The cause of cleaner vehicles has been addressed in past Budgets in different ways. In some years, through Customs duty on few electric vehicle (EV) parts, so as to encourage local manufacturing. Last year, it was the brief announcement on a scrappage policy for commercial and personal vehicles. This year, it is the declaration that the government will promote a shift to use of public transport in urban areas led by EVs, as well as the announcement of a battery swapping policy.

Public transport and battery swapping

The focus on public transport and in that the use of clean tech, bodes well for listed e-bus manufacturers such as Tata Motors, Ashok Leyland and JBM Auto. The announcement is also a continuation of the streamlining announced in the procurement of e-buses in mid-2021 so as to remove roadblocks in e-bus adoption among states.

Since then, under FAME II scheme, demand for e-buses from States are being aggregated through the government run Energy Efficiency Services. For manufacturers who in the past had been grappling with widely varying terms and conditions for bidding across states and cities, the presence of a nodal agency has helped in bringing about a standard eligibility criteria for bidding as well as in payment terms and in other technical and functional requirements. With city buses plying fixed routes with set timings, announcement on battery swapping will provide an impetus to greater e-bus adoption too, as the turnaround times in swapping is expected to be much lower than time taken for charging. According to a statement by the Transport Minister in October 2021, India is expected to have 40 per cent EV penetration for buses by 2030 and these moves are a step forward towards achieving this goal.

Data from Bloomberg NEF shows that the volume weighted average price of an EV lithium-ion battery (pack & cell) has come down for $684/kwh in 2013 to about $132/kwh as of 2021. Still, batteries and associated components constitute at least one third of the cost of an EV if not more and hence, ability to bring down this cost by any means, will help higher adoption. Considering that batteries are also an imported component, the government earlier announced the ₹18,100 crore PLI Scheme for Advanced Chemistry cell batteries in mid-2021 to encourage local manufacturing.

Among listed players, Amara Raja Batteries, Exide Industries, Lucas –TVS, M&M and others such as Reliance New Energy Solar, Ola Electric, have submitted bids under this. Following this, the announcement on a battery swapping policy provides further boost to adoption of EVs in vehicle segments other than buses, if battery standardisation can be achieved and if the cost of the battery can be de-linked from the cost of the vehicle. It also opens up bigger opportunities for domestic battery manufacturers who can benefit from economies of scale as adoption increases. While swapping does have its critics in equal measure as it may not suit all vehicle segments, this move can help small commercial EVs used in last mile delivery thrive, as standardisation of batteries might be easier in these segments where range may not be an issue. Listed players in the small commercial EV segments include Bajaj Auto which is coming out with its e-three wheeler shortly. Mahindra Electric Mobility is a bigger player in this space too.

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