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Mobility Energy and Transportation
Clean mobility energy & services market in India
18 Apr 2024
In this following section, we will delve into the clean mobility energy & services market in India focusing on the current state of charging infrastructure & the required infrastructure to meet the 30% electrification target by FY30. We will also delve deeper into the prevalent models of charging like direct battery charging and swapping and explore business opportunity available for private players along with the key headwinds & tailwinds facing each model.
1.1 Need for charging infrastructure

Establishing a robust and accessible charging network is imperative for the widespread adoption of electric vehicles (EVs).
This infrastructure serves as a critical enabler, addressing concerns such as range anxiety and facilitating the seamless integration of EVs into everyday life. The deployment of an effective charging infrastructure involves strategically locating charging stations in urban centres and along highways to meet diverse user needs. These stations play a pivotal role in supporting drivers, ensuring convenient and efficient charging to propel the success of the EV transition.

Despite the growing significance of EVs globally, India currently lags behind in the number of operational charging stations. In FY22, India had approximately 10.9K charging points, significantly fewer than other leading nations. For comparison, China, a frontrunner in the EV space, boasted a substantial 1.7M charging points, emphasizing the gap that exists in the charging infrastructure between India and other key countries.

1.1.1 Current state of charging infrastructure in India

At present India has a EVs to charging station ratio of 9:1 and in order to reach the globally acceptable standard ratio of 4;1, Government has taken multiple initiatives, including significant allocations in FAME II (INR 1,000 crore) and the reduction of GST rates on EV chargers. Further, Ministry of heavy industries has sanctioned a total of 7,580 EV stations spread in all states and 6 UTs under FAME India scheme Phase II as of December 2023. Industry players, especially large-scale fleet operators and e-commerce entities are actively contributing to the expansion through collaborations and community charging stations.

Despite this progress, challenges persist, land prices / shortages for charging infrastructure and the unpredictable electricity demand further complicate the establishment of charging stations. Additionally, high cost of hardware equipment poses a significant barrier to widespread adoption.
1.2 Battery charging and swapping
There are two primary methods which are currently in use for charging an EV: battery charging and the method of battery swapping. The charging & swapping market is expected to become ~US$8-9B opportunity by FY30P with increasing adoption of EVs.

1.2.1 Battery charging

Battery charging is the predominant method for replenishing the energy stored in electric vehicles (EVs).

For users with lower kilometre usage, detachable batteries and portable chargers, home charging proves to be a convenient and popular option. This is especially true for electric two-wheelers (e2W) with slow charging requirements and electric four-wheelers (e4W) and three-wheel cargo vehicles with faster charging needs.
In the premium segment or care where detachable batteries are absent, battery charging stands as the sole feasible method.
1.2.1.1 Points for EV Charging
There are two primary methods for charging an EV, home charging and public/ private charging. Home charging, utilizing standard household, provides a convenient and overnight solution for EV owners while public/private charging stations, equipped with fast and rapid chargers, cater to on-the-go needs. This section delves into the relevance of both methods in the broader landscape of EV battery charging and swapping.

Home charging

Home charging, often utilizing standard household outlets (220V in India), is a prevalent method for charging electric vehicles (EV). Typically offering a charging speed of 1.4-1.9 kW, it is suitable for overnight charging when the vehicle is not in use for an extended period. This method is well-suited for daily commuting needs, ensuring the EV is consistently charged and ready for regular use. Home charging is particularly effective for EV owners with access to private parking spaces, providing a hassle-free and cost-effective solution. Standard charging protocols like Type 2 (AC) are commonly employed for home charging.

Public and Private Charging

Public and private charging stations, equipped with fast chargers (2.5-19 kW) and rapid chargers (50 kW and above), cater to on-the-go charging needs. Fast chargers offer a quicker charging experience, making them suitable for short breaks during travel or at locations with higher footfall. Rapid chargers, on the other hand, provide an even faster charging experience, suitable for highway stops or situations where rapid replenishment is crucial. Common charging standards include CCS (Combined Charging System) and CHAdeMO, ensuring compatibility with various EV models.
 
1.2.1.2 Unit economics: Fast and slow battery charging station

Fast battery charging station
Fast chargers, also known as DC chargers, are high-capacity charging stations with power outputs ranging from 25 to 350 kW. These chargers are strategically located along highways and major routes, providing rapid charging for electric vehicles (EVs). Designed to cater to vehicles frequently covering long distances or in need of quick top-ups, fast chargers are commonly utilized by buses, electric trucks, and commercial cars. 
 
From a unit economics perspective for a fast-charging station operator with a single CCS 30kW fast charger operating at a utilization level of ~12%, can generate a monthly revenue of approximately INR 40,000 with an estimated EBITDA margin of around 10%.
Slow battery charging station

Slow chargers, also referred to as AC chargers, have the distinctive characteristic of longer charging durations, typically ranging from 6 to 8 hours. Operating at lower capacities, between 3.3 and 22 kW, they are strategically placed in residential areas, workplaces, and malls. These chargers are especially suitable for vehicles with residential charging setups or those with longer parking durations. Commonly utilized by 2-wheelers, 3-wheelers, and personal cars, slow chargers provide a convenient charging solution in everyday environments. One notable advantage of slow chargers is their positive impact on long-term battery health and longevity.
From a unit economics perspective, a battery charging station operator with a single AC type-2 7.4kW slow charger operating at ~15% utilization level can generate a monthly revenue of approximately INR 12,000 with an estimated EBITDA margin of around 8%. While slow chargers may have a longer charging duration, their economic viability is underscored by their contribution to extended battery life.

