delivery models, as riders are not required to return to the hub just for charging.
The other category, where we see an extremely strong use case for battery swapping in India is e-rickshaws.
E-rickshaws in India have an installed base of 1.5-2mn vehicles, majorly operating on lead acid batteries, which need to be replaced every 6-8 months. We believe battery swapping for e-rickshaws allow for a lower upfront cost, higher vehicle operating time and a much larger take-home salary for the driver. Fast charging can also work for this category by installing fast chargers optimized for location, but the issues around large capex remain. Also, more importantly, having a fixed battery means there is no physical touchpoint to control risk with the battery, which we believe is quite critical for this segment of users.
As seen in both above use cases, short distances and density are critical for battery swapping and hence, maybe battery swapping was a success in Taiwan. In 2020 in Taiwan, there were about 14 million scooters for a total population of 23.5 mn, living on 36,000 sq km (by comparison Delhi-NCR is 55,000 sq km). This amounts to a density of 389 motorcycles per square km, making it the world’s highest.
Other possible use cases of battery swapping like auto-rickshaws or LCVs are not ideal, as they operate on longer routes, in a hub and spoke model and/or require battery size above 3-4 kWh, where the idle kWh in the vehicle increases (and hence costs).
Auto-rickshaws for example weigh up to 50% more than e-rickshaws (400-500kgs vs 200-300 kgs) and hence to give even a 50-60km range, would need a 5 kWh battery (vs a 2.5 kWh battery for e-rickshaws). Retrofitting such vehicles face very high upfront costs and in cities like Delhi, the economics are also challenging versus a CNG auto. New auto-rickshaws make more sense, but we feel the line between e-rickshaws and auto-rickshaws is getting blurred, as battery prices decrease and swapping allows e-rickshaws to go further.
A final point to consider is how organised the market is and what market share do the legacy OEMs have due to their desire to keep the battery value and energy distribution revenue in-house.
Setting up an energy distribution network, whether charging or swapping is easy, but real differentiation between players will emerge on the technology front, which would enable higher utilisation and revenue, along with lower cost and risk.
