BUSINESS MODEL FOR ELECTRIC VEHICLE MARKET

The share of electric vehicles (EVs) in the Indian transport sector is increasing with the National
Electric Mobility Mission Plan (NEMMP), 2013, and the Faster Adoption and Manufacturing of
Hybrid & Electric Vehicles (FAME) scheme, 2015.
EVs offer enormous design flexibility as it do not have any bulky components like engine or
drive train and can be personalized to a far greater extent than ICEVs. They also have fewer
moving components and therefore do not require frequent maintenance like ICEVs vehicles.
This gives EVs enormous benefit in terms of running costs and also allows easy integration with
other IOT devices for a SMART, connected and autonomous experience. Despite all these
advantages, EVs are not very attractive when it comes to upfront purchase price, which is a
very significant factor in vehicle purchase decision. In this article, we will try to explore business
model that can make EVs disruptive in the Indian market.
Barriers to the growth of EV market
Following are the issues of EVs

 Upfront cost: The cost structure of an electric vehicle is quite different to that of a
conventional vehicle as shown in Figure 1, where the cost of complete vehicle is
segregated into cost of component and component groups for a detailed study. Battery
pack accounts for almost 50% of the vehicle cost thus contributing the largest to the
cost structure with other components taking up less than 20% on individual basis. The
cost of drivetrain in BEV is lower as compared to ICEVs, with difference of around 4%.
The parts used in drivetrain of a BEV are less in number as compared to an ICEV, which
is the underlying reason of the cost difference. An average EV will still cost
approximately double that of a comparable ICEV as the decrease in drivetrain costs is
unable to offset the steep increase in battery cost thereby increasing the overall cost
significantly.
  Charging time: There are three main types of EV charging – rapid, fast, and slow. These
represent the power outputs, and therefore charging speeds, available to charge an EV.
o Rapid chargers are one of two types – AC or DC [Alternating or Direct Current].
Current Rapid AC chargers are rated at 43 kW, while most Rapid DC units are at
least 50 kW. Both will charge the majority of EVs to 80% in around 30-60 minutes
(depending a battery capacity).
o Fast chargers include those which provide power from 7 kW to 22 kW, which
typically fully charge an EV in 3-4 hours. Common fast connectors are a tethered
Type 1 or a Type 2 socket (via a connector cable supplied with the vehicle).
o Slow units (up to 3 kW) are best used for overnight charging and usually take
between 6 and 12 hours for a pure-EV, or 2-4 hours for a PHEV. EVs charge on
slow devices using a cable, which connects the vehicle to a 3-pin or Type 2
socket.

Assuming that consumers are willing to pay more for rapid chargers, the waiting time is much
greater than the conventional vehicle, which acts as a hindrance for consumers to buy an EV.

 Range anxiety: EVs tend to have shorter ranges as compared to a conventional vehicle.
For example, Mahindra Verito’ s electric version has a specified range of 110 km on a
single charge. The diesel edition of Verito, on the other hand, has a tank capacity of 50
litres and specified mileage of 21.77 kmpl, which effectively translates into a full tank
driving range of more than 1000 km. Effectively, the customer is looking at a range,
which is almost 10x lower than the current product he/she is used to. This also as a
major barrier for EV penetration.

 Charging infrastructure or building ecosystem: Charging infrastructure plays a pivotal

role on EV deployment, and, in the absence of a proactive plan and schedule, is a major
impediment to mass market adoption.

Applying Battery Leasing Model/ Rental Model to overcome the above-mentioned issues
The idea proposed by Professor Ashok Jhunjhunwala, to sell EVs without li-ion battery, which
accounts for majorly 50% of cost of an EV. The battery can be taken on lease and can be swiftly
swapped with recharged ones at the station. India, being a price sensitive market, Battery
leasing model can be successful as without any added government subsidies, the cost of EV can
significantly be reduced by 70%.
Financial feasibility:
Global examples of Battery Swapping Model

Better Place, an Israel based company, partnered with Renault to build a vehicle with a small,
120-km range battery system designed for swapping. Customers could charge the vehicle at
home using charging systems or use one of Better Place’s swapping stations while on the road
to swap a depleted battery. The model failed when initial plans called for 100,000 of these
vehicles and only 1,500 were sold because the system relied on massive sales of the Renault
vehicles, which used the swappable battery system Better Place had developed. With limited
demand for the Renault vehicle, which had a high (US$38,000 or INR 25 lakh) price tag, the
battery leasing program, eventually failed.

Better Place’s failure shows that markets for swapping stations and EVs go hand in hand, and
that a certain level of EV acceptance and penetration must precede the swapping model.
Swapping stations can survive with lower use, but only after a certain amount of the EV market
exists. Swappable batteries should be standardized across more than one vehicle model;
otherwise they become too vulnerable to consumer preferences. In order for the swapping
model to successfully scale in India, the standardization of batteries and vehicles will be
essential, as will coordinated planning with electric utilities.

HENCE, REQUIRED POLICY PROVISIONS

 Battery Standardization is very important to deploy electric vehicles. The

standardization decisions will have a huge impact on EV penetration. Moreover, the
investment on EV infrastructure is difficult if clarity on standards is missing. Largely the
standardization is not a question of technical capabilities or features, but more a
question of market policies and openness.
 Battery Swapping Infrastructure: Building infrastructure that includes, dedicating areas
to setup battery-swapping stations is also very important in order to make the model
viable. A move in this direction has been taken by Chetan Maini led startup, SUN
Mobility which plans to install the first batch of its automated battery-swapping stations
for electric two and three-wheelers across the country in last fiscal of 2019.

Revised Model: Learning from global best practices and keeping in mind the financial feasibility,
bringing down the cost of an EV is primarily important, but building an ecosystem of emobility,
which includes predictability of service, quality and requisite infrastructure for acceptance of EV
is also significant. Applying the same business model, on the public vehicles can help in building
ecosystem for emobility through investing on infrastructure from both public and private
players. Furthermore, giving people time to be comfortable with the whole idea of emobility
will play a key role that will guarantee an expansion of the market. At later stage, personal
emobility can also be pushed.
CONCLUSION
Assuming, leased battery packs are reliable and battery degradation infrastructure is feasible,
we can conclude that, battery-leasing model could be a successful business model, if made
viable first on Mass and Intermediate Public Transport like buses, 2 wheelers and 3 wheelers.
With required policy provisions, market can be expanded and profitability can be increased
through economies of scale and maturity in technology. Subsequently, inviting more
investments from both public and private players to achieve the ultimate vision of achieving
100% electric mobility.

References:
 https://www.livemint.com/Companies/GBaaGeREDOUDlpRaP7G1RJ/SUN-Mobility-plans-up-to-
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 http://www.iimb.ac.in/sites/default/files/2018-
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