1.2.1.3 Battery charging models
The charging infrastructure landscape in India encompasses three predominant models—Government driven, consumer driven, and the service provider model—each playing a crucial role in the development of a robust charging network.

Government driven: This model operates on government-owned lands, leveraging financial subsidies and concessional land provisions. The government supports Charging Point Operators (CPOs) to reduce the initial cost of implementation. This approach aims to establish charging stations strategically, ensuring widespread accessibility and encouraging CPOs to contribute to the national EV infrastructure.

Consumer driven: In the Consumer driven model, charging locations span across diverse areas such as malls, offices, homes, and fleet owners. Consumers have control over charging sessions through software services accessible via mobile apps. Additionally, Time-of-Day (ToD) tariff advantages incentivize users to charge during off-peak hours, promoting optimal utilization of the charging infrastructure.

Service provider: This model involves charging locations on CPO-owned or private lands, allowing for flexibility in establishing stations in high-demand areas. A key feature is revenue sharing with the landowner, creating a mutually beneficial arrangement.
1.2.1.4 Headwinds and tailwinds

The journey to establish a robust EV charging infrastructure in India is marked by a myriad of challenges and opportunities. Overcoming hurdles such as grid constraints, logistical complexities, and regulatory intricacies has been a gradual process, slowing down the deployment of charging stations.
Charging electric vehicles takes a long time compared to faster battery swapping. Managing various charging standards among EV models adds complexity, requiring adaptable solutions.

Despite these obstacles, favourable conditions contribute to the growth of EV charging infrastructure in India. The increasing adoption of EVs acts as a powerful catalyst, driving the demand for an expanded network of charging facilities. Government initiatives, exemplified by FAME policies and MHI incentives, has played a pivotal role in supporting the charging infrastructure.

The rise of fast-charging technologies, showcased by solutions like Ather Grid's 60-minute charging, serve as possible solution for extended charging durations. Industry-driven initiatives such as collaborations with fleet operators and the proliferation of community charging stations further strengthen the availability of charging points in public spaces.
1.2.2 Battery Swapping
Battery swapping emerges as an alternative to EV charging in the electric vehicle (EV) landscape, involving the swift exchange of discharged batteries for fully charged ones. This model finds favour, particularly among B2B users, 2W, and 3W owners, driven by the higher daily usage. The convenience of swapping in minutes, compared to the hours needed for traditional charging, is a significant draw. This approach becomes especially effective for users who cannot afford the vehicle to be out of operation for extended charging periods, maximizing income generation. Therefore, 2W, 3W commercial vehicles use battery swapping as their preferred mode of refuelling their EVs.

In the battery swapping value chain, key stakeholders include battery suppliers/assemblers, maintenance providers, financiers, and infrastructure providers collaborating with battery swapping operators, ultimately serving vehicle owners, EV mobility providers, and fleet aggregators.
1.2.2.1 Headwinds and tailwinds

The battery swapping landscape faces its share of challenges. High capital requirements pose a hurdle, demanding significant investment to procure a substantial number of batteries for breakeven. The non-standardization of EV batteries across brands complicates matters, necessitating investments in various battery types and hindering scalability. Operational challenges, including finding skilled operators, ensuring battery security, securing access to a reliable power supply, and addressing insurance uncertainties, further contribute to the headwinds.

On the flip side, tailwinds are evident in the anticipated growth of EV penetration, especially for 2Ws and 3Ws, expected to exceed 40% by 2030. The rise of hyperlocal B2B delivery services, driven by the surge in e-commerce and last-mile deliveries using 2Ws, enhances the need for battery swapping. Encouragingly, both new entrants and established players are investing in battery swapping infrastructure, signifying a promising trajectory for this evolving landscape.

1.2.3 Upcoming services: Battery as a service and battery leasing

Battery as a service and battery leasing are innovative approaches aimed at mitigating the high upfront costs of EVs by 30-40% and addressing concerns related to battery degradation. The cost of ownership and maintenance is effectively spread over the vehicle’s lifetime.

Battery as a Service (BaaS) is a concept where a third-party provider offers the battery as a service. In this model, consumers swap their discharged battery for a recharged one at swapping stations. Users do not own the battery, rather pay for it via pay-per-use or subscription models. The provider assumes responsibility for maintenance and upgrades. BaaS promotes sustainability through efficient recycling and reuse practices. However, challenges include the need for widespread standardization of EV batteries and charging infrastructure for BaaS to thrive. Users face a trade-off, as they lack ownership, leading to limited control over maintenance and replacement timing, with potential long-term cost implications for paying for battery usage over time.

Battery leasing involves leasing from an automaker, leasing company or another entity for a set duration, with payments based on annual mileage. Lessee (usually EV users) own the battery after the completion of lease, making regular payments like traditional vehicle leasing. They control battery use and maintenance, with options to purchase or return the battery at the end of the lease period. Fixed payments ensure cost predictability over the lease term. However, leasing has its own set of challenges such as uncertain resale value influenced by factors like technological advancements, and potential additional costs or restrictions at the end of the lease.

In conclusion charging infrastructure development is a vital tool for realising the target of ~30% EV penetration by 2030. While new & innovative models of EV charging like battery swapping have found greater adoption among B2B service providers, public and private/home charging development is required for large scale adoption of EVs. New emerging services like BaaS & battery leasing will also find greater adoption as they reduce the upfront costs of acquisition of EVs.

Praxis has built a strong IP across clean mobility ecosystem ranging across products & services and players across the ecosystem stands a chance to leverage our strong capabilities to build on their current offerings or venture into the new business opportunities and stay ahead of the new & upcoming competition.

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