India allows 2- and 3-wheel electric vehicles to be sold without pre-installed batteries to help boost sales

14, Aug. 2020

An electric three-wheeler driver stops at a newly set up battery swapping facility in the northern Indian city of Chandigarh on June 25, 2020. (Photo courtesy of Sun Mobility)
An electric three-wheeler driver stops at a newly set up battery swapping facility in the northern Indian city of Chandigarh on June 25, 2020. (Photo courtesy of Sun Mobility)

By Atul Ranjan

NEW DELHI, NNA - India will allow two- and three-wheel electric vehicles (EVs) to be sold without pre-installed batteries, in a move to make environmentally friendly transportation cheaper and more accessible.

The Ministry of Road Transport and Highways said in a statement on Wednesday it has delinked the cost of battery, which accounts for 30-40 percent of vehicle cost, from the EV’s total price tag. This makes the upfront cost of EVs lower than those of internal combustion engine models.

The battery can be provided separately by the original equipment manufacturer or the energy service provider, the ministry said.

According to the Society of Manufacturers of Electric Vehicles (SMEV), a total of 156,000 EVs were sold in the fiscal year ended March 2020, out of which electric two-wheelers accounted for over 97 percent.

The government is promoting electric mobility in the country to reduce vehicular pollution and oil import costs, but industry experts believe that the impact of this latest policy initiative will be limited at first until more battery swapping facilities are in place. At battery swapping stations, the drained batteries are replaced with the charged ones.

Vinay Piparsania, global consulting director with Counterpoint Research who tracks the automotive industry, told NNA that the step will help bring down the vehicle price significantly, “but in the absence of required infrastructure, this initiative may not yield desired results.”

However, he said that this would be “good news for businesses looking to set up charging and battery swapping infrastructure in the country.”

Piparsania noted that a similar policy Taiwan had some success. Gogoro Inc., an electric scooter and battery swapping infrastructure maker, is using a similar model to make EVs affordable.

“For this to take off and be able to efficiently pass on the benefit to the consumer, we ought to work towards a strong infrastructure that allows EV owners to charge and swap batteries wherever they require,” Naveen Munjal, managing director, Hero Electric Vehicles Pvt. Ltd., India's leading e-scooter manufacturer said in a statement.

The SMEV welcomed the move but said the government should have also reduced Goods and Services Tax rate on batteries to 5 percent from the current 18 percent if sold separately, and also update its incentive plan.

Under the second phase of the government's Faster Adoption and Manufacturing of Electric Vehicles (FAME 2) program that offers incentives to buyers upfront in the form of reduced EV prices, the subsidy is linked to battery capacity. For example, it provides a 10,000 rupees reduction ($134) per kilowatt-hour of a battery used in a two-wheeler.

India allotted a total of 100 billion rupees for its three-year FAME 2 scheme which started in April 2019, aiming to promote purchases of 500,000 electric three-wheelers, 55,000 electric cars, 7,090 electric buses and one million electric two-wheelers. The plan has already supported purchases of about 15,800 EVs through March 12, 2020, according to the Ministry of Heavy Industries & Public Enterprises.

The first two-year FAME scheme was launched from April 1, 2015, and was extended through the end of 2019 with a total outlay of 8.95 billion rupees. The plan supported purchases of about 280,000 hybrid and EVs, the ministry said.