Battery-swapping: The transformational $100 billion EV opportunity

Battery-swapping has emerged as a transformative solution with the potential to reshape India’s transportation landscape while advancing its sustainability goals. Currently, India faces the challenge of transitioning to electric vehicles (EVs) to mitigate the environmental impact of traditional internal combustion engine vehicles.

In this context, the integration of battery-swapping technology offers a promising avenue and a $100 billion business opportunity to accelerate the adoption of EVs and address critical hurdles that hinder the widespread adoption of sustainable transportation options.

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As India advances steadily towards sustainable development, the momentum in favour of electric vehicles is gaining traction. Nevertheless, achieving a full-fledged transition to electric vehicles demands addressing several accompanying challenges, which encompass the creation of EV charging infrastructure and the implementation of battery-swapping solutions.

Battery-swapping presents a convenient plug-and-play remedy for recharging electric vehicle batteries. This method entails exchanging a drained battery for a fully charged one at a designated swapping station within the network of the battery swapping operator (BSO). This recharging approach is especially well-suited for electric two-wheelers (E2W) and electric three-wheelers (E3W) due to its significantly shorter duration compared to traditional charging stations.

India’s battery-swapping market

The EV battery-swapping sector in India is experiencing rapid and exponential growth. It was valued at approximately US$ 10.2 million in 2022, and projections indicate that it could soar to around US$ 61.57 million by 2030. This expansion is anticipated to occur at a Compound Annual Growth Rate (CAGR) of 25.20%, driven by the advantages of lowered initial expenses for electric vehicles (EVs) and the elimination of charging wait times.

As electric rickshaws and commercial scooters see increased adoption, the potential for EV battery-swapping mechanisms becomes increasingly promising for infrastructure developers. This approach finds particular favour within the electric three-wheeler segment, which dominated the revenue share at approximately 90% in 2022. In the realm of electric two-wheelers, it is projected that this sector will experience a robust Compound Annual Growth Rate (CAGR) of about 32% between 2022 and 2030.

In the upcoming years, the adoption of battery swapping for electric vehicles is poised to gather substantial momentum, driven by the increasing awareness among consumers. Within this realm, lithium-ion battery swapping solutions present a multitude of prospects for industry participants, as these batteries effectively tackle crucial obstacles that hinder the shift towards EVs, including concerns about range anxiety and extended recharging durations.

India’s battery-swapping market value projection 2030

Source: psmarketresearch, Values in US$ million*

Prabhat Khare, Executive Vice President, Lithion Power shared his views with IBT stating –

“The Battery swapping technology today is a highly innovative field both from core electronics point of view to highly complex power grid & load management as well as energy balancing (between conventional & renewable energies) point of view. While battery swapping technology has the potential to improve the convenience and cost-effectiveness of EVs, more testing and research are needed for its scalability, ease of operation with safety to make improve its acceptability.”

Support to EV transition

As a lack of charging infrastructure is one of the biggest barriers to the widespread adoption of EVs, setting up battery swapping stations seen as a game changer. Additionally, as the cost of new batteries is one of the major reasons why EVs remain beyond the reach of most consumers, with a battery-swapping system, EV owners could simply exchange depleted batteries for fully charged ones at swapping stations. This will reduce the initial cost of purchasing an EV, making electric vehicles more affordable to a large section of buyers.

Battery swapping for electric vehicles could provide a number of benefits as well as drawbacks, some of which are listed below:

• Reduced Charging Time: Battery-swapping eliminates the need for long charging times as a user can simply swap their depleted battery with a fully charged one in just a matter of minutes.
• Increased Convenience: As the swapping of batteries is quicker and more convenient, it could be advantageous for commercial fleets, taxis and delivery services, where minimizing downtime is crucial.
• Compact solution: One more benefit of battery swapping is its suitability for small spaces and the possibility of establishing it as an independent system. This potential could address the challenge of installing extensive charging infrastructure in urban regions where space is restricted.
• Extended Vehicle Range: Since India is in its infancy in its charging infrastructure, battery swapping could enable vehicles to cover longer distances, and eliminate issues like range anxiety.
• Lower Initial Vehicle Cost: The battery constitutes a significant portion of an EV’s overall price, battery-swapping can potentially lower the upfront cost of EVs making it more affordable for the buyers.
• Battery Standardization: Battery-swapping could lead to standardized battery packs across multiple vehicle models, simplifying production and maintenance processes.

However, the rate of deployment of battery swapping stations is slow, even as charging infrastructure has grown rapidly from 900 publicly accessible chargers in 2021 to nearly 11,000 in 2022. Some of the major challenges that impede deployment of battery swapping stations are;

• Infrastructure Investment: Developing an extensive network of battery-swapping stations requires a significant upfront investment in terms of both capital and resources.
• Quality of batteries: Since several companies are involved in battery manufacturing, a user could face quality and performance issues.
• Compatibility and Interoperability: Ensuring compatibility between different EV models and battery-swapping stations could be challenging especially if different manufacturers adopt varying battery designs.
• Battery Standardization: Although standardization could benefit the industry, it could also be a drawback if a particular battery standard becomes outdated or inefficient over time.
• Battery Degradation: Frequent swapping could accelerate battery degradation due to wear and tear associated with the swapping process.

Expressing his perspective on establishing a battery swapping ecosystem in India, Pulkit Khurana, the Co-Founder & CEO of Battery Smart, stated:

“India is a cost-conscious market, and a major obstacle standing in the way of EV adoption is the high upfront cost of purchasing new batteries. Hence, battery swapping has the incredible potential to fast-track our country’s EV revolution, especially for two and three-wheelers, as it eliminates ownership of the battery from the end user and reduces upfront costs by as much as 40%. What’s more, drivers can replace batteries in under two minutes, mimicking the entire refuelling experience and making the adoption of electric mobility simple and efficient. Battery swapping also helps combat other deterrents to EV adoption, such as long charging time and range anxiety.”

Supporting investments and policies

To further support the transition to EVs, several companies like Battery Smart, Sun Mobility, Lithion Power etc. are engaged in improving the charging infrastructure. Recently, EV battery swapping network Battery Smart raised US$ 33 million in its Pre-series B funding which will be utilized to add over 100,000 customers to its network by 2025 and to further expand its geographic footprint.

Battery Smart saw active participation from its existing investors, Tiger Global and Blume Ventures as well as new investors, The Ecosystem Integrity Fund (EIF) and British International Investment (BII).

Battery swapping is generally used for 2Ws and 3Ws, as they have smaller batteries that are easier to swap as compared to 4 wheelers and e-buses. However, there are solutions available for the latter segments as well. According to industry projections, an approximate investment of at least US$ 100 billion and the establishment of around 450,000 swapping stations will be required to meet current demands of both two-wheelers and three-wheelers. In light of this, the implementation of a robust battery-swapping policy could greatly advantage the sector, alleviating issues like vehicle charging downtimes and the spatial constraints faced by two and three-wheelers in urban areas.

NITI Aayog released a draft policy document on Battery Swapping last year for review and comments. The core objective of the policy is to “promote swapping of batteries with Advanced Chemistry Cell (ACC) batteries to decouple battery costs from the upfront costs of purchasing EVs, thereby driving EV adoption”. Enacting this policy promptly could accelerate the acceptance of electric vehicles (EVs), aligning with the nation’s climate change objectives for the year 2030.