Abstract
The Electric Vehicle manufacturing industry has witnessed multiple twists and turns in its battery infrastructure, due to which there has been an ongoing debate between a charging-based infrastructure and battery swapping infrastructure. Thus, this blog post shall scrutinise both the infrastructures’ merits and demerits alongside scrutinising the governmental and regulatory hurdles faced by this sector. In finality, this blog post shall propose the need for a National Draft Policy for Electric Vehicles in India.
Introduction
The Electric Vehicle (hereinafter “EV”) manufacturing industry in India has seen enormous growth in the past few years, which can be credited to the Government trying to play catch-up with the industry leaders across the globe EV manufacturing prowess. For a decade, India has been experimenting with electric mobility, but the lack of charging infrastructure has hampered EV sales. Furthermore, there is a substantially low demand for EVs because of a phenomenon called “range anxiety.” In this phenomenon, the EVs run out of charge before getting to a charging point in the vicinity, [1] provided there is a charging point accessible in the vicinity in the first place. This low demand, in turn, disincentivises the automobile manufacturers from investing in the creation of charging stations as they see it as a futile and low return investment.
The most recent fork in the road is the transition from private to public electric mobility. This paradigm shift has infused the atmosphere in India with a sense of urgency when it comes to greener modes of transportation. It has also shifted the focus of infrastructure from installing stationary charging stations to battery swapping.
Generally, a regular internal combustion engine vehicle owner can access a fuel station every few hundred kilometres. This access, in turn, enables him to have no “range anxiety.” The fuel is readily and easily available, without hassle, across the length and breadth of India. However, the same is not the case with EVs as they need specific charging stations when moving, even for slightly longer distances than the one within a single charge coverage. Traditionally, the operation and maintenance of EVs always carry with it the added costs of building a charging station infrastructure. As of date, no such semblance of EV charging infrastructure exists in India. Both the industry players and the Government recognise this fundamental problem in the rapid increase of EVs in India. Considering the aforementioned fundamental problem, the Indian Government, through the Department of Heavy Industry, has given its principal approval to certain PSUs to move ahead with building EV charging stations across India.
On the other hand, the EV industry has been debating on an alternative approach: battery swapping. Much of the EV space used to be dominated by such designs, which incorporated the EV battery as part and parcel of the EV. However, off late, there have been multiple newer entrants in the market who have argued for creating EVs without pre-installed batteries and instead provide swappable battery mechanisms. The same is to control the wait–times at charging stations and the requirement of the vast number of charging stations. Although viable on multiple counts, this argument has created its own set of issues and challenges, which both the Government and the industry are tackling at the moment.
Furthermore, the growing use of EVs in public transportation and distribution fleets, combined with a severe lack of charging infrastructure, has created a unique mix of necessity and innovation. For example, SUN Mobility is a young company taking advantage of this battery swapping v. charging station debate. In SUN’s scheme, it owns the batteries, which Original Equipment Manufacturers (hereinafter “OEMs”) are not keen on owning because EV batteries can account for up to 50% of a vehicle’s cost. [2]
Thus, in this article, we aim to look at multiple issues plaguing the EV industry space.
Charging Stations v. Swappable Batteries: Issues and Roadblocks
The current principal challenge that the EV sector faces is that of standardisation. The regular mode of charging based EV infrastructure has been challenged on two grounds. Firstly, in January 2020, the Department of Heavy Industries had discussed plans of setting up 2600 charging stations spread out over a geographical expanse of 62 different cities. [3] Secondly, the Ministry of Road Transport and Highways (hereinafter “MoRTH”) released a notification in August 2020, enabling the registration and selling of EVs that do not have batteries. [4] Furthermore, according to the statement, batteries can now be registered and sold independently. [5] This has resulted in a shift in the way the EV space is currently being perceived in India because earlier, there used to be a level playing field between the OEMs and Battery as a Service (hereinafter “BaaS”) providers in the market space. However, after these developments, the battery swapping methodology is seen as a driving force with such aforementioned Governmental measures supporting it.
OEMs also make sense from the end consumer’s perspective from this unexpected edge that BaaS providers now have. Customers can now purchase electric two-wheelers for half the price — Rs. 50,000 ($680) v. Rs. 1.2 lakh ($1,630) on average [6] — and switch batteries instead of charging. Theoretically, this allows for 2–3 electric scooter ownerships for one family without investing in additional battery packs. Apart from families, this holds good consumer sense for regular fleet owner services because such business owners can now ask for better standards of high–performance batteries or even customised standards of batteries depending on conditions of use and other factors to lower mobility costs. The large order volumes for such business owners will allow them to leverage EV battery manufacturers.
All of the aforementioned positive factors will eventually assist BaaS providers in creating a standardised structure for battery swappable EVs, which, in turn, shall also resolve the ancillary concerns over safety and quality that flow from a lack of standardisation in the EV battery manufacturing industry.
