Battery Swapping: A Promising Future For Electric Vehicles

• Published date: 11 August 2022
• Subject Matter: Transport, Energy and Natural Resources, Energy Law, Oil, Gas & Electricity, Rail, Road & Cycling
• Law Firm: IndusLaw
• Author: Saurav Kumar, Swathi Sreenath, Ritvika Thakur and Kajal Kashyap

Rising temperatures, rising sea levels, floods and climate change in general has become a cause of global concern in the last decade. To combat climate change, the Government of India ("GoI") has been proactively campaigning about its climate goals. With the aim to achieve net zero emissions by 2070¹ and 100% shift from Internal Combustion Engine ("ICE") vehicles to electric vehicles ("EVs") by 2030, the GoI has taken various steps to promote mass electrification of transportation and push for a shared, electric, and connected mobility future.² A detailed analysis of the incentives and policies issued by the GoI and various state governments and the legal landscape governing manufacturing of EVs has been covered in our previous articles on this topic, titled 'Electric Vehicles: Driving India Towards Sustainability'³ and 'Legal Landscape Governing Manufacturing of Electric Vehicles And Batteries'⁴.

In order to enhance the demand for EVs, manufacturers of EVs and its components have been trying to make EVs affordable, easy to charge and economically viable.⁵ Battery swapping has emerged as one of the biggest solutions to the shortcomings of traditional EVs. It has been reported that batteries consist of 40% to 50% of the EV's cost, with a switch to EVs without a battery this cost is eliminated, thereby making EVs more affordable. In addition to making, it more affordable, primarily, battery swapping is a noteworthy solution for the lack of fast paced development of charging infrastructure in India. With leading market players advocating for this change, battery swapping has the potential of becoming an alternative that is adequate, affordable, accessible, and reliable. We have dealt with the distinguishing aspects of battery swapping infrastructure and battery charging infrastructure in greater detail in later part of this article.

The objective of this article is to undertake a comparative analysis of the different approaches adopted in various jurisdictions towards successful implementation of battery swapping services and examining the key features of the draft battery swapping policy ("Policy") published by Niti Aayog on April 20, 2022 to implement such a service model.⁶.

Further, emphasis is drawn on other measures, incentives and schemes introduced by both the GoI and the state governments to promote a complete battery swapping ecosystem in India to attract potential investment and mass adoption.

Global Trends - Battery Swapping in China, Japan, and U.S.

Despite initial resistance, countries are now actively switching to battery swapping to accelerate adoption of EVs. Set out below is a summary of the current position in respect of battery swapping in China, Japan, and U.S.

• China: Battery swapping is in its nascent stages in China whereas it hasn't really taken off in other parts of the world.⁷ China's State Council announced the New Energy Vehicle Industry Development Plan (2021-2035) on October 20, 2020 ("Plan") with an aim to ensure development of the new energy vehicle industry.⁸ Under the Plan, the Chinese government is looking forward to developing a public charging network with focus on fast charging. Further, it also provides financial support to the businesses' involved in the construction of charging stations. Amongst the companies in the swapping business, companies like Nio and Aulton New Energy have built 1,400 battery-swap stations nationwide and plan to grow the number to 26,000 by 2025.⁹
• Japan: The Japanese government's goal is to achieve carbon neutrality by 2050. It is aiming to transition to 100% EV by 2035.¹⁰ Original Equipment Manufacturers ("OEMs") in Japan namely ENEOS Holdings, Honda Motor, Kawasaki Motors, Suzuki Motor and Yamaha Motor have collectively established a new company called Gachaco Inc. to ensure production of swappable batteries meeting the same standards and set up effective replacement systems to swap batteries.¹¹ The newly incorporated company will develop necessary battery as a Service ("BaaS") platform infrastructure to provide the swapping service to electric 2W users,¹² thereby combating one of the common hurdles to the widespread adoption of EVs in the country. The aim is to manufacture mutual-use swappable batteries that can be swapped in the Two-Wheelers ("2Ws") produced by all the OEMs forming part of the consortium.
• U.S.: Tesla, one of the biggest EV manufacturers in the world had introduced swapping stations in the US back in 2013.¹³ The company had to shut down the swapping stations within a few years due to low-cost recovery. This led to the innovation of super chargers which would decrease the otherwise high downtime for EVs. However, recently battery swapping has witnessed immense demand in the U.S..¹⁴ Ample, a start-up based in California, U.S., engaged in developing battery swapping technologies has produced battery modules that can handle battery packs of different cars and low-cost swapping stations Batteries that can accommodate a range of vehicle, eliminates the requirement of a standard battery pack required to be maintained by OEMs while producing 2Ws in order to ensure that the batteries being produced fit into the vehicle.

Global trends suggest a move towards battery swapping as a new solution. As observed, different countries have used different business models of battery swapping to overcome the prevalent shortfalls in the EV landscape. With the release of the Policy, the GoI has also joined other jurisdictions in promoting a switch to battery swapping. This move should be further backed by state governments to ensure deeper penetration of electric 2Ws and three-wheelers ("3Ws") in India. The Finance Minister of India, Mrs. Nirmala Sitharaman had during the 2022-23 budget announcement, introduced BaaS as a new business model to accelerate sustainable mobility solutions.¹⁵ This model aims at resolving the space constraint faced in setting up charging stations in urban areas by providing a recharging facility akin to the refueling facility available for ICE vehicles...