However, that is merely the beginning of the issues for BaaS providers as they find solace in this slight leap over the OEMs. The operationalisation of a battery swapping mechanism brings in a hoard of new challenges for them. A battery is the central nervous system of an EV. A good battery can manage the vehicle’s power supply, provide data-based feedback on performance, and keep an EV from burning out before its time. An EV is nothing more than a flimsy metal frame without the correct battery. [7] The very particular problem here is that of the proper lack of talent pool to take forward the R&D in EV space, especially in the realm of batteries. Due to the problem mentioned above, the learning curve for the Indian industry players is perpendicular at this stage. Thus, the development of proper talent for the EV sector at scale is no small task.
Furthermore, the technology of EVs evolves every six months. With each passing year, automobile manufacturers are used to improving Internal Combustion engine (hereinafter “IC–engine”) units by 1-2%. However, EV technology must be fully comprehended and designed from the ground up. Since 60% of the electric engine drivetrain (group of components of a motor vehicle that deliver power to the driving wheels, excluding the engine or motor that generates power) is distinct from an IC–engine drivetrain, it is onerous for a workforce –– that has not been trained in this technology before –– to operate and work around such EV technology effectively and efficiently.
Globally, this learning curve had been handled by an extensive industry – academia interface – where the industry funded innovation–boosted research. For example, when General Motors sought to extend its electric footprint in the United States, a timely collaboration with the University of Michigan aided the introduction of the electric car, “Volt.” For this electric car, approximately a hundred people worked together –– comprising scientists, designers, and battery engineers –– to create a market-ready technology from the ground up. However, in India, such partnerships between academia and the industry do not exist as the situation has been quite different. An electric car is a technological Jenga tower that needs at least five forms of engineering input: mechanical, chemical, electric, electronic, and material sciences. Colleges in the United States teach these skills as part of a “mechatronics” course, which combines experience from these various fields into one and emphasises practical application. Indian colleges such as IIT-Chennai, IIT-Delhi, and Galgotias College in Greater Noida are only now collaborating with the EV industry to offer these EV–specific courses; however, they are at least a decade behind their American counterparts.
In the automobile industry, graduates usually go through a six–month rotational training programme. Mid-tier management oversees new hires on younger programmes, creating a cycle of learning and preparation. However, such mid-tier talent is hard to come by in newly created EV divisions within OEMs. Manufacturers face the same cultural challenges as universities, with insufficient time and money for R&D, experimentation, and exposure to new EV technology.
Furthermore, batteries are one of the most significant technical issues here. It is easier to understand the operation of a single Li-ion battery, such as in a smartphone or other such small devices. However, in a vehicle, a battery ten times its size may have entirely different properties, and its reaction with the other components can be unstable. Due to this, there is an inevitable need for experts. For instance, the overheating of batteries is a big issue on Indian roads because the conditions of Indian roads and high temperatures create the inevitable requirement of such EV batteries to withstand heavy performance use under such high temperatures. This has to be ensured while not eating away from the overall life of the battery itself.
The specific blend of chemicals for the perfect Li-ion batteries has been a research subject for ages now. While India is a net importer of Li-ion battery technology from China [8] and there is no domestic manufacturing of Li-ion, it is again imperative to note that there is no infrastructure for their manufacture. A regular Li-ion manufacturing line is located inside a sanitised “clean space,” where water condenses at minus 70 degrees Celsius, unlike an obstreperous and convoluted lead-acid battery factory. According to experts, these conditions must be preserved in the EV factory, which could cost between Rs. 1200-1500 crore ($168-$210 million). India lacks both the high-tech equipment and the required talent to supervise the coating and baking of these batteries.
Furthermore, rare earth magnets such as dysprosium, neodymium, and praseodymium are used in EV motors but are not readily available in India. Although the Government agreed to finance research into alternative materials for engineering these magnets under FAME – II, priorities have shifted due to the COVID–19 pandemic. However, seeking an alternative to lithium, which makes battery production the most expensive aspect of the EV supply chain, is the most critical field of study. Even though the cost of Li-ion batteries has dropped by nearly 80% since 2010, [9] the lead–to–lithium transition has been difficult for manufacturers.
Since India lacks its lithium reserves, it must rely on expensive lithium imports, which raises the cost of manufacturing and selling EVs. Thus, as these are all laborious and expensive research fields, we need homegrown talent to complete them. Without it, widespread acceptance would be an arduous task alongside even lesser opportunities to cultivate quality talent for the EV sector on a commercial scale.
Governmental Measures & Regulatory Aspects in the EV Sector
The two spaces where the Indian Government has done substantial work in the past few years is solar energy and EV infrastructural development. While the Government’s efforts in both the spheres have been equally prominent, they have led to substantial results in the solar energy space, whereas the same success has not found its place in the EV manufacturing space.
There is an array of relaxed measures provided by the Government via various policy measures to incentivise Li-ion battery manufacturing in India, such as Corporate Tax refunds, subsidies on final products, import subsidies, fast track regulatory clearances, and other similar incentives. The traditional lowest–bidder–wins tendering scheme is also abolished in such a policy. Instead, the emphasis is on selecting bidders based on a minimum criterion, such as achieving a scale of 40% manufacturing capacity by 2023, investing a minimum of $150 million per project, and generating a minimum of 5 Gigawatt hours (GWh), and other such parameters. [10]
The reason for this increase in governmental incentivisation and reduction of requirements for EVs and batteries under FAME – I and FAME – II [11] is the little to no growth in demand for EVs and battery storage capacity. However, these schemes have not accelerated growth in the EV industry, thereby communicating the patent lesson to the Government that mere subsidy cannot trump low demand for the product itself. Furthermore, industry personnel in India believe that there should be more India–oriented handling of such issues. For instance, they feel that the stringent policy measures have been stifling growth, such as 50% local equipment requirement or aping other countries blindly in technical requirements despite the unique challenges that Indian mobility faces. Additionally, the GST on EVs is currently 5%, while the GST on Li-ion batteries is as high as 18%. In finality, there is no specific Governmental incentive scheme in place for customers — individuals and fleets — to purchase vehicles that do not have batteries, thereby further distressing the current situation of the EV industry and its growth and development in India.
Conclusion: A Burning Need for a National Draft Policy for EVs
Considering how scattered and non–uniform the infrastructure, laws, and regulations are regarding EVs and their sector, it leads to India’s inevitable need to develop a National Draft Policy for paving the way ahead. This policy will not only assist in the standardisation and enabling the creation of uniform infrastructure, laws, and regulations but shall also play a pivotal role in the development of rules regarding battery swapping as the feasibility of charging stations in India is far from achievable given its population and other demerits. Apart from the inclusion of uniform infrastructure, laws, and regulations for the EV sector, a National Draft Policy would also enable governmental concessions and subsidies in a cogent industry requirement–based manner that are the need of the hour because they incentivise the manufacturers and developers for developing and boosting the EV sector in India.
Additionally, the second key component for governmental consideration is that open subsidies, without such draft plans and without considering factors for R&D as well as generation of demand, will not yield any productive results. In other words, there will not be an EV industry if the market players are not willing to participate owing to minimal demand.
Thus, a National Draft Policy can be developed through various stakeholders such as State Governments, governmental agencies like NITI Aayog, experts in the EV sector, and other similar agencies. Therefore, governmental efforts at the national level to develop a National Draft Policy can prove highly beneficial to India, considering the EV sector’s latent potential to boom.
About the Author
Esha Nair is an Associate in the Projects, Infrastructure and Energy Team at DSK Legal. She would like to extend her gratitude to Achyut Tewari, 5th year student, at HNLU Raipur, for his valuable inputs in this blog post.
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Preferred Method of Citation
Esha Nair, “EV Battery Swapping Infrastructure in Indian Marketspace: Issues and the Way Ahead” (IJPIEL, 14 May 2021)
<https://ijpiel.com/index.php/2021/05/13/ev-battery-swapping-infrastructure-in-indian-marketspace-issues-and-the-way-ahead/?et_fb=1&PageSpeed=off>
Endnotes
[1] Pranav Balakrishnan, A plug for India’s electric charger pain point, THE KEN (Feb. 28, 2020), https://the-
ken.com/story/a-plug-for-indias-electric-charger-pain-point/.
[2] Olina Banerjee, Plug-in or Swap-out: What’s going to charge India’s EV ambitions?, THE KEN (May 6, 2019), https://the-ken.com/story/battery-swapping-ev-ambitions/.
[3] Government approves 2,636 new charging stations in 62 cities: Prakash Javadekar, LIVE MINT (Jan. 4, 2020),
https://www.livemint.com/politics/policy/government-approves-2-636-new-charging-stations-in-62-cities-prakash-
javadekar-11578076280181.html.
[4] Olina Banerjee, EV batteries get their own identity. EV makers face an identity crisis, THE KEN (Sept. 10, 2020),
https://the-ken.com/story/electric-vehicles-batteries-identity-crisis/.
[5] Id.
[6] EV batteries get their own identity. EV makers face an identity crisis, SLSV (Sept. 10, 2020),
https://www.soundnlight.in/ev-batteries-get-their-own-identity-ev-makers-face-an-identity-crisis/.
[7] supra note 4.
[8] Heidi Vella, Inside China’s move to monopolise cobalt, MINING TECHNOLOGY (May 31, 2018), https://www.mining-
technology.com/features/inside-chinas-move-monopolise-cobalt/.
[9] Radhika, An Electric Future: Second life for EV Batteries, ION ENERGY (June 22, 2019),
https://www.ionenergy.co/resources/blogs/second-life-for-ev-batteries/.
[10] Olina Banerjee, Not open and shut: India’s gigafactory ambitions have three doors to get through, THE KEN (Nov. 13,
2019), https://the-ken.com/story/indias-gigafactory-ambitions/.
[11] Naina Bharadwaj, Electric Vehicle Industry in India: Why Foreign Investors Should Pay Attention, INDIA BRIEFING (Mar. 11, 2021), https://www.india-briefing.com/news/electric-vehicle-industry-in-india-why-foreign-investors-should-pay-attention-21872.html/.
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